Entity Portfolio Management: It’s time to embrace data

Entity Portfolio Management: It’s time to embrace data

The management of a multinational’s entities has never been more important. Governance and legal professionals work in a challenging business environment where regulations and reporting requirements change in a heartbeat and vary greatly across jurisdictions, with local nuances and tight deadlines. As multinationals grow in size and expand into new markets, the governance of their subsidiaries around the world becomes increasingly complex and often difficult to keep oversight of.

Navigating this complexity puts pressure on a multinational’s in-house legal teams to innovate and optimise their governance processes and to assure internal stakeholders that not only are all entities are compliant but operating as efficiently as possible. To do this, they must be able to measure performance across businesses, industries, jurisdictions and regions.

Historically, however, there existed significant obstacles in accessing quantitative data to frame and support portfolio-wide decision-making. Partly because Entity Portfolio Management (EPM) is only now starting to be considered a specialist discipline in its own right within the traditional governance profession. Data that existed on a company level tended to be available only from a patchwork of internal and external sources in a non-standardized and non-centralized fashion. Whereas industry-wide data points are predominantly survey-driven and thus rarely provide a fully accurate and truly-objective picture of the landscape.

To challenge this, Mercator launched ‘The Entity Portfolio Management Report Series’ - providing direct insight into the cost and time involved in global subsidiary management, covering 170+ jurisdictions and all major industries. Unlike survey and sentiment-based reports, our EPM reports are based on real-life data drawn directly from Mercator’s proprietary technology platform - Entica™. The reports serve as a benchmark for multinationals’ when it comes to their EPM expenditure and efficiency and allows us to track year-on-year global rankings.

Our latest report - UK EPM: Special Report - was launched earlier this year at a joint event with CGIUKI. Here are some of the key findings:

International competition heats up

In 2021, the UK ranked as the third most favourable location for multinationals to base entities, out of 170 jurisdictions. One year on and the UK has dropped to seventh in 2022. This is due to the rapid advancements of other jurisdictions in digitalising company law procedures and a consequence of flexible company regulations, introduced across the world in response to the disruption caused by the COVID-19 pandemic.

In this new digital landscape, other jurisdictions across the world have managed to significantly reduce the time to complete activities. Unfortunately, this has left the UK in a worse position comparatively, falling from the 14th fastest country in 2021, to 26th in 2022.

Competitive legal sector fees keep cost down

However, the UK remains one of the most cost-effective jurisdictions to set up entities, rising from the 19th in 2021 to the 14th cheapest country in 2022. This is driven by a highly competitive legal sector, which significantly lowers the cost relative to other jurisdictions due to competitive market pricing. Indeed, legal services in the UK are well established and often externalised which also further increases demand and in turn the supply.

Conclusion

Overall, our data shows that the UK is 36% cheaper and still 40% faster than the combined average of 170 jurisdictions worldwide.

The UK’s combination of lower costs and speed of business in managing multinational entities – paired with its straightforward legal system and international standing as a global financial centre – means it remains an attractive legal base for multinationals.

However as the digitalisation drive continues to sweep across the globe more and more countries bring their corporate governance processes into the digital age; it will be interesting to see how the UK fares in the global rankings in the years to come.

Download the full report for a detailed breakdown of the cost and time it takes to complete key corporate secretarial activities in the UK – here

Kariem Abdellatif
Head of Mercator® by Citco



About Mercator
® by Citco

Mercator by Citco (Mercator) is the pioneer of Entity Portfolio Management (EPM). Mercator creates lasting partnerships with its clients to understand their individual needs and offer ease, efficiency and visibility through a clear layer of oversight.

Mercator’s unrivalled knowledge of EPM and proprietary technology – Entica™ – is evolving the way companies view and manage their portfolio of entities, helping them navigate an increasingly complex regulatory environment.

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