You are not ready for the future. Want to know why?
Corporate governance and due diligence are inextricably linked. Automation and digitalization are about to change both areas radically. What does the future look like?
Our Diligent Expert Panel is at the forefront of innovation. Tapio Nuotio, attorney-at-law, is one of these experts. We asked him about the future of corporate governance and what it takes to prepare yourself for a digitalized world.
How would you define good corporate governance?
In addition to the statutory demands and applicable by-laws, good corporate governance is about having the correct versions of files and documents readily available so that even third parties outside of an organization can find whatever they’re looking for. Everything should be in place.
Essentially it’s how a company organizes its documentation, files, agreements, and so on.
Why is this important?
It allows manoeuvres. Whether it’s financing, operations for strategy, or many other things, you need to take a look at what you’ve done in the past, what sort of liabilities you’ve got on your back at that moment. You need to find the papers.
Sometimes the occasions where you need to know where you’re at come at short notice. Then it’s of even more importance to be able find your papers in an orderly state and examine what you’ve done.
If you don’t know your current status, you can’t really take any steps forward with peace of mind.
Why is corporate governance overlooked surprisingly often?
Because it takes time and it costs money. It’s not viewed as an important thing at the moment deals are done or an agreement reached. The papers are usually left in a file somewhere, and the company turns to the next pressing issue.
How does good corporate governance impact upon the due diligence process?
It makes it faster, easier, and cheaper. Things that require due diligence usually come at short notice and they need to be carried out quickly.
It’s good to have documentation already in place before the process begins. Especially for companies that may not have dedicated people looking after documentation and corporate governance. Otherwise it can be a week of just going through emails, trying to find the latest versions of agreements.
What role can digitalization play in corporate governance and due diligence procedures?
Digitalization can help a company keep their documentation in an orderly and maintained state. It means you know when dues are due and when actions need to be taken. This is especially important if there’s no one inside a company who is able to constantly maintain the documents.
Doing this manually is very labor-intensive. Digitalization can help to make data, especially from within documents, easily sourced.
And can automation play a part?
When law firms carry out due diligence processes, every word of every document has to be read and understood by somebody. Say you have to go through a company’s employment agreements – that can be very repetitive.
I hope that automation will ease the burden of this labor-intensive and sometimes mundane work.
What will the future of due diligence look like?
Leaner, faster, and less labor-intensive when it comes to carrying out large due diligence processes. I can already see these trends developing today.
Thank you, Tapio!
It’s obvious – we can’t keep trying to make yesterday’s tools work in today’s constantly evolving world. But what’s the next step?
Our forthcoming posts will explore the future of corporate governance and due diligence, and how global trends are revolutionizing the business world.
Big question: Will digitalization transform corporate governance?
Tapio Nuotio, Attorney-at-Law: Mäkitalo Rantanen & Co Ltd, Attorneys-at-Law
– Graduated LL.M. 2013
– Specializes in corporate governance, mergers and acquisitions, investment agreements
– Wide experience in domestic and international M&A projects
– Co-founder of Blueworks Inc, an innovative company focused on carbon fibre products