How do you know if you need a (new) legal entity management solution?

28 December, 2022

Insights

In this article, we will look at why people decide to license a legal entity management solution.

There are different reasons why you start using a legal entity management solution. Some reasons are similar for most groups, whereas others are very specific for some groups. There are also different reasons to utilize a legal entity management solution for different departments.

We have divided the most common reasons under the different headings listed below.

  • Organizational
  • Technical
  • Structural
  • Other

Many of the reasons we discuss in this article are relevant for groups that already utilize an existing legal entity management solution. Current solutions can not always meet the increasing compliance burden, or some systems uses old technology or lack the functionality required by a modern department. Thus, there may be reasons to replace an existing solution.

Below are some reasons for implementing a new or replacing an existing legal entity management solution, together with comments under each heading.

Organizational

  1. An expanding group
    When your group grows, both organically and via acquisitions, your organization also grows. Your organization will consist of more people, and the complexity of how you organize your group will increase. You may have people in different time zones and on other continents. You may also divide the group into different regions, divisions, or business areas. A complex organization requires an efficient system to manage all reporters and allow you to appoint roles and responsibilities. Even a less complex organization may want to allocate responsibility within the group and may need an advanced access rights system to manage who can see and do what in your solution.

    More people equals more manual work without system support.

  1. Manage data between departments
    Several departments often use data typically found in an organization’s legal entity management solution. If one department is responsible for legal entity management, they may receive requests from other departments to deliver data. Legal requirements have increased in the last few years, and legal entity data has become even more essential to include in filings with authorities. These filings often require data to be delivered in new formats or segmented in specific ways. These new requirements increase the pressure on the people responsible for legal entity management.
  1. Data is found locally
    Most legal entity data is found, updated, and filed locally. Collecting local data from your local entities requires a lot of manual work. Many groups look to make this process more efficient by allowing local people to report data in a legal entity management solution instead of mailing it to the responsible people. Appointing locally responsible people will make the process more efficient as people can update data directly, and you can review data centrally to apply a four-eyes principle. Implementing a solution for local data reporting in a system will automate your work.

Quality control

  1. Automatic controls
    As mentioned above, data is found locally. If you introduce a solution to collect data from local people, you can also implement automatic controls to avoid simple mistakes by people who maintain your data. You can introduce a sign-off process to increase quality even further. Validation is done consistently by the system for all data, ensuring that the information entered is in the correct format.

    These functions will reduce the number of errors that appear during the review process.

  2. Automation of the process
    As responsible for legal entity management, you would like to automate the process and have the legal entity management solution monitor the process for you, automatically remind people of reporting responsibilities, and send out reminders. An automated process will help you be on top of the process and increase the speed of delivery and the quality of your data.
  1. Access to high-quality data
    If you establish a single source of truth, a master database, you can reliably share data between different stakeholders and ensure everyone works with the same quality controlled data. You can also control who is granted access and what data users can change and view.

A master database will ensure that people within the organization easily access high-quality entity data and org charts.

Technical

  1. Accessibility
    A SaaS system for legal entity management ensures that entity information is accessible from anyone in the group with the correct permissions, even from newly acquired legal entities. An acquired company or group can immediately enter details on the entities without having to wait for internal IT to establish, i.e., VPN connectivity to internal data centers.
  1. Connectivity
    Having entity information in a legal entity management system ensures that it can be easily integrated into other systems. A modern entity management system supports integration using various APIs, both Web API and event-driven API. A mature entity management system should also be easy to integrate in your services landscape using single-sign-on and automatic user provisioning protocols such as SCIM.
  1. Usability
    A modern entity management solution is easy to learn and provides integrated help and powerful dashboards. It should be easy to enter and retrieve information. The system should automate tasks where possible, such as sending reminders to reports or notifying users about item workflow changes. Data should be possible to export to the formats you are used to working with, such as Excel and Word.
  1. Security
    A modern, hardened and mature entity management solution provides the benefits mentioned above while at the same time staying secure and compliant. Running on well-known cloud service providers, you are most likely already using in your organization; you can rest assured that the services are built on robust technology and reliable processes.
    Switching from Sharepoint and Excel would improve your security in building a well-structured database and a secure way of maintaining and sharing data throughout the organization.

Structural

If your group acquires many entities, the amount of data that needs to be collected grows together with the people who will provide the required information. Other triggers, such as spin-offs or divestments, may also increase the demand for information and initates restructurings, which puts higher pressure on accurate data. These events result in several challenges that you need to address.

  • You need to handle a growing number of entities which is hard to manage manually
  • Acquisitions may lead to the organization making restructurings, which changes the legal ownership structure
  • The ownership structure may end up being complex and hard to keep track of
  • The complexity of the ownership structure makes it hard to draw org charts
  • A growing and changing organization puts pressure on the people responsible for the legal ownership structure to deliver accurate data both for the current data as well as for historical dates
  • A restructuring increases the demand to quickly be able to separate parts of the group, move that data into a new database and draw up org charts of the spun-off or divested group.

In all cases, the requirements are high, and you need to quickly and accurately ensure that you have all data available and can separate and control it. In separating data, you must ensure that only the necessary data is separated. At the same time, you need to be in control of the legal ownership structure of the group at every step.

Other

There may be many other reasons to implement a legal entity management solution. Some groups think it takes too long to draw up org charts or that they can not reliably update them due to many changes to the legal ownership structure. Implementing a legal entity management solution will help you automate the drawing of org charts, save you a lot of time, and increase the quality.

Some groups need to set up a flexible solution that can collect data tailored for their organization. Often, analysis of this data requires specific reports or the possibility to include certain data visually in org charts or other reports. A legal entity management solution can help you to automate and make the process of managing your data efficiently.

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