Legal entity reporting: Best practices
Every organization's legal entity reporting needs will invariably be nuanced. While the basics of incorporation are similar, the ways that organizations choose to run their entities are as varied as the types of organizations operating in the world.
On the surface, managing subsidiary reporting and the corporate record may seem like a relatively simple task, but those in charge of legal entity reporting have a lot on their plates. They must:
- Have oversight of and manage the company's subsidiary and affiliate information to ensure the integrity of entity data.
- Track each entity's life cycle.
- Track all officer and director appointments, and ensure personal details are stored safely and securely.
- Understand subsidiary and ownership structure of all entities and facilitate both reporting on and analysis of what that structure means for reporting and compliance.
- Know all registration requirements and ensure any entity in question is compliantly registered across all its domains.
- Ensure that all licenses and certificates are up to date so the entity may continue to legally operate.
- Align with corporate governance needs.
And that's all before they start thinking about regulatory filings! The burden of legal entity reporting can be huge; for example, the Federal Reserve system collects more than 80 different report types every year, each of which has different cuts, definitions and consolidation rules.
Learn from reporting best practices
The way each organization handles those, and other, elements of governance and compliance will change, but there are best practices common to all subsidiary reporting ' those elements and practices that help to ensure a robust and functioning organization, one that can remain in good standing wherever it's operating.
These legal entity reporting best practices not only take in policies and workflows, but harness the plethora of technology now available to governance and compliance managers. With automation and a central repository for the corporate record, subsidiary reporting can become more streamlined and easier to track. After all, accurate subsidiary information is crucial to a company's business function and timely compliance, so it's not something any organization can afford to take lightly.
So how can entity managers get in step with the best in legal entity reporting processes? By considering the following best practices, of course.
Ensure access to real-time entity data
It's no use reporting on things that happened last month, or even last week. The regulators want to see the very latest information to ensure nothing has slipped and the organization remains in compliance, so it's imperative that organizations work with processes and systems that allow them to access real-time entity data. Static databases can cause significant classification errors in legal entity reporting, but organizations can mitigate that risk by ensuring data is stored in a dynamic,real time environment.
Action: Review current processes and assess any time delays or lags involved in your access to entity data. If it's not real time, it may pose a risk to legal entity reporting and compliance.
Document everything and store it securely
Even if you're not sure whether it's important or relevant, file it away until you know for sure. It's much easier to remove unneeded information than it is to dig around and try to find something that was ditched long ago. This is where cloud-based entity storage works so well; there's no need to worry about bandwidth or server space, which means you can expand the entity data you store while also knowing it's protected by robust security policies that are tested against the most hardened hackers.
Action: Review the documentation and information you keep hold of, and make sure you have everything important before it comes time for legal entity reporting.
Break down internal silos
The quickest way to a road filled with subsidiary reporting errors is to put your blinkers on and not communicate across departments. Legal entity reporting must involve teams from across the business ' be it treasury and finance, legal operations, governance, the board, HR or IT ' but to ensure you get up-to-date cross-functional input, it's best to create a central repository that everyone can access. This helps to ensure each team can get ahold of the relevant information, while those responsible for legal entity reporting have a bird's-eye view of all operations. Instilling a culture of openness can also help to give legal entity reporting the status it needs internally ' that it must be taken seriously and take priority regardless of job role. Without clear and transparent communications between internal teams, the organization runs the risk of falling afoul of the global push for transparency in operations.
Action: Gather a cross-functional team to act as a working party for compliance and legal entity reporting, ensuring clear and open communications.
Automate repetitive tasks and workflows
When we rely on humans, we run the risk of introducing human error. It's only natural. Our eyes don't catch every mistake, our brains can miss subsidiary reporting deadlines by accident, our hands can send confidential information to the wrong stakeholder – or worse, to an outside third party that really shouldn't see it! Today's modern governance and compliance technology allows many repetitive, manual tasks to be automated, which, in turn, minimizes manual intervention and limits the use of spreadsheets. Entity management software workflows can automatically push documents and tasks to the right people at the right time, and this automation not only reduces the risk of human error, but also helps to free up time to focus on more strategic and bigger picture items.
Additionally, entity management software allows users to create dashboards specific to their responsibilities and departments. This frees users' time and facilitates an efficient workflow. For example, a user in Finance can improve his or her workflow by creating a dashboard that provides information most relevant to Finance. Instead of being bombarded by reporting requests, the Finance user can, when needed, make efficient and informed decisions based on relevant data.
Action: Invest in entity management software that makes the most of artificial intelligence, allowing automation of repetitive tasks to save time and money, and mitigating risk.
Regularly review processes
Of course, all good processes can break at some point and even the best workflows can run into trouble. Even if your organization has automated tasks and is using the very best in modern compliance technology, you should still make it a priority to regularly review how your legal entity reporting looks and feels. Circumstances and requirements can change, especially in a global market as politically fraught and moveable as the one in which we currently operate ' and you must ensure your governance, compliance and subsidiary reporting practices remain fit for purpose''across all jurisdictions.
Action: Schedule regular reviews, at least annually if not more frequently, and ensure processes include a regular checking of regulatory requirements in every jurisdiction.
Create a single source of truth
The best way to power all of the above, and to make the most of legal entity reporting best practices, is to create a single source of truth for all entity information. By housing the corporate record in a central repository – one that is accessible to all stakeholders from wherever they are in the world – organizations can help to mitigate regulatory risks and ensure legal entity reporting can be achieved seamlessly and efficiently.
Entity management software, such as Diligent Entities, can help legal operations teams to embed these best practices and streamline the legal entity reporting functions. This software enables organizations to centralize and manage their corporate subsidiary data management to simplify entity governance throughout the entire organization, improving compliance and mitigating risk.
Legal operations teams can manage the ongoing accuracy of the corporate record by using compliance calendars, reminders and workflows for better data, while the cloud-based nature of Diligent Entities enables storage of entity information, documents and organizational charts in a highly secure format to create a single source of truth. It can also enable reports on governance and compliance requirements, and electronic filing of statutory forms into global regulatory bodies.
Diligent Entities also integrates seamlessly with Diligent Boards and a secure file-sharing system to create the Governance Cloud, an all-in-one compliance and governance ecosystem built to drive the modern organization.
Action: Get in touch and request a demo to see how Diligent's secure cloud-based software can help you make the most of legal entity reporting best practices.
