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A growing body of legal entities are using purpose-built legal entity management systems, according to Ernst & Young.

According to their report entitled “The General Counsel Imperative,” 65% of all companies use a purpose-built legal entity management system. Additionally, 85% of businesses with annual revenues that exceed $20 billion use these systems to report corporate governance obligations.

However, a significant percentage of those companies report technology challenges. Specifically, 62% cite challenges in tracking and reporting governance activities within their legal entity management platforms.

How corporate governance works

Corporate governance embodies all the rules, bylaws, policies, and procedures that ensure businesses remain accountable to their stakeholders. Effective corporate governance mitigates risk, provides transparency, and establishes structured workflows that allow corporate entities to fulfill their mandates and achieve their visions.

There are four ways that organizations implement and evaluate the effectiveness of corporate governance policies.

Interconnected relationships between people and stakeholders

Any business entity’s primary objective is to fulfill its vision and turn a profit while doing so. Corporate governance policies influence relationships between the people who determine an organization’s profitability. It includes how founders and board members set internal policies through the consumers and influencers who purchase the company’s products.

Align all stakeholders around a common purpose

Internal and external relationships allow corporate entities to grow their businesses. To ensure satisfactory relationships, the organization must establish a core purpose. Corporate governance policies align all stakeholders around that purpose so that they make decisions to achieve that common goal.

Establish processes that guide organizations to their goals

Businesses must have the tools to analyze and evaluate performance to achieve their purposes. Corporate governance establishes structured processes to track the business’ performance. You can amend your workflows over time, but your processes create a baseline for how to report productivity.

Determine the success of organizational performance

Business entities use corporate governance policies to measure the effectiveness of their performance. Evaluate the success of your corporate governance workflows. Did you achieve your goals, or did the workflows cause more setbacks than achievements? Accurately reporting on corporate governance performance helps the business set more realistic goals.

Challenges of reporting corporate governance performance

Corporate governance helps organizations make more strategic decisions to improve performance. Therefore, accurate reports on corporate governance are necessary to iterate and enhance performance.

So what happens if 62% of business entities have challenges tracking and reporting on corporate governance using legal entity management systems? There are many reasons why those organizations experience reporting challenges with their chosen platforms. These are a handful of the most common struggles.

Difficulty maintaining up-to-date entity management systems

The legal industry is noteworthy for its slow adoption of modern technology. In-house legal departments in large enterprise companies are more accepting of entity management technology, but there are still gaps in how businesses use those systems.

When legal departments are too reliant on older systems, there’s a risk that reporting data will be compromised. Older systems like binders of minute book records or countless files of Excel spreadsheets are less effective than more intuitive entity management platforms.

Uploading all reporting data into an entity management platform like MinuteBox eliminates errors with reporting data. The platform uses helpful wizards to guide general counsellors and their subordinates as they build diligent corporate governance records. The platform also warns the team if data is missing in the modules, ensuring corporate governance risk management.

Passive approaches to entity management that compromise data integrity

According to the EY report, corporate governance reporting challenges are at their highest within organizations where only legal departments use entity management systems. Companies often view the purpose of entity management systems as tools to house legal entity data.

Businesses with effective corporate governance reporting and performance evaluations recognize entity management software as a forward-thinking resource. These entities use their systems to evaluate organizational risk — internal and external — so that they can pivot accordingly.

Entities with global reach and numerous subsidiaries use entity management software for more real-time reporting. They use entity management software as a single source of truth by hosting, reporting, and evaluating data from all subsidiaries in one centralized platform. As a result, they make regular updates to corporate governance workflows.

Tedious and repetitive workflows impede corporate governance

Finally, many corporate entities rely on inefficient operating workflows. Businesses that use spreadsheets, physical minute books, or non-intuitive entity management systems subject their workers to tedious and repetitive corporate governance reporting tasks. As a result, workers struggle to complete governance reporting tasks by designated filing deadlines.

Modern entity management systems like MinuteBox automate most clerical, administrative, and data-entry tasks. The platform’s intuitive nature creates structured cloud-based minute book documents with modules highlighting what reporting data to insert throughout the system.

Automated workflows make corporate governance reporting more efficient and more effective. Detailed performance reports help stakeholders evaluate the effectiveness of their corporate governance programs.

