Restricted Stock Unit (RSU) Vesting: Safeguarding Your Process Against Risks

Written By: Michelle Tomasetti

Processing the vesting event for Restricted Stock Units (RSUs) can be a tricky business, with potential risks lurking around each corner. 

Below, we’ll explore the risks associated with administrating RSUs and provide valuable tips to mitigate them. 

By understanding and addressing these risks head-on, you can ensure a smooth and error-free RSU vesting process for your company.

Top Risks for Stock Plan Administration of Restricted Stock Units (RSUs)

1. Human Error

Mistakes happen, but when it comes to RSUs, you obviously want to do your best to avoid them. 

How? Your company can implement practical strategies such as double-checking share values and conducting thorough tax calculations. These will ensure accurate and fair distribution of shares, keeping your employees happy and satisfied.

2. System Failures

Nobody wants to imagine the horror of their RSU processing system crashing. But these disasters can and have happened. To prevent this nightmare scenario, establish reliable systems and implement contingency plans in case of technological failures. 

By planning for such an event beforehand, you can ensure that shares are delivered correctly and on time even if the worst case scenario happens. This is crucial for maintaining the trust and confidence of your employees.

3. Fraud Prevention

Fraudulent activities involving RSUs won’t just disrupt your company’s operations. They can also damage your reputation. 

Protect your organization by implementing robust controls that prevent employees from engaging in unauthorized activities such as selling unvested shares or using RSUs as collateral for loans. By being vigilant and proactive, you can maintain the integrity of your RSU program.

4. Compliance Concerns

When it comes to RSUs, compliance is not optional—it’s essential. Stay on the right side of the law by thoroughly understanding and adhering to the strict rules set by regulatory bodies like the SEC. 

By having a solid grasp of compliance requirements, you can avoid penalties and legal complications, ensuring a smooth and transparent RSU process for your company.

5. Market Volatility and Tax Law Changes

The stock market can be as unpredictable as the weather, and tax laws have a habit of changing overnight. Mitigating risks associated with market volatility and tax law changes requires your company to implement savvy strategies. 

Stay informed about market trends, employ risk management techniques, and adapt your tax planning accordingly. By doing so, you can navigate through turbulent times and ensure the stability and success of your RSU program.

Mitigating Restricted Stock Unit (RSU) Vesting Risks

Now that you’re aware of the risks, let’s equip you with some powerful best practices to keep those risks at bay.

Here are 3 short, simple, tactical strategies you can employ:

  1. Clear and Concise Policies and Procedures: Craft crystal-clear policies and procedures that outline the RSU vesting process and the responsibilities of everyone involved.
  2. Employee Training: Educate your employees regularly on your company’s policies, procedures, and the risks associated with RSUs, so they’re well-equipped to make informed decisions.
  3. Robust Monitoring and Reporting: Implement a rock-solid system for monitoring and reporting to keep a close eye on the progress of RSU vesting events and catch any hiccups before they turn into headaches.

Addressing risks head-on by implementing the strategies above will contribute to a smoother and more secure Restricted Stock Unit (RSU) vesting process for your company. 

The Benefits of Outsourcing Administration 

One final tip for elevating your RSU strategy is to consider teaming up with experts in outsourced administration. Industry experts like Infinite Equity can provide expertise and guidance to streamline your RSU vesting process. 

We also have the scalability and flexibility to adapt to your changing needs. Whether you’re onboarding new employees, expanding globally, or introducing innovative equity plans, we provide end-to-end solutions that seamlessly accommodate your requirements and provide customized solutions tailored to your specific goals.

You can learn more about Infinite Equity here, or reach out to us for guidance.

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