In all the focus and pressure around governance and compliance, it can be easy to forget that much of what an organization does operationally comes down to managing risk to navigate the waters of global regulation.
Whether it’s regulatory compliance in the form of financial or environmental practices, or the security of both the business and its reputation, risk management best practices for entity management are crucial to the modern organization. Those businesses that operate under best practices can gain a greater understanding of their business, which allows them to make better-informed decisions.
And even if their job title is not “risk manager,” those involved in governance, compliance and legal operations should be aware of risk management best practices to ensure their own workflows and responsibilities can work in harmony with the organization’s risk profile, or its willingness to take risks.
IRM: Where entity management and risk management intersect
The area where both entity management and risk management meet is known as “integrated risk management,” a holistic approach to legal operations that helps to improve decision-making and performance through an integrated view of how well an organization manages its own risks.
Gartner’s definition names six attributes for IRM: strategy, assessment, response, communication and reporting, monitoring and technology. They write: “To understand the full scope of risk, organizations require a comprehensive view across all business units and risk and compliance functions, as well as key business partners, suppliers and outsourced entities. Developing this understanding requires risk and security leaders to address all six IRM attributes.”
And to gain that comprehensive view across all business units and functions, risk management best practices for entity management suggest utilizing technology to get greater visibility into operations across the entire structure.
The five areas driving risk management best practices for entity management
Once that comprehensive view has been gained through technology, risk management best practices revolve around five key areas:
Without clear paths of communication – within departments, between departments, and with third parties and other stakeholders – organizations run unacceptable risks. Not only does it risk duplicate information and duplicate work, but it also risks incorrect data being reported to regulators and even filing deadlines being missed.
Entity management software enables organizations to create a central repository where the corporate record lives. This mitigates risk by establishing a single source of truth for all entity data, helping to ensure all stakeholders and colleagues are working from, and basing decisions on, the same information.
The importance of communication is complemented by the importance of collaboration. Working in silos poses a greater risk to organizations, particularly in the area of entity management. It won’t do to have the finance team working on annual accounts while the treasury team doesn’t inform them on the cash situation.
Risk management best practices push for cross-team working to break down silos and help protect and inform the integrity of all entity data. By collaborating, rather than competing, those working on an organization’s compliance profile can ensure all deadlines are met efficiently through working effectively together.
Collaboration and communication both support an organization’s flexibility, which is important in this ever-changing market. Even before the global financial crisis of 2008, flexibility was key in any entity that wanted to thrive in the digital world. Technology has brought customers closer and enabled multinational working. Without attention to risk management best practices, organizations risk stagnation and irrelevance.
To gain this flexibility, organizations need to be able to see across the whole structure. They need to be able to identify weak spots, gaps in the market and any inefficiencies in operations.
“Resilience” can be such a loaded term, but in terms of risk management best practices, we’re talking about the organization’s ability to withstand threats and a changing industry or market. It’s especially important in today’s global world, where organizations are operating in far-flung markets, and where cybersecurity threats are a very real prospect.
When it comes to entity management, resilience is driven by a robust corporate record that is easily accessible yet highly secure. It’s the ability to get back up again when you take a knock, and the ability to visualize the entire structure to understand – and take steps to rectify – the weak points. Better risk management provides greater resilience in entity management.
Finally, all roads lead back to knowledge. Risk management best practices are all based around a free flow of information between collaborators; without this information, there can be no analysis of strategy and no overview of the optimum structure and style of operations to suit the desired growth.
Creating that central repository for the corporate record enables risk managers and entity managers to collaborate wherever they are, to communicate with all stakeholders from within the same platform. Importantly, though, it provides the data on which all analysis can be performed – whether it’s risk analysis, structural analysis, strategic analysis or any other sort of investigation to help inform strategy and growth in a way that mitigates risk while not being afraid to take a chance.
A single source of truth drives risk management best practices for entity management
When it comes to both entity management and risk management, one constant remains true: data drives all. It’s entity data that helps those in both areas to analyze the status of the entity, to assess the risks of business strategy, and to ensure that those that must be informed can be kept up to date.
But entity data alone is not enough, and without robust management of entity data, the organization runs the risk of making decisions based on outdated information, or even of running into trouble with the regulators for submitting reports based on corrupted or inaccurate data.
To combat this, risk management best practices advise organizations to establish a single source of truth for all entity data. This single source of truth helps to ensure that all actors within an organization, and its stakeholders and third parties, are basing decisions on the same available information. To take it one step further, basing the single source of truth in the cloud means that anyone who needs to access real-time data can get to it, no matter where in the world they are located. No more late signings because Director X couldn’t receive mail in time.
Cloud-based entity management systems, such as Diligent Entities, are built using risk management best practices for entity management at their core. Diligent Entities helps organizations to centralize, manage and effectively structure their corporate record to improve entity governance. This, in turn, helps to better ensure compliance, mitigate risk and improve decision-making using an integrated management system.
Adding to the robust approach to risk management, Diligent Entities seamlessly integrates with Diligent Boards and a secure file-sharing platform to create the Governance Cloud, an all-in-one ecosystem for modern governance practices that enable risk management best practices for entity management.
Get in touch and request a demo to see how Diligent’s suite of modern governance software can help to drive risk management best practices for entity management in your organization.