How much can you save by changing your D&O questionnaire process?
There are a lot of ways to look at the cost of conducting these kinds of compliance related activities, but I want to focus particularly on the cost that I think most Directors and Officers would agree is singular in importance — their time. How much time did it take your Directors and Officers to complete the process?
The average D&O Questionnaire is about 40 pages long. Yet, the number of questions that the average Director or Officer has to answer only takes up about 12 to 15 pages. The rest of the pages are either questions that don’t apply to them, or are explanatory notes, definitions and various schedules and appendices containing compensation or stock ownership details.
Seasoned Directors & Officers are probably quite used to the form and can focus quickly on the questions they need to answer, but they still have to wade through 40 pages. And sprinkled throughout these 40 pages are often changing definitions of terms such as “Family Member,” “Associate,” and “Beneficial Interest” — all of which the directors have to consider in answering questions, but then refer to an appendix to read the two paragraph definition.
It’s no wonder that every year, at every company, there is always at least one questionnaire that doesn’t get fully completed. And this takes yet more time.
The great thing about technology is that it can help us save time. Often lots and lots of time. And moving the D&O Questionnaire to an online process does just that. We can reduce the number of questions, make them easier to follow and answer, and make accessing definitions and schedules as simple as hovering the mouse over a term or clicking a link.
Directors who used our online process for the first time said that it cut their time in half — saving them an hour or more. If you have 15 people taking your D&O questionnaire, that is a lot of time you are putting back in the hands of your most highly compensated people.
Are you using best practices to collect and store the information you obtain from your Directors and Officers? If you still compile your company’s information manually and collect responses on paper, by scan or emailed responses, you already realize that your systems are not optimized, but it has further reaching implications.
Best practices in compliance- and governance-related tasks require professionals to consider many additional factors that technology can improve. Modern, cloud-based systems for D&O questionnairesprovide a number of key benefits that go beyond saving the legal team time:
- Security & The Private Cloud – A private cloud environment provides greater control and security for your data. Most providers for these types of services rely on a hosted cloud service like Amazon Web Services or Microsoft’s Azure. With hosted servers, are you sure who really controls your data at the end of the day? Using a private cloud ensures that your data is under your control and can be kept secure or deleted completely at your discretion. This provides heightened security, ensuring that sensitive data is retained and is not susceptible to inadvertent destruction or theft that targets mass-market systems.
- Time – Few things are more valuable to your Directors and Officers (or to any of us for that matter) than time. Customer feedback indicates that a properly constructed online process reduces the time it takes to complete the questionnaire by nearly 50%. This is time that you are giving back to the highest paid people in your company. That’s no small matter. In addition, the legal and compliance teams will save dozens of hours by automating the most labor intensive parts of their processes, while also creating a series of gatekeepers to flag particular types of responses.
- Accuracy – Have you ever had questions left blank on a questionnaire, which then requires follow-up and perhaps additional certification? Online tools can eliminate missed questions and ensure a more accurate process by pre-screening for changes from prior years and even creating internal flags that generate alerts for the legal team whenever an unexpected answer is entered. Using best practices helps eliminate errors.
While it is often difficult for legal departments to obtain additional legal budget for technology acquisitions, there are points in time when best practices can no longer be overlooked and technology migrations become necessary.
The D&O questionnaire has tipped over. Paper or cut and paste processes can no longer be justified now that the efficiencies and reliability of cloud-based systems so clearly outweigh the minimal cost.