What Are the Catalysts Driving Automation in Entity Management?

Luc Van Daele
4 min read

Diligent partner Legadex is an international legal services provider based in Amsterdam, with a core focus on entity management, contract review, risk and compliance and contract lifecycle management. We asked company co-founder, Luc van Daele, for his thoughts on what’s prompting in-house legal and company secretarial teams to turn to automation and systems integration.

Legal and corporate governance teams today are being tasked with handling an increasing workload, often while managing with a lower level of resources.

It was quickly becoming evident that the compliance function needed streamlining. In many corporations it had become chaotic, with either too few or too many people involved and a mass of disparate and disorganized data, handled inconsistently.

Companies are increasingly realizing that automating recurring and repetitive tasks will enable their governance teams to handle higher volumes of work with more accuracy. Not only that, but it will empower them to spend more time focusing on strategic initiatives – where to rationalize entities or enter new jurisdictions, potential mergers and acquisitions or when to launch an initial public offering (IPO).

Here are a few of the key drivers precipitating the move to increased automation for the in-house legal and compliance teams at corporations we work with…

Greater control of costs

To cope with an increasing workload, some of our clients have opted to increase headcount in their corporate governance teams. But this is a temporary solution to an ongoing issue. It will often work out cheaper to set up automation to complete repetitive tasks. This doesn’t necessarily mean that fewer people are needed, but it does mean that the team will be freed up to focus on tasks that would add value.

Automation also helps to make costs more predictable. Legal is a bit of a black hole – project costs and workloads can often turn out to be much higher than anticipated and human error can cause even more work and spiraling expenses. Judicious use of automation will speed processes up, increasing consistency and accuracy while enabling greater control of costs.

A clearer view of the work being done

As businesses grow, the governance and compliance workload tends to grow proportionally. The wider business doesn’t always acknowledge the impact this can have on the central legal and governance teams. Inevitably they will be spread more thinly, meaning they only have the capacity to cover the basics and work reactively.

This lack of insight can lead to inefficiency and of course stress and poor levels of engagement, which can in turn lead to a higher churn of staff in that function. Of course that will further dent efficiency – a very negative cycle altogether.

Freeing up governance teams from reactive work

As corporations grow, business functions such as tax and finance start depending more on the data managed by the governance function.

Finance will need director, entity name, address and banking information and tax will need information to help them assess the most appropriate transfer pricing routes. They will usually ask the governance team for this information on an ad-hoc basis, turning them into inbox managers.

Ironically the increased pressure can lead the legal and governance teams themselves to fall into working in a silo.

Integrating data systems into a central entity management platform will provide a single source of truth for your entire corporate record. Key stakeholders in other departments will then be able to access that pool of data on a self-service basis, with permissions set appropriate to their level of authority. That will free up company secretaries and their colleagues to plan their own time and work more productively.

Handling a faster turnover of data

Business data today changes at an alarming rate – according to Opus it typically decays at 25% each year.

Keeping up with that rate of change is manageable when a company has a small corporate record, but as an organization grows, it becomes harder to keep on top of the data. And good up-to-date business information is essential for accurate reporting and compliance.

A blended approach

Today, we see approaches to entity management ranging from completely decentralized and chaotic to 100% centralized, efficient and integrated.

For many corporations working across a variety of jurisdictions with different requirements and entitles with different set-ups, a blended approach will make most sense. However, from our experience, the more efficient and streamlined a company can be about its day-to-day entity management, the better.