If the program is successful, it can continue with only minor changes. If the data indicates anything less than success, stakeholders can review the evaluations and change their corporate governance processes.

Use MinuteBox to build effective corporate governance programs

Ensure your organization remains on the right side of corporate governance reporting. Join the MinuteBox revolution to build more structured corporate governance processes in an intuitive platform and streamline how you evaluate governance performance.

Economic volatility, tightening labour markets, and geopolitical instability; each of these factors are impacting how global compliance leaders manage their responsibilities. Despite these challenges, compliance tasks must be completed to preserve the legal standing of business entities around the globe.

Compliance leaders develop diligent compliance programs to instill structure and organization while ensuring proper reporting data is submitted to regulatory authorities. As new challenges disrupt traditional compliance workflows, leaders must adapt their protocols and push through these difficult times. Failure to maintain compliance amounts to significant penalties for the business.

So what are the three biggest compliance function trends that leaders must address? Gartner conducted a recent study to identify how compliance departments are adapting to complicated legal and geopolitical landscapes. Here’s a quick overview of the protocols that will impact compliance reporting into the new year.

Leaner financial capital to invest in compliance

Two economic considerations are affecting compliance departments everywhere: stubbornly high inflation rates and the ongoing risk of a global recession. As financial costs rise, leaders must mitigate the situation by finding more efficient ways to get important work done.

Most of a compliance department’s direct costs are tied to employee personnel. With inflation remaining near record-high levels, demand for higher wages has forced many businesses to implement hiring freezes. Forced to do more work with less staff, it’s imperative that business leaders, including compliance leaders, find ways to retain top-performing talent.

One way to do so is to hop on a growing trend in compliance matters. Compliance departments have spent the past few years doubling down on investments in technology that help automate many workflows and improve productivity. Technology can also take some of the pressure off overworked employees — stress becoming more profound with hiring freezes in place.

Solutions like entity management technology help companies build compliance protocols in more efficient manners. The platform includes a built-in compliance framework using drag-and-drop features that speed up how compliance-related tasks are completed. Employees can check off their lists faster and easier, freeing up their own time and reducing fears of burnout.

Fewer dedicated resources to support compliance workflows

With hiring freezes in place and salary demands on the rise to keep pace with inflation, it leaves companies struggling to maintain full-time workers. Compliance departments are no stranger to these challenges as, according to Gartner, compliance teams have seen decreases in full-time employee headcounts for over three years.

It’s also difficult for compliance leaders to retain top-performing talent in light of these challenges. The Great Resignation saw many full-time employees voluntarily resign their positions at companies where expectations placed on those same employees were deemed no longer reasonable. Low pay and fewer opportunities for advancement also trigger mass quitting.

Challenged to enforce compliance protocols with fewer members of the team, compliance leaders are increasing their reliance on technology to automate their workflows. Once again, solutions like entity management software can accelerate all compliance reporting data management tasks.

Workflows that used to require at least five minutes for support staff to file, tag, and sort pieces of compliance reporting data are no longer necessary. Using entity management platforms, the filing process for a particular record is completed in seconds, not minutes. Time saved on these workflows adds up to an abundance of hours that give limited staffed compliance teams more time to enforce protocols across the organization.

Compliance leaders investing in more supportive technology

In part due to global concerns about inflation and recessions, compliance leaders freely admit to Gartner that technology is a growing part of their operating plan. Investments in technology will be how many compliance leaders use their limited budgets, implementing solutions that will help automate compliance tasks and protect the interests of the organization.

Some of the areas cited by Gartner where technology will improve compliance workflows are:

• Automated systems to manage organizational hotlines
• Digital training modules to support compliance and ethics coaching
• Systems that help control risks to organizational compliance

Amongst all possible technology companies, providers of entity management software should be high on compliance leaders’ lists of vendor partners. Entity management software functions as a single source of truth for all compliance protocols. Any employees with questions about compliance and ethics protocols can simply refer to the platform for a helpful guide to answers.

Additionally, entity management software’s intuitive design includes automated prompts for any missing compliance data that poses a risk to the organization. If the prompts are triggered, compliance managers know exactly what data is missing that risks compromising compliance. They can input the missing data and, if they don’t have it, they know exactly what to ask for from the appropriate stakeholders.

