Kirstin McCracken, Principal Associate/Consultant, Eversheds Hong Kong, looks at how new technological advances can be relied on to change the way that corporate secretaries more efficiently support their organisations, along with the challenges inherent in moving to these new working practices.
With the pace of change in digital technology, almost every aspect of the working world is changing to some degree and businesses need to adapt to keep up. Ask almost any major business and investing in technology is likely to be one of its key strategic priorities in the coming year. In this context, it is interesting to examine the changing role of the corporate secretary.
The role of the corporate secretary, especially in Hong Kong’s listed companies, has increased and become more complex in recent years. As demands for better corporate governance have increased, so have the challenges and responsibilities of the corporate secretary who has traditionally been responsible for regulatory compliance and advising on corporate governance. The challenge is to create and embrace a mutually beneficial relationship with technology which automates routine tasks, while allowing the corporate secretary time to add more value to the increasingly complex regulatory compliance and corporate governance challenges which their organisations are facing.
Technology as an enhancer of the corporate secretarial role
There are a number of ways in which technology has helped to make the role of the corporate secretary more efficient in terms of both time and cost. In an increasingly competitive market, clients expect high-quality work for relatively low fees. This expectation extends not just to external corporate secretarial service providers but also to internal corporate secretaries who are expected by their organisations to be able to take advantage of increased efficiencies to free up their time to provide additional value in other areas.
The automation of routine work has generally changed the nature of the global workforce. The ever-increasing ability to effectively use technology to conduct routine work can reduce the administrative burden, allowing corporate secretaries to focus their attention on more value-add matters. While the resulting work must still be checked and overseen, the increased use of technology should overall reduce the risk of human error that may occur, improve the overall quality of the work and speed up the process.
Advances in communication allow corporate secretaries to engage with those at all levels of their organisations in a number of different ways.
Video call facilities may enable easier co-ordination within international companies, while reducing the time needed for business travel. Similarly, shared virtual workspaces and webex-type technology make remote collaboration easier. This allows corporate secretaries to work more efficiently and flexibly, maximising the use of their working days (and often after-hours too).
Technology such as documentation management systems and board portals help with retrieving and sharing information efficiently, while providing some advantages of security over the traditional paper methods. Advances in technology are moving towards an automated and paperless company secretarial department within Hong Kong. With this technology comes security enhancements, along with security risks. Arguably, sensitive and confidential information is as well (if not better) protected in a secure online records archive than in a traditional locked filing cabinet, automatic alerts and reminders for filing dates can be set to avoid unnecessary fines for late filing of documents and company secretaries’ regulatory compliance tasks can be more easily monitored and tracked. All of the above should increase productivity through improved quality, flexibility, speed and efficiency whilst overall reducing cost.
Technology and the role of the corporate secretary as a business adviser
As well as the use of technology to make the role of the corporate secretary easier, there has been increasing focus on the role that corporate secretaries may have in advising the board on transformational change within their organisations, including the adoption of new technologies. The HKICS Technology Interest Group published its first guidance note in late 2016 which focused on the role of the corporate secretary, as a trusted adviser to the board, to help manage the risks of implementation of technology across the business.
What degree of responsibility should corporate secretaries have for technological issues? Often companies have specialist IT departments with employees hired specifically to be responsible for any technological issues. Should the role of the corporate secretary, traditionally one of regulatory compliance and advising on corporate governance, be expected to cover these too? The guidance note argues that technology is critical to a company and is therefore critical to a company’s corporate secretary as a trusted adviser. ‘There are all too many examples of what can happen if these risks are not managed properly, with the consequences being operational, financial and, importantly, reputational,’ the guidance note states.
The technological knowledge and expertise of board members can vary from greatly experienced to limited knowledge. A corporate secretary can assist the board by considering whether technology should be a regular item for board committee discussions. Furthermore board members may require training to understand the risks associated with new technologies, such as data protection and cybersecurity. Corporate secretaries should work with the board and the relevant internal bodies to raise the board’s awareness, understanding and ultimate responsibility of these issues.
Personal data containing sensitive and confidential information will regularly be dealt with and recorded by the corporate secretary. Therefore it is essential to have a system in place to define the type of information and what extra measures, if any, should be taken in terms of security protection. According to a study in 2016 conducted by IBM, 60% of companies without an effective business continuity plan had their brand and reputation damaged because of a technological disruption, and the average cost of a data breach has increased significantly.
