ERP Systems: The Legal and Financial Shield for Protecting Companies and Shareholder Rights

The Key to Efficiency, Transparency, and Compliance in the Era of Digital Transformation

Amid the rapid transformations in the business world, Enterprise Resource Planning (ERP) systems have become essential tools for ensuring the sustainability of companies and protecting shareholders’ rights both legally and financially. These systems are not only aimed at improving internal operations and inter-department coordination, but they also play a pivotal role in mitigating financial risks, such as profit manipulation, financial waste, and the potential danger of fraudulent bankruptcy.

1. Reducing Fraud and Manipulation of Profits and Expenses

Fraud and manipulation of profits and expenses are among the most significant threats faced by businesses. Such practices often occur due to a lack of financial oversight or insufficient transparency. With the implementation of ERP systems, financial control becomes more accurate and effective, as all financial data is consolidated into one system, making it easier to monitor financial transactions and detect any manipulation or fraud.

• Continuous Monitoring of Financial Processes: ERP allows tracking of every financial transaction from initiation to completion. This enables early detection of any attempt to manipulate data, thanks to continuous electronic documentation.
• Minimizing Information Gaps: ERP systems ensure that all transactions across different systems are documented, enhancing the accuracy of information and reducing the possibility of errors or deliberate manipulation.
• Comprehensive Auditing: ERP systems generate accurate periodic reports on expenses and revenues, facilitating automated internal audits and limiting the ability of any individual to alter figures or falsify financial statements.

2. Reducing Financial Waste

ERP systems contribute to reducing financial waste by managing processes with high efficiency. This includes:

• Effective Inventory Management: ERP can improve inventory management, which reduces waste in raw materials or unsold products.
• Expense Tracking: The systems allow companies to track their expenses with precision, helping them make informed financial decisions and reduce the likelihood of unnecessary spending.
• Performance Monitoring: With performance reports and future forecasts, ERP helps identify sources of waste and directs efforts to minimize it.

3. Protection Against Fraudulent Bankruptcy Risks

Fraudulent bankruptcy occurs when company owners conceal true losses or exaggerate assets for the purpose of misleading investors. ERP systems play a crucial role in mitigating this risk:

• Accurate Transaction Documentation: ERP systems provide detailed records for every financial transaction, enhancing the credibility of financial data and reducing the chances of manipulation in financial statements.
• Financial Transaction Transparency: ERP systems increase the transparency of financial information, allowing investors and shareholders to easily monitor a company’s financial health, thus making it difficult to conceal data or manipulate figures.
• Thorough Risk Review: ERP systems include automatic auditing procedures that regularly track financial transactions, helping detect any attempts to manipulate or hide losses early.
• Compliance with International Accounting Standards: ERP systems help companies adhere to the highest international accounting standards, ensuring that financial disclosure is accurate and consistent with legal regulations.

4. Protecting Shareholder Rights: Ensuring Transparency and Legal Compliance

ERP systems significantly contribute to protecting shareholder rights by ensuring transparency in financial transactions and accurately documenting all business operations. This helps minimize legal risks that could threaten shareholder interests.

• Increased Transparency: ERP systems provide unified and precise data, which enhances transparency and reduces the likelihood of manipulation or errors.
• Compliance with Local and International Laws: Implementing ERP systems assists companies in ensuring compliance with local and international legal and regulatory frameworks, especially regarding taxes and financial auditing.

5. Enhancing Efficiency and Competitive Advantage

By integrating various functions such as accounting, procurement, inventory, sales, human resources, and production into one system, ERP systems help improve coordination between departments and reduce human errors resulting from redundancy or lack of information.

• Improved Efficiency and Coordination: ERP systems allow the unification of processes across different departments, helping to enhance the speed and accuracy of decision-making.
• Boosting Competitive Advantage: Companies using ERP systems can make faster and more informed decisions, enabling them to adapt to rapid market changes and strengthen their competitive position.

Are they available in the market?

Did you know that there are many systems offering solutions that fit all types of businesses?

ERP systems are available in the market through a wide range of solutions that cater to businesses of various sizes and industries. Some of the leading ERP systems include:

• SAP ERP: One of the oldest and most well-known ERP systems, used by many large companies worldwide. It is renowned for its flexibility and power in handling diverse business operations.
• Oracle ERP: A strong option for large enterprises, focusing on data analysis, compliance, and financial management.
• Microsoft Dynamics 365: A flexible solution that provides tools for managing financial processes, sales, procurement, and inventory.
• Infor ERP: Offers integrated solutions for companies operating in manufacturing, distribution, and logistics sectors.

Is it time to implement ERP systems in your company?

Given the rapid growth in markets and the complexity of business operations, ERP systems have become essential for ensuring the sustainability of companies and protecting shareholder rights. Whether a company is publicly traded, privately owned, or family-run, implementing ERP systems contributes to improving efficiency, transparency, and legal compliance, ensuring business stability and enabling adaptation to future digital transformations.

Therefore, we believe it is necessary to mandate the application of ERP systems and similar solutions across companies to ensure long-term performance, compliance with regulatory standards, and the protection of shareholder interests in today’s fast-paced business environment.