Ready to transform compliance matters with more modern solutions? Join the MinuteBox revolution and introduce valuable entity management solutions to your organization’s compliance mandates.

On October 4, 2023, the US Department of Justice announced a new policy known as the Safe Harbor Policy. Deputy Attorney General Lisa Monaco made the announcement, aligning the new policy with the DOJ’s Corporate Enforcement Policy that seeks to uncover criminal conduct within corporate entities.

Here’s a quick breakdown of what the Safe Harbor Policy is, what it means for business entities, and how to remain in compliance with the new protocols should you undertake a merger or acquisition of a subsidiary business.

What is the DOJ Safe Harbor Policy?

The DOJ Mergers & Acquisitions Safe Harbor Policy is a voluntary self-disclosure that aims to provide greater clarity for acquiring companies. The policy outlines benefits to acquiring companies who uncover criminal conduct by the target company during the acquisition phase.

Acquiring companies can use the Safe Harbor Policy to minimize any legal consequences for their corporate stakeholders if misconduct by the target company is identified. Legal protection is granted if the acquiring company:

• Self reports the criminal conduct within the safe harbor period
• Fully complies with the DOJ during the investigation
• Engages in timely, requisite, and appropriate disclosure of financial fraud

Acquiring companies that voluntarily self-disclose such information will be granted a presumption of declination by the DOJ. Essentially, this means that the federal government will not lay any charges against the acquiring company should they cooperate with the DOJ.

What’s the timeframe to comply with the Safe Harbor Policy?

The DOJ has mandated specific timeframes for acquiring companies to comply with and benefit from the Safe Harbor Policy. Acquiring companies have up to six months after a merger or acquisition deal closes to voluntarily self-disclose any discovered financial malpractice by the acquired company.

Additionally, acquiring companies have up to one year after the closing date to remediate any ill-gotten gains in a timely and appropriate manner. The DOJ may extend both of these timeframes on a case-by-case basis under what they describe as a “reasonableness analysis.”

Purpose of the Safe Harbor Policy and similar legislation

Legislation like the Safe Harbor Policy, the Corporate Enforcement Policy, and other DOJ protocols are part of a broader effort to crack down on white-collar crime. North American society incurs serious consequences from white-collar crimes like money laundering, corporate fraud, and other examples.

Innocent people end up paying the price for these corporate crimes, impacting the health and well-being of people who fully comply with jurisdictional laws. The Safe Harbor Policy is designed to incentivize cooperation with authorities when mergers or acquisitions uncover examples of misconduct, fraud, and other criminal activities.

Other prominent legislation, such as the Corporate Transparency Act, requires corporate entities to provide diligent records about beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This is another example of the government mandating greater transparency and accountability amongst the country’s largest business entities.

Use legal technology to conduct in-depth M&A due diligence

As an acquiring company leading the merger or acquisition process, it’s incumbent upon your team to conduct diligent due diligence of the target company. After all, if you detect any signs of shady or nefarious conduct by the target company, you may decide to pull out of the process before a deal can be finalized.

To assist with the due diligence process, it’s best to use legal technology like entity management software. Entity management software is a platform built by legal professionals for legal professionals that functions as a single source of truth for all corporate reporting data.

Simply upload reporting data supplied by the target company’s legal, compliance, financial, HR, and other departments into the entity management platform. The platform’s intuitive nature organizes all reporting data into structured minute book records that offer a holistic overview of the target company’s fiscal, legal, and compliance positions.

While nothing is fool-proof, there may be data that’s missed during the due diligence process that could cause problems with the DOJ post-acquisition. The Safe Harbor Policy will protect your stakeholders should this occur, provided you voluntarily disclose your discovery to them.

Ready to modernize mergers & acquisitions while shielding yourself from legal or financial consequences? Join the MinuteBox revolution today and remain in compliance with the laws, no matter what subsidiaries you bring under your corporate umbrella.

Enterprise risk management (ERM) is an organizational strategy to identify and mitigate risks to a corporation’s legal, financial, and operational objectives. An ERM strategy allows key stakeholders to assess risks to the corporate entity. Using the results of these assessments, department heads determine the best course of action to mitigate risks.