The corporate secretary has a role in assessing and determining whether the company’s IT controls are adequate to protect such information. In the event of a data breach, it must be known which immediate action should be taken to best protect the privacy of the information and limit the amount of damage caused. The immediate steps taken in the event of a breach are often the most important and the corporate secretary is likely to have a key role in any breach management plan, including decisions as to whether any notification of the regulator or the individuals concerned is advisable.
What challenges do corporate secretaries face when trying to harness technology?
In a period of increasing ability of technology to understand unstructured data and take on more complex tasks, it is expected that corporate secretaries will keep abreast and utilise new technologies effectively. However there are physical barriers that corporate secretaries face when trying to harness technology. These include problems with securing budget, difficulties integrating with existing systems, lack of digital skills within the organisation and difficulty knowing what to invest in (that is judging the potential of new technologies).
While the list below is not exhaustive, it gives some examples of the challenges which corporate secretaries may face when incorporating new technologies into their organisations and roles.
1. Adapting to new systems
Many are sceptical as to whether or not technological advancements (including, in particular, automated systems and online records) bring tangible and measurable benefits to an organisation. Some believe that organisations may be reacting to demand by investing in specific technologies without investing in the underlying training and cultural changes needed to make the most of these technologies. Corporate secretaries can have an important role in the promotion of the adaptation of new technologies and finding ways to optimise their use within their own organisations.
2. Budgetary considerations
Securing budget to invest in technology can be a challenge in any organisation, but can be a particular issue for corporate secretaries as a support function (albeit a crucial one) rather than the customer facing side of an organisation. The expense is not limited to the purchase of new technology. Employees must be trained in using such technology and often existing systems will have to be integrated. All of which is costly and may be seen as unnecessary in uncertain economic climates. In order to push for budget to invest in such new technologies, in many cases a clear business case must be set demonstrating real savings in the long term through efficiencies.
3. Maintaining quality and controls in the face of immediacy
Emails require a more immediate response than letters used to do and the use of instant messaging applications (such as What’sApp and WeChat) has raised expectations of an even more immediate response. Employees within organisations in Hong Kong are increasingly using instant messaging platforms and the group chat functionality to collaborate on projects. Decisions are made quickly, changes are implemented and those who do not keep up with the pace of the discussion can be left behind. While this can adversely impact work-life balance (which we discuss below), it also creates a number of risks. In particular, corporate secretaries still need to ensure that proper governance and risk-sign off occurs and that, while decisions are made quickly, time is still taken to consider appropriate angles and consequences.
4. Increased data privacy and cybersecurity risks
There can be a perceived increased risk to the security of data that is stored electronically or on the cloud. Cybersecurity threats continue to increase and companies are having to evolve, consider and apply more technical solutions to reduce and contain the risks of any loss of personal data or commercially sensitive information. In 2016, the Hong Kong Privacy Commissioner received 104 data breach notifications (44 from the public sector and 60 from the private sector), affecting over 850,000 individuals.
The role of the corporate secretary has had to evolve with the increasing occurrence of data breaches and now must also take into consideration the adequacy of a company’s IT controls and regulations when managing risk. Before adopting any new technologies or engaging external service providers who will host sensitive corporate information externally, corporate secretaries should take care to carry out due diligence on the proposed IT controls (including working with their organisation’s IT security team) and ensure appropriate contractual arrangements are in place to require the data to be retained securely and safely.
5. Impact on work-life balance
There are mixed views on whether the impact of digital technology has improved work-life balance or has further encroached upon it. Corporate secretaries, like many other professionals, are able to work from almost anywhere with relative ease, regardless of where colleagues and/or clients are based provided that their organisations have adopted the necessary technologies to allow them to do this. This is true for all employees, not just for the role of the corporate secretary.
While some people find that the ability to work remotely, whether from home or overseas, enables a flexibility which improves work-life balance, others can find that this leads to a pressure to be constantly available. The obligation to remain connected to work constantly can lead to increased levels of stress which over time can have serious negative impacts on an employee’s long-term physical health.
Furthermore many people admit that this expectation to be constantly available is not placed on them by the employer but by employees themselves who feel pressured to be online even whilst on annual leave.
Corporate secretaries, in their role as adviser to the company board, may be able to assist the board in decisions to discuss and provide training on the available technology, how it should be used effectively and to dissuade excessive use.
In an environment characterised by economic and political uncertainty, global competition and fast-moving advances in technological innovation, companies are facing more opportunities but also increased risks. The role of the corporate secretary has evolved with these advances and should work closely with the company to both circumvent the risks and exploit the opportunities going forward.
Principal Associate/Consultant, Eversheds Hong Kong