Why you shouldn’t use a free entity management software solution
'Entity management' is a term that's increasingly used for completing the essential goals of corporate governance, regulatory and compliance tasks. As we've covered in this space before, an entity management software (EMS) platform aims at three major functions:
- Cutting out manual processes, expediting the formation of new entities and ensuring that regulatory requirements are met so legal teams can spend more time on the long-term goals of the organization, thus increasing efficiency;
- Achieving improved governance, regulatory and risk standards to ensure compliance with the thicket of laws and regulations in the overlapping jurisdictions your organization operates within; and
- Unifying the sources of data and ensuring their accuracy to transform your ability to effectively manage them and allow your staff to efficiently summon accurate data upon command.
As with other tasks, when considering an effective EMS solution, entity professionals are constrained to measure the effectiveness of a particular platform against its costs. Especially among small and medium-sized organizations, the need to cut costs to 'or just above' the bone is making some look to free platforms. But in general, as with other software solutions and business decisions, you get what you pay for.
5 Questions to Ask About Free Entity Management Software
In this post, we aim to demonstrate why free EMS is a solution that a growing organization can ill afford. In doing so, we present five different questions you should ask about any EMS platform, whether it comes free or at a price:
1) How secure is your data?
As we've covered at length in other posts, the first essential task of EMS is creating a single source, a digital vault of data truth for your entire organization. The advantages in having such a source are immense, but with centralization, your exposure to potential data breaches can increase.
Breaches are becoming more common: In 2021, the phone numbers and personal data of 533 million Facebook users were leaked online, resulting in nearly $1 billion in regulatory fines against the company. The price tag of the breach may pale in comparison to the damage experienced to the company's reputation and loss of trust among many users.
You should know the ins and outs of how your potential EMS platform is guarded against breaches, and its protocols to control the damage if the worst should happen. Chances are that using a free platform for EMS will come with minimum or non-existent security. Otherwise, they probably wouldn't be giving it away for free. If your data has no value to others, why should they spend time and money figuring out how to protect it?
2) How will your EMS solution evolve with changes in or growth to your business?
A software platform must be able to fulfil the needs of your organization — not only as it presently exists, but its future needs as it changes and expands. This is why an effective EMS solution should be able to keep and even increase efficiency in its features and functionality as an organization grows. It can meet the demands of all key stakeholders across the jurisdictions in which they operate, as well as adapt to the different requirements of specific industries and sectors within which your business operates.
The bare minimum standard for functionality that exists among free platforms for EMS unfortunately most often means that even when the essential features you need are there, they aren't appropriately sized or designed to scale along with your business.
3) Will the right people have appropriate access?
This, in some ways, is the same question as security in #1. Along with managing all data from a central repository or vault, that vault needs to come with the appropriate levels of access and the ability to assign and reassign editing and reading permissions by individual and group automatically.
Free EMS solutions often have to be prodded and coaxed into providing the kinds of access your organization needs across all of its entities right now. Even where they can be, free typically means no or minimum service, which, in turn, may lead to your IT team spending dozens of frustrating hours getting the free platform to work to your requirements. It might have been cheaper in the end to just buy a platform that has more functionality and includes service.
4) What features are necessary to manage your entities appropriately?
We've discussed the major aspects of entity management at length in previous posts. To brutally simplify them, they include:
- Secure storage for legal data
- Full entity lifecycle management and structured workflows
- Visualizing corporate data through entity management diagramming
- Effective and flexible options for reporting to regulators
If the free EMS platform you're looking at provides even two out of four of these effectively, you've found something special. But that probably isn't enough to survive and flourish in entity management today.
5) How reliable is the software provider?
As we've said before, if your data isn't valued by a software provider for its proper place in the organization or your relationship with the provider, there is little reason for them to expend much effort protecting it and helping you to manage it with the constant service that good entity management demands.
Free platforms in all different kinds of software tasks, not just entity management, can appear and disappear with few consequences to their makers, but potentially brutal ones to those who rely on them. They can get bought up, change their essential functions on a dime, or impose fees without your input. Consider whether the savings are truly worthwhile when it comes to protecting and managing your data.
Meet Your Needs with Diligent Entities
Diligent Entities isn't free — but it has a number of elegant and effective solutions along the lines you're seeking to enable smarter decision-making.
Our vision: With Diligent Entities, the leader in global entity management, we are driving the governance, regulatory and compliance industry forward.
Our expertise: We provide governance solutions to 1 million global users from over 25,000 organizations with clients in the Fortune 100, FTSE 100 and ASX 50.
Our platform's flexibility: Whether you're a highly regulated multinational organization with thousands of entities or an up-and-coming, mid-market company, our platform can seamlessly integrate fulfilling the short-, intermediate- and long-term aims of your organization's compliance function.
We are confident that we can serve as your organization's entry point and constant partner in establishing best governance practices. Request a demo today to learn more about our solutions.
