The recent disqualification of 3 lakh directors, deletion of 2 lakh companies by the Ministry of Corporate Affairs, and compulsory delisting of 200 companies by the Bombay Stock Exchange rattled corporate India forcing all Board Members, Senior Management, and Auditors to re-check the compliance status of their companies. It comes out that the non-compliance forcing regulator can take such strong action.
Large and mid-size corporates often implement ERPs spending lakhs and crores, but still miss out on many critical areas of businesses that are untouched by technology. Though Finance remains the key focus while implementing ERPs to automate various aspects, however, functions like Compliance, Secretarial, and Legal are not touched by any of the ERP players. Imagine these functions are equally crucial for any business, however, the technology acceptance level for these functions is almost zero. Everyone understands at the back of their mind that the cost of compliance is far cheaper than the cost of non-compliance, however, a continuous run for ambitious growth, profitability, and revenue always keeps the Management, Board Members, and Heads of these functions take technology adoption for Compliance, Secretarial and Legal function as the last priority.
Possibly businesses and leadership still feel that these are knowledge functions and hence do not need technology, however, in today`s world, you need technology in every part of the business.
It has been observed that CEOs, CFOs, and Chief Compliance Officers of large and mid-size corporates do not have a list of compliances in the form of technology and dashboards. These businesses let respective departments manage respective compliances with overall supervision and guidance by the Chief of Compliances resulting in certain compliances being missed out and suddenly there is notice coming from the regulator asking for an explanation, penalty and at times businesses run the risk of losing their license. This proactive measure by regulators is forcing businesses to re-think technology adoption strategy and move towards adopting technology solutions for corporate functions like Compliance, Secretarial, Legal, and Tax.
Solutions like Compliance Management Systems, Secretarial Automation Software, Paperless Board Meeting Solutions, Contract Management Software, and Litigation Management Software are a necessity for all businesses nowadays.
Another possible risk listed companies run is maintaining physical documentation for circulating Board Meeting papers or sending documents on email IDs of Directors / their secretaries (these are free email subscriptions that run the risk of hacking). These documents are either sent through office boys in physical spiral-bound papers and books or through emails, which run the risk of crucial information of company secrets, financials, and competitive information at the mercy of the office boy and the expectation that everyone keeps Board Papers in a safe place. This may not hold all the time and it leads to the leaking of company confidential information to competition, employees, or third parties which can be misused and attract various penal provisions including strong action by Stock Exchanges and SEBI. A paperless board meeting solution hosted on the Company`s server can solve this problem and allow Board Members, Company Management, and Company secretaries to have a Secure and Safe environment to exchange information, views, and records of all Board Meetings.
Imagine a company having more than 100 legal contracts covering more than 50{e2c1e7703bf7b6642b5af6e60324f3a1752447b5447bd7c54193dc70712531ff} of their revenue and does not have a tracking mechanism. This can lead the company to a situation where a client’s contract expires and your payment is stuck or the customer comes back with a price reduction request impacting your business and profitability. A situation may arise wherein legal contracts, agreements, and Purchase Order signatory and control are decentralized, and suddenly the management gets a legal notice invoking open indemnity of a contract signed by someone in the company without the knowledge of the Legal Dept. A technology solution, awareness, and technology-based workflow will help businesses manage their legal contract execution systematically.
All these technologies are not part of any ERP software/system and hence CEOs and CTOs should look for tech solutions outside ERPs to enable technology in Legal, Compliance, and Secretarial functions.
