Modern legal entity management systems can also solve other technological challenges that organizations face. Sixty-two percent of organizations say their technology does not allow them to track the status of governance activities, reflecting the limitations of some legacy systems. Modern entity management systems, by contrast, offer significant opportunities.
They allow for automated workflows so all governance activities – from internal approval through local execution – follow a defined and optimized process. Additionally, they can interface with a wide variety of corporate systems, providing a centralized location for data warehousing to build analytics tools from.
“Inefficiencies in older legal entity management systems are causing many organizations to create and maintain parallel processes and datasets around compliance deadlines, organizational charts and other governance activities,” says Fry. “This is inefficient and creates risk due to a lack of visibility and coherence.
“Leading technologies can resolve these challenges and deliver significant internal efficiencies across a broad range of stakeholder groups by creating a single source of truth for the organization and by utilizing entity data to provide real-time governance insights.”
Why legal entity management and effective governance matters
Optimized, well-supported legal entity management processes can help enable a wide range of strategic and operational business priorities.
Data from the 2021 EY Capital Confidence Barometer – a survey of C-suite members designed to identify boardroom trends – reveals large organizations have transactions top of mind this year. Forty-nine percent are planning to actively acquire in the next twelve months, with the majority looking to acquire international companies.
Other types of transactions, such as spin offs, are also being pursued. Seventy-eight percent of organizations say they have held on to assets too long and are looking to divest.1 Deal readiness is clearly a top strategic priority for organizations.
However, inefficiencies in legal entity management processes put deal readiness at risk. “If a company is engaging in a major corporate event, such as a restructuring or a transaction, legal entity management plays an integral role,” says Jennifer Cox, EY Asia-Pacific and EY Oceania Entity Compliance and Governance Leader. “Failures in legal entity management can lead to delays, timeline pressures and unnecessary and often unbudgeted costs.”
Operational priorities can also be put at risk by poor legal entity management processes. Eighty-five percent of companies are looking to make significant changes to their supply chains in the wake of the challenges create by the COVID-19 pandemic.2