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Can hybrid outsourcing ease the subsidiary governance burden for multinational companies?

6 June 2022

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For growing multinationals, there is no “one-size-fits-all” solution for entity management, say Rogier Bronk, Head Global Entity Solutions – Americas, and Jonathan Scrocchi, Vice President, US Mid Atlantic.

Legal and compliance work is a significant and growing administrative burden for all multinational companies.

Pressure from regulatory authorities across many different jurisdictions is increasing, as are the penalties and reputational damages from failing to adhere to local legislation while meeting related compliance deadlines.

We can all agree that it is highly important for organisations operating across different jurisdictions globally to have a consolidated, streamlined model for executing subsidiary governance. However, as no two organisations are the same, there is rarely a “one-size-fits-all” approach to entity management.

Yet as the amount of administrative work created by global subsidiary governance duties grows, many organisations are simultaneously trying to control costs and resources, for which a hybrid outsourcing service may be the solution.

What challenges surround subsidiary governance obligations?

Many of the challenges we see now were around before the pandemic, but the overall disruption it caused, including closed offices, have made matters worse for many companies.

Multinational organisations face a large backlog of legal and compliance paperwork. At the same time, they are accommodating staff requests for hybrid working practices, while trying to get to grips with a paperless office and virtual meetings.

All this complicates efforts to streamline subsidiary governance operations.

Many companies with a global reach are looking to resolve the problem of managing an ever-increasing workload with a shrinking compliance budget through various outsourcing options.

Ideally, multinational companies would want one centralised source of information and one source of truth, through which all legal and compliance requirements could be fulfilled and monitored.

What are the obstacles to outsourcing subsidiary governance operations?

In many ways, having one source of truth for compliance work and centralising operations under a single structure and framework appears ideal. However, organisations have been reluctant to embrace outsourcing for several reasons.

Historically, resources for dealing with compliance issues have been allocated to in-house legal teams,  or occasionally tax and finance departments.

Also, organisations that did decide to outsource had to manage several suppliers, bringing cost implications when budgets were being tightened.

Only few service providers offer a one-stop service delivery framework for subsidiary governance, but organisations have been reluctant to hand over full entity management administration to such third-party providers, for fear of becoming dependent of them or losing the control and oversight they require.

How has the market responded to subsidiary governance streamlining?

Few outsourcing companies offer a holistic or hybrid service covering the three key areas:

  • Operational framework
  • Technology
  • Human resources and experience

With a hybrid service framework, organisations can choose which subsidiary governance operations to outsource and which to keep in-house, but there are still limitations to this model.

To provide that bespoke service, regardless of its framework, it is important to appreciate that no single model fits all. Instead, an efficient model provides a service solution that can be adapted to the client’s requirements in relation to the ever-changing regulatory landscape.

What are the benefits of a full or hybrid outsourcing model for subsidiary governance?

  • Organisations can monitor compliance for all entities and jurisdictions or just opt for assistance in a chosen region or jurisdiction, while receiving a centralised, coordinated offering
  • This model allows an accurate and up-to-date overview, enhancing strategic business decisions
  • Centralised global monitoring avoids negative financial or reputational penalties for the whole organisation
  • It frees legal, tax and finance departments to concentrate on key business areas, rather than being distracted by repetitive and time-consuming administration

Service providers can execute administrative work and provide infrastructure for operational frameworks across the globe where multinational organisations most need it.

That said, not all providers can be a flexible outsourcing partner providing a framework that can be customised for individual clients and multinationals.

Every company is different in terms of budget exposure and the need for support in specific countries continues to exist. Rather than outsource the whole portfolio, an alternative is partnering with a firm that can provide a bespoke service solution when necessary in the jurisdictions where assistance is needed.

How Intertrust Group can help with outsourcing subsidiary governance

  • Intertrust Group’s team of more than 4,000 experts around the globe are on hand to help your legal department run more smoothly, so you can concentrate on growing your portfolio.
  • Our Global Entity Solutions department provides a broad menu of corporate secretarial services and is experienced in maintaining entities within global portfolios in more than 150 jurisdictions. We also proactively provide updates and guidance on continuously changing local law and legislation as well as corporate secretarial requirements.
  • Using up-to-date technology, we provide support to streamline, standardise and facilitate the administrative workload, customising our service to fit your internal legal structure.
  • At Intertrust Group we continuously develop solutions that satisfy market demand and stand out from our competitors.
  • We are equipped with the talent, technology and expertise you need from a one-stop solution.

Visit our website and get in touch for more information and talk to our expert team today