Global entity compliance and governance is a constantly moving target. Not only are corporate structures and objectives gaining complexity, but individual jurisdictions also implement new rules and regulations regularly. The opportunity cost of falling behind on compliance and governance best practices is virtually immeasurable, and includes far-reaching reputational, legal and financial consequences.
Entity compliance encompasses a broad variety of practices and processes. Everything from board and entity structure to regulatory and financial compliance to document and communication security, and more, falls under the broad remit of governance and compliance. Entities that operate on a global scale must ensure that their practices are integrated while enforcing specific jurisdictional differences and requirements.
Compliance and governance are topics with a great deal of depth and context. With that in mind, here are five strategies for ensuring that your entity and its subsidiaries stay ahead of the global governance/compliance curve:
Strategy 1: Implement subsidiary governance policies and procedures
If you haven’t already done so, the first step in creating best practices around governance and compliance is to implement a clear set of policies and procedures across all of your entities and subsidiaries. These policies and procedures should include comprehensive guidelines that cover all areas of compliance and governance. Employees, directors, managers and personnel should be aware of and verify that they understand and have received copies of relevant policies and procedures.
Once designed, these policies and procedures can be automated through entity management platforms so that as many routine practices as possible are taken care of seamlessly and routinely. While compliance and governance are important, they can’t be so time-consuming that they interfere with the operational aspects of the entity and its subsidiaries.
Strategy 2: Provide director compliance training
Ongoing director training is an essential best practice in these times with changing regulations, social media and constantly changing social norms. Decisions about the type, frequency and depth of the training should be made by entity compliance and legal departments. Topics that lend themselves to regular training include:
- Fiduciary role meaning and obligations
- Audit committee responsibilities and issues
- Governance models
- Board and committee responsibilities
- Subsidiary “arms-length” rules
- Executive compensation trends and issues
- Sexual harassment and discrimination
Geographical location isn’t a barrier to training, as many different types of effective online training exist that automatically verify that training has been completed for corporate record-keeping purposes. Training can also take place at specific times during board meetings. In addition, trade associations, universities and other organizations offer board training in governance, compliance and other issues.
You can also survey directors regularly to ensure that they accept and understand their governance and compliance responsibilities, and that, if they serve on more than one subsidiary board, their entity affiliations and appointments are recorded and updated correctly.
Strategy 3: Understand jurisdictional differences
Jurisdictional differences around compliance and governance are a true landmine for the unwary. Your legal and compliance team should be fully versed in all jurisdictional differences in every country and territory in which you operate. For large entities with multiple subsidiaries, this job is literally endless, as new laws and regulations are being passed all the time. Changes in tax laws and tax treaties, for example, can impact your corporate structure.
This is why it is vital to not only keep current on governance and compliance changes and best practices, but also fully understand the implications of those changes so that you can implement them within your entities and subsidiaries. Automating compliance through technology can help ensure that governance policies and procedures are followed and tracked once they are established to ensure that compliance is maintained throughout the organization.
Strategy 4: Create robust internal processes
Internal processes carry out the bylaws, policies and procedures established by a board in collaboration with its legal and compliance teams. As we’ve mentioned, automating these processes through entity management software increases efficiency and also avoids potential problems caused by human error. Internal processes fulfill a variety of functions, including:
- Ensure that all required documentation is executed and filed on time with the appropriate authorities
- Recording, distributing, and storing board and committee meeting minutes
- Routing proposals and necessary compliance and governance changes through appropriate constituencies, including compliance, operations, treasury, accounting, legal and tax
- Appropriately scheduling and dating required documentation, including annual meetings, annual and quarterly tax and financial filings, etc.
Robust processes are the bedrock of successful governance, and, indeed, successful entity management. Without them, chaos results. With them, entities and subsidiaries run much more smoothly, efficiently and effectively.
Strategy 5: Institute governance and compliance check-ups
Implementing initial policies and procedures is a great start, but not a place to stop. Entities are constantly changing, which means that practices must be regularly reviewed to ensure that they meet the needs of your organization and its subsidiaries as they evolve.
Your compliance and legal departments should regularly review your governance and compliance policies and procedures to ensure that they meet your needs while maintaining the standards set by governments, self-regulatory organizations, trade associations and international organizations. Even when regulations don’t change, social norms change, which can require a compliance or governance response. For example, many entities and organizations have been reviewing their sexual harassment policies and training programs in the wake of the Harvey Weinstein scandal.
Streamline Compliance Through Technology
Finally, implementation and maintenance of proper governance and compliance processes and practices is facilitated by a robust technological platform. Technology, when implemented appropriately, ensures that communication, compliance, governance and financial processes are followed, leaving directors, executives, managers and personnel increased time to attend to the strategic and profit drivers of a business.
See how Blueprint OneWorld’s global entity management and corporate governance platform can help you achieve compliance and demonstrate good governance. We’d be happy to book you a demo of the product.