Creating a diligent ERM framework creates awareness throughout the business about risks posed to corporate governance, legal compliance, and business profitability. Utilizing technology, such as entity management software, creates a centralized source of truth for all aspects of the risk management strategy. Stakeholders inquiring about the plan can refer to the platform for answers.

What is the purpose of an enterprise risk management plan?

An effective ERM strategy takes a holistic approach to managing risks throughout the corporate enterprise. Risk managers use an ERM plan to minimize risks while also identifying opportunities to improve operations.

Innovative or efficient workflows can improve, for example, how legal or financial data is reported to corporate executives and directors. When analyzed using the corporation’s ERM strategy, these new efficiencies can streamline business costs while preserving effective risk management.

What risks does an ERM framework address?

Anything that threatens the legal or financial integrity of a business is classified as a risk. However, most corporate risks can be classified into one of the following categories.

Corporate compliance

Corporate compliance risks are any actions taken by a company that violate jurisdictional laws or regulations. As an example, failing to produce annual financial statements to authorities within established timeframes risks violating compliance.

Take note that there are differences between compliance and ethical risks. Violations of compliance policies could subject the corporate entity to serious financial and, in some cases, criminal penalties. Ethical violations may be classified as legal, though they reflect poorly on responsible governance and the brand reputation.

Legal matters

Similar to corporate compliance, general legal risks threaten a corporate entity with substantial financial repercussions. A prime example of a legal risk is a contractual dispute with a vendor or third-party affiliate that results in a lawsuit brought against the corporation.

Business strategy

Changes in global economic conditions threaten the overarching corporate strategy of the business. These risks are largely beyond the control of the corporation, so having a thought-out ERM strategy enables your business to change course against troubling economic headwinds.

Business operations

Similar to economic instability, some unexpected risks affect global operations. For example, disruptions to the global supply chain, fueled by events like the ongoing war in Ukraine, have hindered business activity throughout the world.

Data security

Data security has always been an important part of any ERM framework. In recent years, the rise of invasive and disruptive cybersecurity data breaches has only accelerated the global need for robust data security measures. Ensure your ERM framework directly addresses cybersecurity and balances this matter with the cost of not improving data security protocols.

Financial performance

Of course, no risk management plan is complete without considering risks to financial performance. Anything that increases corporate debt or reduces profits is a risk to business growth and must be appropriately considered within your ERM framework.

5 components of an effective ERM framework

Now that we’ve identified areas in which an ERM strategy best serves your corporate entity, what are the key components of an effective ERM framework? Generally speaking, there are five important ways to build and maintain an ERM plan.

Risk identification

The first step is to identify the risks to your business. Assess the costs to your corporation from each identified risk so that you can evaluate proper solutions to mitigate those risks. Then, determine the cost to implement those solutions so that you can develop enterprise risk management in a structured manner.

Risk ownership and response

The second component of your ERM framework is to determine which stakeholder is responsible for mitigating risks in a particular aspect of the business. Assigning risk ownership to the appropriate leader ensures matters are not overlooked and solutions are implemented.

Risk control policies

Next, determine how you will solve matters of risk to the business structure. A great example of how to do so lies within compliance risks. By using entity management software, you have access to built-in compliance frameworks that use modules, wizards, and prompt notifications to enforce strict compliance throughout the organization. If there are any gaps in reported compliance data, the platform alerts users of these gaps so that corrective action can be taken.

Risk monitoring and reporting

Upon selecting viable solutions to manage corporate risks, set in place a process to monitor and report any subsequent risks. Start by creating ERM objectives and the list of stakeholders who are assigned responsibility for certain aspects of risk. Then, create a risk registration workflow that allows risk managers to monitor any deviations from the established framework.

Risk assurance

Finally, as proper monitoring and reporting structures are implemented, establish a process that allows business leaders to evaluate all reporting data. Use the takeaways from those reports to assess and continuously improve the ERM framework so that you’re constantly controlling risks to the corporation.

Use entity management software to help minimize risk

Solutions like entity management software are a boon to organizations that desire a structured approach to risk management. All reporting entity data is stored within cloud-based servers that are backed by biometric and hardware key authentication solutions. Join the MinuteBox revolution today and take your corporation one step closer to effective risk management.

Regulators say that effective corporate compliance begins at the top. They encourage company executives and directors to set an example in terms of a responsible culture built around ethics, morals, values, and a willingness to do the right thing.

