Introduction to delegated authorities
What is delegation of authority? What are the different types of delegated authorities? And what are some of the best practices for managing delegated authorities remotely? Find the answers to these questions and more in the discussion below.
What is delegation of authority?
Delegation of authority simply means assigning tasks or responsibilities to another person and giving them the right to perform those tasks autonomously.
In business, delegation of authorities refers to a formal organisational process that allows staff in managerial roles to transfer their duties among their subordinates and lower-level employees. The main purpose of delegating authority is therefore to ensure a smooth and effective business operation.
Generally, the process involves the following 3 key elements:
Responsibility – Assigning tasks or sharing responsibilities with an individual. Managers delegate responsibilities to their subordinates. However, whilst the responsibility is shared, it’s not completely transferable – managers remain responsible for the execution of the task and are accountable in the case of a performance failure to their seniors.
Authority – Responsibilities usually come with a certain level of authority. Simply put, authority is the power to make decisions. To fulfil their responsibilities, employees need to have the right level of authority so they can perform independently and efficiently. Other than in small companies, it’s impossible for the board Director to do this all themselves, and to ensure good governance you would want each Director to be empowered to do everything.
Accountability – As mentioned earlier, accountability is non-transferable so, in case of task failure, managers remain responsible. So, accountability involves the process of making sure that delegated authorities are assigned appropriately.
To sum up, delegation of authorities is the process of delegating responsibilities along with the required level of authority to fulfil these responsibilities and maintaining accountability. And everyone in an organisation operates within the remits of their level of delegated authority.
Types of delegated authorities
The definition and level of delegated authorities vary across different types of organisations and industries. Below, we’re taking a look at some of the most common ones.
Delegated authorities in banking or bank mandates
In banking, you can allow another party (in case of business, specified personnel) to access your bank account. Delegated authority lets you set different levels of access for each individual depending on their role and permissions.
Usually, delegated authority grants the following rights:
view statements, balances and transactions,
make transfers and payments or amendments to future payments,
create or make amendments to standing orders and cancel direct debits, and
apply for a business loan, apply for and obtain an overdraft and apply for a savings account.
Delegated authorities in insurance
According to IUA Good Practice Guide for Delegated Authorities, delegated authority “refers to an arrangement under which an insurer delegates its authority to a company or partnership to enter into contracts of insurance on behalf of the insurer… Delegation is a feature of the way that parts of the general insurance market operates. The term. ‘delegation’ is frequently used by firms where outsourcing is taking place”.
In the case of delegated underwriting authorities, they are widely defined as “coverholders”. Coverholders play a major role in today’s insurance industry as they help insurers expand their operations, reach new markets and regions, and therefore deliver a large proportion of their premium income.
In terms of the level of authority, a coverholder can have a full or limited authority to underwrite on behalf of the insurer that is known as a binding authority. The coverholder can also settle the claims, this is referred to as a claims authority.
Delegated authorities in trusts
Trustees of NGOs, academic organisations and charities have the legal responsibility for the management and administration of their organisation. However, it’s not always possible for the trustees to make every decision, so they often delegate their authorities to sub-committees, individual trustees, or to the employees of the organisation.
Even in the case of delegated authorities, the ultimate responsibility for the exercise of these authorities remains with the board of trustees. So, it’s key for trustees to closely monitor any delegations and have a proper reporting process in place, with an efficient control and management system.
Best practices for managing delegated authorities
Below are some of the best practices for delegating and managing authorities.
Have a comprehensive delegated authority document - The ultimate goal of a delegated authority document is to provide a clear framework of the different levels of authorities and set specific delegation limits and conditions.
Have an effective monitoring and reporting process in place – Set up a delegated authority management system that allows you to regularly monitor and control all delegations and make any changes when required.
Maintain a valid and up-to-date authorised signatory list – How do you know who has been authorised to sign what in your organisation? Having a clear and up-to-date signatory list of all your delegated authorities can help you reduce the risk of fraud and non-compliance, and prevent any operational delays and failures.
“Signatories at all levels should ensure they have gathered sufficient information to sign off effectively. We would want to avoid any situations such as the CEO or Finance Director signing off contracts for another Director, when that Director may not be aware. This authority should only be exercised when the other is unavailable or asks the CEO / FD to sign on their behalf due to the size of authorisation.”
What is Authorised Signatory Management?
Find out in our latest special report where we discuss the fundamentals of Authorised Signatory Management. Download
How Cygnetise can help you strengthen the management of your delegated authorities
Cygnetise provides a digital solution, as an alternative to the paper-based management and distribution of Authorised Signature Lists (ASLs). It allows you to manage all your authorised signatory and delegated authority data in a secure, cost-efficient and sustainable way, from anywhere in the world.
Without having a clear view of who your authorised signatories / delegated authorities are and who has access to your signatory data, your signatory lists might be incorrect, out-of-date, or fall into the wrong hands and thus expose you to a higher risk of security breach and fraud.
With Cygnetise, flying paper pages of sensitive signatory data and time-consuming manual processes will become a thing of the past. Operational resilience, enhanced efficiency and a contribution to your ESG goals, could become the new norm.