In-house legal counsel often isn’t paid attention to until an emergency pops up. This approach leads a company’s in-house legal counsel to become accustomed to a reactive role rather than a proactive one. Entity management software can change that.
What Is the Difference Between Reactive and Proactive Governance?
Reactive governance involves taking action once an issue has been acknowledged but before it escalates into a bigger problem of deeper concern. In contrast, proactive governance means acting in advance to avoid having any sort of issues at all.
The difference between reactive governance and proactive governance often comes down to:
- When a board is made aware of the severity of a risk or problem
- The probability of it occurring
- The best way to try to avoid it
There are more differences, but the rest are not as frequent.
Reactive Governance
Proactive in-house legal counsel must be able to identify the predecessors of reactive governance.
Usually, the first predecessor will be data. No matter how effective a company may be when it comes to collaboration and communication, nothing will be able to compensate for disorganized data. The larger the company’s overall hoard of data, the more crucial it is for that data to be well-organized.
The second predecessor of reactive governance is when once-valuable information that was intended to help decision-making is forgotten or goes completely unused. This oversight most likely means that, in reality, the information lacked quality or lacked accuracy, and relevance.
Information that lacks quality could have been published by an unreliable source, be completely outdated, or be overall inefficient. The more removed that the data is from its source, the more edited it will likely be; therefore, the less relevant context it will have overall.
The third predecessor of reactive governance is when a company does not have the resources to transform its information into insights. Companies need effective technological resources to organize large amounts of data, and they usually need humans performing administrative work to turn that data into insights.
Proactive Governance
A few key benefits of proactive governance include:
- Efficient avoidance of problems and risks
- Pursuit of unexplored opportunities
- Release from the negative effects of reactive governance
Proactive governance is most likely to be achieved by quickening the collection, curation, and interpretation of market and competitive intelligence.
Being proactive involves planning in advance to take a strategic view of your company’s compliance requirements, examining the regulations that go hand in hand with those requirements, and finding every control, audit, policy, procedure, and task related to compliance that ties back into those regulations.
Proactive governance allows you to have a clear idea of requirements, fewer chances of any problems and surprises, and the ability to track the controlling regulations. You can even make sure that your processes change and adapt at the same time that the regulations do.
Modern proactive governance usually requires multiple project resources to catch governance and compliance issues. It should be noted that this capacity usually comes with significant costs. Despite this issue, however, there are still many different advantages to this approach.
One advantage is not having to rely on audits to address any governance problems. As an alternative, the project manager will open a discussion regarding decisions, problems, and approaches.
Another advantage that sets proactive governance apart from reactive governance is that you and your team won’t have to make corrective actions anymore. Proactive governance ensures that the team makes the correct decision the first time around.
How Cloud-Based Entity Management Software Can Help
Avoid scrambling to implement reactive practices when you and your company can be proactive. How? Cloud-based entity management software can play a key role in keeping entities under control.
Governance and compliance can be difficult areas to manage, and they won’t be getting easier to handle any time soon. New processes and new policies are good ways to try to become more proactive, but they're also fairly easy to ignore or forget about. This disjunct is where cloud-based management software comes in.
A cloud-based management system can assist companies with cataloging, managing, and reporting their obligations, almost like checking off items from a to-do list. This approach helps improve proactivity, ensures compliance, mitigates risks, and enhances decision making.
Avoid Reactive Work with the Right Partner
By taking a more proactive approach to governance rather than a reactive one, reactivity will significantly decrease, and in turn, compliance will be less of a problem. Consider using Athennian, which offers a variety of useful features, including but not limited to:
- Corporate information sheets
- Corporate information templates
- Custom reports
- Virtual minute books
- Visual org charts
- In-app live chat
- Feedback center
All of Athennian’s features can benefit an in-house legal team. Want to learn more about what our software can do for you? Speak to an entity management software expert today!
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