There are overlaps between compliance and ethics that influence corporate cultures. When stakeholders demonstrate their capacity to operate in ethically responsible manners, the message is received by the rest of the corporation. Employees in the organizational hierarchy abide by the same ethical principles and, therefore, create a culture that upholds compliance.

What is the culture of compliance?

A culture of compliance is a set of attitudes, behaviours, and values that guide corporate workers to align with policies, procedures, and regulations. Essentially, a culture of compliance uses ethical principles to enforce legally binding protocols.

Some companies create diligent compliance culture programs that are shared with their employees. The Starbucks Standards of Business Conduct is one prime example, in which the corporation describes a series of ethics, values, and principles that all employees must adhere to as they conduct their day-to-day responsibilities.

Why is culture important in compliance?

Companies with strong organizational cultures empower employees to operate under both legal and ethical best practices. According to Gartner, strong compliance cultures produce both financial and non-financial benefits for the corporation. Specifically, they found that:

• Employees in strong cultures are 90% less likely to passively observe misconduct
• Employees in strong cultures are 1.5 times more likely to report misconduct
• Employees in strong cultures are 2 times as likely to be engaged with their companies
• Employees in strong cultures are 2.5 times more likely to voluntarily report misconduct

The commonality is a sense of trust. When people trust the corporate values; that they can safely live by those values, and that they can report misconduct without fear of reproach; they’re more likely to abide by those principles. As a result, any behaviour that could compromise compliance is dealt with before it becomes an issue for the business.

6 steps to achieve a culture of compliance

Creating an effective corporate compliance culture isn’t something that happens overnight. It takes time, patience, vigilance, and resources to implement the proper cultural protocols.

Here are six key steps recommended by Thomson Reuters that your compliance team should follow. Use these recommendations to achieve an effective culture of compliance.

Create an internal awareness initiative

Regulators are constantly changing compliance protocols, and employees won’t know how to abide by the proper protocols if they don’t know about them. Ensure your compliance managers have the resources to remain on top of these changes. Your compliance team is your first line of defence to uphold corporate compliance cultures.

Set the tone that the C-suite will communicate changes

Culture is set right from the top, and the C-suite executive team must communicate the cultural expectations to the rest of the organization. Expectations, policies, and procedures must be set by leadership, and there must be transparent communication of those expectations to shape the culture that develops from those guidelines.

Disseminate cultural protocols to employees

As your compliance team learns about changes that could impact corporate culture, they need the means to educate the rest of the company. Give your team the resources to produce educational content that can be disseminated to the rest of the company. Education is the best weapon against non-compliance activities.

Use the right technology to enforce compliance

Part of the educational effort is through the use of technology. Create e-learning programs like videos, modules, and quizzes that test employee awareness of compliance culture protocols.

You should also use technology like entity management software to create structured compliance programs. Entity management platforms have built-in compliance frameworks that are easy to use. Plus, they provide prompt updates to your team if any data is missing, filings are late, or anything that could trigger non-compliance.

Develop a rewards program for positive cultural behaviour

Incentives are the best motivator to prompt responsible actions. Leadership can use suitable compliance incentives as rewards for abiding by the compliance culture. Employees are far more likely to live by cultural values when they understand how they benefit from doing so.

Establish whistleblower programs that protect case reporting

Employees must feel safe coming forward when they witness unethical behaviour that amounts to misconduct. By creating a whistleblower program that protects employees, people will find the courage to report misconduct so that the compliance culture remains in effect.

Cybersecurity matters have emerged as one of the biggest issues facing global businesses. The global average cost of a cybersecurity breach now stands at $4.45 million.

When looking at the numbers on a regional level, the data is even more alarming. For example, in the United States alone, during 2006, the average cost of data breaches was $3.54 million. Fast forward 17 years, and that cost has escalated by over 150% to an average of $9.48 million, according to Statista.

It’s not just the direct financial costs of data breaches that concern organizations. There’s also the matter of corporate compliance. Data security breaches affect corporate compliance protocols that, left unattended, could subject legal entities to even greater financial costs.

What is the role of cybersecurity in compliance?

Cyber compliance is a series of corporate processes designed to maintain data privacy and security. These processes must align with regulatory standards and by-laws to protect sensitive corporate records.

