Working in entity management within a corporation, no matter how large or small, can be a tricky business. There are so many moving parts—from managing and protecting the personal data held on directors around the world, to ensuring the right training is given to the right people at the right time, and the right filings are made in the right places—that keeping track of how all entities are performing can be a full-time job in itself.
With all these spinning plates, those in charge of entity management—the company secretaries, the compliance department, the legal operations team—can be forgiven for focusing on just keeping the plates in the air. One false move, one slip, and the whole set can come crashing down. In entity management terms, that crash means a risk of reputational damage, of fines and even of jail time for directors in some jurisdictions.
Yet stepping out from under the fog of constant process and filing can work in the compliance team’s favor. Yes, the process is important, but it will never get any easier or any more streamlined without thinking about entity management in terms of an overall strategy.
Strategic entity management means exactly what you think: taking a strategic approach to entity management. It means not just spinning the plates but identifying long-term goals and objectives for how your company manages its entities.
It’s aligned with entity governance, which encompasses the entire life cycle of each entity from incorporation to closure. In both entity governance and strategic entity management, attention is paid to the secure management of relevant documents, stakeholder knowledge transfer and understanding ownership structures. While entity management explains the corporate structure, entity governance is having enough strategic oversight of the corporate structure to be able to forecast the downstream effects of regulation and law changes. In that sense, it’s the other side of the strategic entity management coin.
Both approaches can make a real difference to compliance and legal operations in any company, but we’ll focus on strategic entity management here.
Managing Entities with a Strategic Head
To manage strategically is to formulate and implement the major goals and initiatives taken by management based on careful consideration of the available resources and an assessment of the internal and external environments. Those working in entity management have a unique view of the company’s global obligations, putting them in a very special position to work in a more strategic way.
Let’s say, for example, your company is growing. It’s going through a merger and acquisition (M&A) process or it’s decided to set up a new office in a far-flung destination. This decision has been taken by the board and company leadership for a strategic reason, no doubt—to increase influence, to reach a new market, to offset operational costs in a more expensive jurisdiction.
This strategic decision by the board is likely to also necessitate a new entity, or at the very least will need an existing entity to be managed in a different way. The compliance team could just open its arms to bring the new work into the fold and manage it the way it always has, or it could use this moment to pause and think about what this new entity really means for the way all entities are managed throughout the business. It could think strategically about its entity governance.
Is this an opportunity to consolidate work in any way? Is it time to set some objectives to bring all entity management under the same process? Is entity management handled centrally or locally, and does that process work hard for the group structure? Is there a need for additional training for directors or new filings to incorporate into process? Are all governance practices up to date and fit for purpose? Is this the right entity type in the right jurisdiction to achieve the business goal?
Aligning Strategic Entity Management with Business Strategy
All of these questions must be answered from a strategic viewpoint, both in terms of strategic entity management and entity governance, and in line with the company’s overall strategy. It’s imperative that the compliance, legal operations and/or company secretarial department is aware of the leadership’s intentions relating to entity operations so that it can prepare for any necessary changes in entity management.
Strategic entity management means staying up to date on the responsibilities of your entities and their leadership; advising leadership on governance matters; and actively maintaining the corporate record for transactions, filings, reports and audits. It’s taking a strategic approach to knowledge and data management as well as entity management, aligned with the entity governance approach.
The board relies on the company secretary to not only keep them informed about duties and disclosure obligations, but also about governance requirements and effective board processes. This means not just ticking the boxes of entity management, but also being more strategic in their thinking—they must act as a long-term guardian for the business.
A business’s growth plans don’t just happen; it takes a whole company of people to bring these dreams to reality. Instead of focusing on the day-to-day paperwork, strategic entity management requires those responsible for entities to be both plugged into the company’s strategy and thinking about what that strategy might mean for structure, regulation and compliance.
By thinking strategically about entity management, compliance teams can work to embed processes into day-to-day operations. They can help to:
- Implement a companywide compliance standard
- Establish processes to regularly evaluate risks
- Create reliable oversight standards for managing regulatory matters
- Enforce annual regulation and compliance reviews, encouraging participation at all levels, from the board to junior officers
- Unite compliance and business strategy while simultaneously controlling risk and managing costs
Remember, those in charge of entity management are in effect the guardian of the company’s reputation. They play an essential role in making sure the company can continue to operate with a legal and social license.
Technology Allows Time for Strategic Entity Management
So let’s go back to all those spinning plates—all the entities are in the air and they must be kept spinning through careful planning and tracking of regulatory requirements, filings, knowledge and data management, and more. It used to be that the compliance department, the company secretary and the legal operations team had to get their hands dirty to keep up to date—a recent study found 87% of company secretaries are responsible for compliance and entity management as well as tending to the board—but technology has emerged that helps streamline all of this formerly manual labor.
The one constant in the day-to-day world of entity management is the need for access to real-time information on subsidiaries and related data and documents. Entity management platforms such as Diligent’s offer secure and affordable solutions to entity management that are simple to use and easy to access. You can attach files to different entities and departments, manage access rights, and create diagrams to visualize your entities. All of this creates a single, central source of truth for entity management that allows you to analyze data and perform the ongoing tasks of filing and management and improve entity governance.
And by handling all of this plate-spinning through technology, the company secretary and compliance teams are freed from manual reporting. This gifts the time and headspace to think about strategic entity management, to truly plan and align compliance and governance work with the overall business strategy. Schedule a demo to see how Diligent can help you get the time to be more strategic about entity management.