A system of agreement wraps around a signature. A signature is only as strong as the system of agreement it sits in.
System of Agreement
An electronic signature never exists alone in empty space. It is never a standalone thing, but rather a component of a larger system known as a system of agreement.
In this episode, Jennifer Lauchlan and Marcus Hannah of Docusign. will go through six questions with you about this system of agreement.
Here is what we learned but please listen in as Jennifer and Marcus explain all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Electronic Signatures
We spoke about electronic signatures on the 4th of July 2018, in episode 62. A lot has changed since then, so that is why we are doing this again in this three-part mini-series. This is the first episode and then we will come back to electronic signatures in episodes 392 and 393.
System of Agreement
Here are six questions about the system of agreement, of which the electronic signature is an integral part.
1 – Electronic versus digital signature
How is an electronic signature different from a digital signature?
In Australia and New Zealand, this is a theoretical question, since Australian and NZ regulations only refer to electronic signatures and not digital signatures. Hence Australia and New Zealand mainly rely on electronic signatures, which is good given that electronic signatures usually have a better user experience since less complicated with less ID required.
However, in the EU and other parts of the world, play a much bigger role. High-value contracts in the EU usually require a digital signature due to their higher level of authentication.
So what’s the difference? We actually just have to go back to the show notes for ep 62 back in 2018. That answer still stands.
“A signature – be it manual or electronic or something else – needs to show two things. It needs to show who signed and it needs to show that the signer actually signed. Intending to be bound. Electronic and digital signatures both endeavour to do that – the official term is electronic authentication method. But digital signatures go beyond that.
Digital signatures use a certified-based digital ID to authenticate the signer’s identity and demonstrate proof of signing by binding each signature to the document with encryption. A digital signature receives validation from Certificate Authorities (CAs) or Trust Service Providers (TSPs).”
The only thing we might add is that digital signatures are also referred to as Standards-Based Signatures or Qualified Electronic Signatures,
2 – Did COVID change anything?
Yes, COVID did change things. COVID prompted temporary provisions allowing more documents to be signed electronically in Australia and New Zealand. And these temporary provisions then became permanent.
Companies can now sign deeds under the Corporations Act. And you can witness most documents via an audio-visual link now.
Federal and especially state governments are working hard to push this further. So a lot is still in consultation, with more changes to come. So what we are discussing in this episode is not the final chapter in this saga.
3 – Is an electronic signature safer than a wet signature?
A paper (‘wet’) signature just gives you a scribble and a written date and possibly (in some jurisdictions) a written location. You have no way to verify whether actually signed on that date in that location unless you are there, ask witnesses or with respect to date do some microchemical analysis.
An electronic signature gives you an IP address, logged-in email address, date signed and geo-location. It can also possibly give me SMS verification and id verification and in an audio-visual link you can see the person signing. An electronic signature gives you a superior audit trail compared to wet signatures, as it is admissible in court and offers additional details about the signing experience.
4 – Do fewer documents require a witness nowadays?
The need for witnesses is declining. There are better authentication methods available.
Victoria, Queensland, and Western Australia have entirely removed the need for a ‘face-to-face’ witness. The other states are working on it.
You still need a witness for crucial documents such as oaths, affidavits, wills, and POAs, but that can now be done through audio-visual links.
Having a witness requirement does not prevent electronic signing since you can do the witnessing over platforms like Zoom, Teams and similar. All will give you an audio-visual link.
5 – Do wet and electronic signatures face the same challenges?
Electronic and wet signatures have a lot in common. They both sit within a system of agreement that we discuss below.
They both run through the four stages within this system of agreement – (1) Prepare, (2) Sign, (3) Act and (4) Manage – and need to integrate this four-part process into everyday business operations.
And they both face similar challenges. But they deal with these challenges in different ways. Take inefficient processes, information silos and unbalanced risk management as an example.
A – Inefficient Processes
The less streamlined your processes are, the harder it is to fit signatures efficiently into your operational framework.
But even with that, electronic signatures still add efficiency through their very nature. You don’t have to print, assemble and mail the document.
B – Information Silos
Siloed data and information make it difficult to prepare, act on, or manage documents efficiently.
But an electronic signature makes it easier to connect information and hence avoid silos.
C – Unbalanced Risk Management
The less you manage your risks, the harder to fit signatures into this wobbly framework.
But electronic signatures come with their own inbuilt security and hence enhance risk management.
6- What does a System of Agreement look like?
A system of agreement wraps around each signature and consists of six components:
(1) The person who signs,
(2) The person who relies on the signature,
(3) the data that goes into the document,
(4) the document itself,
(5) the processes linking all this and
(6) the legal framework within all this sits.
The more you connect your system of agreement with your other systems, the better. Try to facilitate the automated movement of agreements from preparation to signature, enactment, and management.
Despite the investments made to modernize systems of record and engagement, many companies have yet to upgrade their systems of agreement. Their legacy system are often slow and prone to human errors, leading to inefficiencies and a drag on productivity.
To address this issue, some companies have implemented e-signature technology to reduce the need for physical signatures. However, this only addresses a single stage of the agreement process and leaves many manual processes elsewhere. To fully automate the agreement process, purpose-built applications and integrations are required to accelerate the process of doing business.
If you want to find out more about modern systems of agreements, please refer to Docusign’s whitepaper, “The Rise of Modern Systems of Agreement.”
MORE
From PI over FYI and Suite to KarbonHQ
Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.