Protecting sensitive data and abiding by the laws aren’t the only reasons to invest in quality cybersecurity measures. Cyber compliance also makes practical business sense that supports growth initiatives. Compliance helps preserve trust with existing and future customers, while also improving overall security measures for the corporation.

5 emerging cybersecurity compliance trends

Cybersecurity breaches occur seemingly at random, and no entities seem impervious to such a breach. In August 2023, for example, the UK Electoral Commission was the victim of what it described as “a complex cyber-attack As many as 40 million UK citizens’ personal information was accessed through the UK’s hacked electoral registers.

Given the reach, breadth, and impact of cybersecurity breaches, legal entities must take proactive measures to protect their sensitive records and maintain corporate compliance. Here’s a breakdown of five of the biggest emerging cybersecurity compliance trends.

1. Reinforcing databases against threats of artificial intelligence

Artificial intelligence (AI) is disrupting many traditional industries and workflows. While there are many benefits to incorporating AI into business practices, there are also an abundance of risks that could compromise corporate security and compliance.

Malicious actors can leverage AI to develop sophisticated malware that penetrates cybersecurity firewalls. These attacks risk becoming more prevalent if AI is primarily used by legal entities to manage cybersecurity. In one fell swoop, the defence mechanism can be turned into the commencement of a cyber attack.

To minimize the risk of these circumstances, ensure your cybersecurity measures are balanced by AI, machine learning technology, and human managers. Using technology can help automate and streamline many cybersecurity sequences. But you should always have human workers overseeing the platforms and ensuring no security measures are overlooked by the technology.

2. Ethics of using AI to enforce data security

There’s also the matter of business ethics regarding AI. Two key ethical concerns regarding the global adoption of AI solutions are the effects on data security and consumer privacy.

For AI to function properly, it requires substantial volumes of data to make decisions. As a result, there are growing concerns about how AI platforms collect and manage that data. If AI is collecting and analyzing sensitive data without giving consent or proper security clearances, the corporations using that technology could be liable for violations of privacy laws.

If your organization intends to use AI, ensure your corporate compliance framework includes the proper protocols to do so. Data must be handled with sensitive care and using strict security measures to avoid compromising any individual or corporate rights to privacy.

3. Security compliance rules and regulations

In the summer of 2023, the Securities and Exchange Commission (SEC) adopted new security compliance rules. The new regulations require legal entities to disclose any cybersecurity incidents and provide annual summaries of their cybersecurity risk management, governance, and strategies.

The SEC deems any corporate data as the intellectual property of shareholders and stakeholders. According to the SEC, transparent disclosures of any compromises of that intellectual property will protect investors, corporations, and the public at large from unlawful uses of sensitive corporate data.

Ensure your compliance reporting structure includes any risks that compromise your corporate data security. Failure to provide transparent reports of this information risks leaving your entity exposed to the penalties of non-compliance.

4. Mitigation of third-party risks from partners or vendors

Very few corporate entities operate on an island. Relationships with affiliate partners or third-party vendors are vital to further grow the interests of the business.

However, in an increasingly interconnected world, those third-party relationships may not be as secure as they once were in the past. Integrations with these vendors that lack the proper security parameters could leave sensitive data vulnerable to cyber-attacks.

As part of a compliance framework, ensure all third-party vendor relationships are backed by robust security measures. Creating risk management policies that vet and evaluate third-party vendors reinforces your corporate security and strengthens the trust of all stakeholders.

5. Automation of more cyber compliance processes and workflows

Finally, corporations increasingly rely on technology (non-AI technologies) to help automate many compliance tasks and workflows. Entity management platforms are a prime example of these solutions, and the market size for entity management software solutions will reach $3.85 billion by 2026.

Entity management platforms like MinuteBox have built-in compliance frameworks that guide legal and compliance teams to build robust compliance protocols. The platform is very intuitive and user-friendly, relying on drag-and-drop modules to help formulate and organize compliance protocols in a centralized domain.

Users of entity management software report valuable time savings and operational efficiencies. The platform accelerates time spent managing corporate compliance protocols, while still maintaining the highest standards for data security and privacy protection.

As a result, expect more organizations to embrace these modern solutions for corporate compliance and data security. To hop onto the bandwagon, join the MinuteBox revolution and take the leading step towards modernized corporate compliance.