Business people discuss how to find the right approach to entity management
ComplianceMay 05, 2023

How to find the right approach to entity management

This article originally appeared in ALM, April 17, 2023

Entity management – especially these days – isn’t what one might call an “easy lift.” Successfully managing the multitude of responsibilities and obligations that an organization has for its legal entities with regard to the owners, government regulations, and other stakeholders is critical to a business’s long-term health.

To do it correctly requires comprehensive knowledge spanning such robust and varied areas of expertise as cultural customs, variations in jurisdictional rules and parameters, and different business practices – a challenge that is only exacerbated as a business continues to grow in scale and size.

And while onboarding technology solutions to help automate process-centric tasks or engaging the services of an outsourced provider who can blend the trappings of tech with domain expertise can certainly lighten the load, it isn’t always abundantly clear which approach best suits a given organization. Here are some things to consider when building a strategic approach to entity management.

The problem

Most business professionals would likely say that growth is a good thing – which is more or less true. But it’s not without its complications. For starters, the larger an organization’s footprint grows, the greater the size of its regulatory burden. And while many jurisdictions may deploy similar regulatory frameworks, the devil is in the details – from the way that cities, towns or even countries elect to administrate their laws to the unique customs that define certain industries. It’s also worth noting that many regulations are written in sand instead of stone, subject to constant revision or change.

Additionally, chances are that a growing company encompasses any number of subsidiaries, all of which require strict management to ensure compliance and governance are upheld to the highest standards. These tasks often walk a fine but critical line between wildly mundane and unbelievably necessary. The process of manual data entry, for instance, is time-consuming and detail-oriented, with practitioners tasked with maintaining upwards of more than 100 unique data fields on a single entity. Mistakes on this or other compliance-related duties can lead to costly penalties and even costlier business disruptions.

How to find the right approach to entity management PDF
How to find the right approach to entity management

A technology enabled approach

So we’ve established that entity management can be a challenging endeavor for corporate legal departments and their internal staff – but what are the steps they can take to successfully manage that load? Technology – or onboarding an entity management solution – is one of the more commonly traveled roads. Effective entity management depends more closely upon interdepartmental corporation and data sharing than one might initially think.

Putting regulatory concerns aside for a moment, data accessibility also plays an important role in supporting key business transactions. Having accurate entity data furnished in a timely manner can have a huge impact on whether a deal goes smoothly. When utilized properly, an end-to-end entity information management tool allows corporate secretaries, paralegals, auditors and employees from every corner of an enterprise to work from a single, central repository in support of compliance-related transactions.

But finding the right entity management solution requires time and thought. No two companies are alike, and a strong entity management program must be based on the information that is the foundation of a particular company and the compliance regulations that they must abide by. Public companies, for instance, sometimes have different requirements to track and abide by than private companies, and entities subject to federal regulations will have additional information that they need to track.

Fortunately, there are some basic ground rules worth following when it comes to choosing the right entity management system. It’s a good idea to seek out a solution that provides ample flexibility while still automating as many routine and process-centric tasks as possible. This could take the shape of a system that can integrate an organization’s entity data with jurisdictional rules and tools will help to automate compliance tasks. The ability to access data by location, time frame, ownership and other perspectives also allows users to respond to internal requests for information more quickly.

Domain knowledge

While onboarding technology for internal use can yield dividends for organizations looking to enhance their entity management programs, it may not always be the most efficient approach. Some legal departments, for example, may not have the expertise required to handle their entity management obligations on staff, with technology alone only able to carry them so far. Outsourcing entity management to a provider that can bring the best of both technology and domain knowledge together under one invoice could be a more appealing choice. It also buttresses against the natural cycle of turnover that unfolds in any organization and the loss of institutional knowledge that can occur when it does.

But the choice between technology and an outsourced provider shouldn’t be decided with a coin toss. Instead, organizations should compile a baseline of the cost and the potential rewards will help inform the decision about how – or if – to proceed in either direction. Chief among those considerations are the key stakeholders and internal functions that will be impacted.

For instance, outlining the needs of stakeholders beyond the in-house legal team – such as the corporate secretary or the finance and tax departments – can help a company to determine the services or capabilities it needs to truly be successful. Maybe an organization’s entity workflow could benefit from the addition of an outsourced Managed Service Team to free up bandwidth for other high-value tasks, or elevating its highly qualified team of legal professionals into data manager roles (a welcome step up from data inputter).

Even under the best of circumstances, entity management can be a daunting challenge for organizations attempting to navigate an increasingly complicated regulatory landscape. Onboarding the right entity management solution or outsourced provider can help to reduce the strain on employees already carrying heavy workloads and bring new efficiencies to existing processes. However, corporate legal teams should first consider the needs of other departments as well as their own pressing business concerns before deciding on the approach that will carry them toward success.

Please complete the form below to access the full article text

Melissa Overgaard
Compliance Business Consultant
Melissa is a Compliance Business Consultant at CT Corporation. Based in the San Francisco Bay Area, she specializes in helping clients evaluate, implement and maximize their deployment of entity management solutions.
Expert Insights
Stay informed
Subscribe to CT Corporation's newsletters for business compliance updates and legislative news.
Back To Top