Boards face increasing scrutiny over adherence to workflows and policies established by regulatory bodies. From fiduciary responsibilities to documentation procedures, boards need to ensure that they have systems in place to ensure compliance. Failing to do so can lead to financial and reputational damage for the board and the organisations they lead.
In this post, we discuss how the digitisation of board workflows and activities via board portals, or board management software, helps mitigate compliance risks.
What are compliance risks?
Compliance risk, as defined by this Deloitte paper, is best described as “the threat[s] posed to a company’s financial, organizational, or reputational standing resulting from violations of laws, regulations, codes of conduct, or organizational standards of practice.”
The article goes on to identify four key areas that drive the strategy for compliance risk mitigation:
- Legal impact: Regulatory or legal action brought against the organisation or its employees that could result in fines, penalties, back taxes, imprisonment, product seizures, or debarment
- Financial impact: Negative impacts with regard to the organization’s bottom line, share price, potential future earnings, or loss of investor confidence.
- Business impact: Adverse events, such as embargos or plant shutdowns, that could significantly disrupt the organization’s ability to operate.
- Reputational impact: Damage to the organization’s reputation or brand—for example, bad press or social-media discussion, loss of customer trust, or decreased employee morale.
Looking at these categories, it becomes apparent that a domino effect can take place, i.e., legal impacts can lead to dire financial, business, and reputational consequences. This underscores the need for compliance risks to be assessed, measured, and mitigated. Thankfully, there are tools that can help with this.
How Board Portals Can Help
To meet the demands of today’s regulatory environment and make it easier for boards to respond to auditors and regulatory bodies, boards of all types of organisations can be supported by technologies to digitise or automate their workflows. One such platform is the board portal.
Board portals help ensure accountability, transparency in processes, documentation is in order while allowing the board to operate in a highly secure environment.
Transparency in Processes
With board portals, board members adhere to a specific workflow or activities typically defined by the software or technology system. This not only ensures consistency, repeatability, and efficiency of processes, but it also makes the workflow more transparent. Board portals are designed to ensure that every step in the workflow is simple, clear, straightforward.
This allows process gaps to be easily identified and addressed before, during, or after internal audits—mitigating legal or financial risks.
Documentation is in Order
Most board portals have the ability to store board information (such as meeting agendas, board packs, or meeting minutes) associated with board meetings. And just as crucial, these can be retrieved quickly, in real-time, with a search.
Documentation is in order because it is supported by “archiving” functionalities, as well. When board meeting information is archived, these become read-only or tamper-proof. Data integrity is preserved at all times.
In short, the board portal serves as an organised, paperless, secure repository where all board-related information can be stored. Documentation is more likely to be complete, correct, and consistent.
Board portals also have features such as version control and electronic signatures. Version control helps ensure that boards and auditors review and work with the latest board information, and that they have the ability to make note of changes made against specific files if and when necessary. Electronic signatures, on the other hand, simplify the process of approving board documents, while keeping track of items agreed upon.
Both these features create a digital “paper trail” which makes it easier to ensure compliance while further strengthening accountability (through board-decision tracking) and transparency in the board process.
Board members continue to be targets of cybercrimes (e.g. whaling) primarily because of their access to sensitive information and their sphere of influence within the organisation. With the proliferation of email phishing scams to outright hacking and monitoring of their personal computers, the use of board portals helps eliminate vulnerabilities to criminal activities.
The most secure board portals, like Boardlogic, provide robust security features to combat these threats. They are often built on a multi-level encryption framework, employ two-factor authorisation (2FA), and have the ability to remotely disable device access. On top of these, they have built in messaging features which can reduce their reliance on email for board-related communications as well.
Without security, data integrity becomes questionable and can lead to steep consequences—especially from an operational, legal, financial, and reputational perspective. It continues to be an area of concern, particularly for government regulatory bodies. Board portals mitigate these inherent risks.
Risk oversight has long been established to be one of the primary responsibilities of boards. What needs to be re-emphasised, however, is that monitoring compliance is a critical component of risk management and can’t simply be viewed as a procedural process that needs to be adhered to.
The stakes for non-compliance are too high to be ignored or trivialised.
By digitisting board processes with the use of board management software, workflows are standardised, information remains secure, accountability and transparency are clear, and human error is minimised—all of which mitigate the risk for non-compliance but also pave the way for better governance.