As your company grows, it's essential to have efficient financial governance of your subsidiary structure through each acquisition. This helps ensure compliance with regulations and streamlines your financial processes. As companies expand into different industries and regions, managing subsidiary information while staying within legal and regulatory boundaries has become more complicated – and has put additional pressure on finance teams to effectively bring subsidiaries into the fold and manage complex ownership structures.
This pressure requires organizations to leverage the most effective tools to optimize their data use, manage risk, and enable data-driven decision-making. So, what are the right tools to use? And how can you optimize your corporate ownership structure management?
The limitations of using your ERP
Enterprise Resource Planning (ERP) systems are primarily designed to help organizations manage various aspects of their operations, including financial management, human resources, supply chain, and more. While ERP systems can be invaluable tools for many aspects of corporate management, they’re not typically the best choice for managing corporate ownership structures. Here are five reasons ERP systems fall short when managing complex ownership structures.
- Limitations of using multiple ERPs
- Lack of data customization
- Inefficient legal and regulatory compliance
- Lack of real-time tracking and reporting
- Integration challenges
For organizations that utilize multiple ERP systems, ownership structure management can quickly become a major complexity for finance teams. When using multiple ERPs (without additional tools), data can be siloed, posing an increased risk for reporting errors.
Lack of data customization
ERP systems are designed to be highly structured and standardized to meet the needs of a wide range of organizations. Managing ownership structures often requires high customization, which ERP systems may not support. You may need specialized software or legal tools to handle intricate ownership arrangements effectively.
Inefficient legal and regulatory compliance
Managing corporate ownership often involves complying with various legal and regulatory requirements, which can vary significantly by jurisdiction and industry. ERP systems may not have the necessary features and updates to ensure compliance, leading to potential legal risks.
Lack of real-time tracking and reporting
Ownership structures can change frequently, especially in larger corporations. ERP systems may not be agile enough to provide real-time tracking and reporting capabilities for these changes. Specialized ownership management tools or legal software might be more suitable for this purpose.
Integration challenges
ERP systems are designed to integrate various business functions and may not seamlessly integrate with other specialized software or tools used for ownership management. This can result in inefficient workflows and data duplication.
Optimizing your ownership structure management with CPM software
Effective subsidiary management starts with the use of the right tools. Modern businesses can gain a lot from leveraging Corporate Performance Management (CPM) software that streamlines essential financial processes like budgeting, planning, consolidation, and the close process. Modern CPM software can also simplify your ownership structure data management. This comprehensive system supports informed decision-making and quick responses to changing regulatory requirements.
Benefits of leveraging a CPM solution
- One place to maintain your full ownership structure
- Flexibility
- Sub-consolidation capabilities
- Scenario analysis
One place to maintain your full ownership structure: A CPM platform can also maintain an organization’s full ownership structure – even when using multiple ERPs. This function gives you a single source of truth to maintain your entire ownership structure – reducing risk and optimizing resources.
Flexibility: A CPM platform, like CCH Tagetik, gives users the flexibility to handle different accounting standards, sub-consolidations, and unique reporting standards. For example, a COM platform can automatically manage both GAAP (Generally Accepted Accounting Standards) for entities based in the US and IFRS (International Financial Reporting Standards) for international entities – enabling users to easily maintain both US and international standards.
Sub-consolidation capabilities: CPM software can facilitate the sub-consolidation of financial data from different subsidiaries or entities within a corporate ownership structure, enabling finance teams to automate complex
Scenario analysis: CPM software can be helpful for conducting scenario analysis when assessing the impacts of changes to ownership structure such as acquisitions and restructurings.
