The global changes in the modern business environment have moved corporate governance from a buzzword to a strategic priority. At the same time, companies who practice corporate governance face a whole set of new challenges ranging from handing the Great Resignation and other consequences of the pandemic and ending with compliance across multiple jurisdictions.
It also turns out that simply throwing more people and resources on the corporate governance does not help achieve the desired goals and leads to more stress, burnout, human error and missed deadlines. Boards and lawyers interested in coping with these novel challenges urgently need new approaches, technology and tools to grapple with the ever-increasing need for effective data management, data sharing, automation and cybersecurity.
ESG and Other Challenges Faced by Businesses in 2022
Environmental, Social and Corporate Governance Challenges
In 2022, the acronym ESG, standing for Environmental, Social and Governance, has become top of mind for most corporate boards. After the U.S. Securities and Exchange Commission (SEC) has created the ESG Task Force, many businesses had to change their attitude to ESG compliance from nice-to-have to need-to-have and started developing new policies.
This shift has been particularly tough for companies working in multiple jurisdictions practicing their own approaches to ESG compliance. For example, SEC requires NASDAQ-listed companies to follow the diversity rule, requiring entities with six or more directors to have at least two diverse directors or explain why they don't. According to the Nasdaq diversity rules, at least one director must be a female, and at least one should self-identify as an underrepresented minority.
Meanwhile, other jurisdictions have their own ESG focus, requiring companies to develop unique implementation strategies. Thus, in January 2022, the Canadian Securities Administrators (CSA) has issued guidance for ESG disclosure by investments funds. The new regulation focuses on funds that mention ESG factors among its key priorities and is intended to help investors avoid greenwashing and make better decisions about ESG solutions.
Other Governance Risks Face by Entities in 2022
The ESG issues are far from being the only challenges faced by businesses in the post-pandemic world. Companies are also experiencing the complications of employee mobility, the issues related to maintaining a remote workforce and the risks of employment law compliance failures.
Other challenges faced by businesses in 2022 include:
• pandemic-related supply chain issues,
• regulatory actions,
• privacy and cyber security compliance,
• increased global compliance requirements.
How Technology Can Help with Better Corporate Governance
The existing concerns within organizations make the need for effective data management and application of digital technologies all the more important. As most companies face issues in addressing major shifts in corporate governance, many businesses note the lack of access to accurate and up-to-date information as one of the most serious issues.
Meanwhile, digital technologies can streamline data sharing, optimize workflow and enable necessary automation.
Streamlining Data Sharing for Entity Management
It is a widely accepted fact that sound governance practices can only exist when enabled by effective entity management. Maintaining corporate records, delivering accurate reporting and staying on top of regulations in an ever-changing legal landscape are hardly possible without effective access to data and data sharing.
The old legacy solutions, such as spreadsheets, show as inefficient, slowing down productivity, causing friction and making effective data sharing impossible. Meanwhile, digitizing manual processes, for example, making scan-copies of paper minute books and other documents, do not provide any tangible improvements. On the other hand, data management can be made most effective by storing documents in a centralized database, providing remote access to corporate users.
Automation of Entity Management
While human capital is companies most valuable asset, the human factor has been reported as the key cause of inaccurate reporting and, consequently, non-compliance, not to mention data leaks and breaches. Meanwhile, automation of entity management and legal processes streamlines compliances, minimizes errors and brings corporate government to an entirely new level.
According to the recent report by the Corporate Legal Operations Consortium, 57% of legal departments participating in the survey mentioned automation of legal processes as their top-ranked priority in 2021. When lawyers and paralegals automate manual processes, they can focus on high-priority tasks, ensure compliance and meet the deadlines. Meanwhile, entity management automation helps improve workflow and collaboration not only for the law firms and in-house legal teams but across all their clients.
Mitigating Challenges with Technology
Are you struggling with these and other governance challenges and interested to learn how other businesses cope with similar situations and other issues? Would you like to know how digital technology and entity management tools can help you manage corporate governance?
Read more in the ebook on How Legal Technologies Bolster Corporate Compliance and Mitigate Risk by Peter Nguyen, a well-known expert in legal technology and in the practice of law, recognized by Legal 500, in collaboration with Stephanie Ford from Obiter Marketing, catering to the unique needs of the legal industry. In the book, Peter shares his insights on how legal technology helps companies cope with unique environmental, social and governance concerns, supply chain issues and other challenges of the post-pandemic world in 2022.