From ‘Compliant to Compelling’; PWC On How To Improve Corporate Reporting

Richard Barrett

After the tips about writing a better MR&A last week, I noticed a newly-pressed research paper by PWC called Trust Through Transparency which reports on current trends in disclosure before giving  tips on building public trust through relevant and insightful reporting.

Along with others such as the Financial Reporting Council and the International Integrated Reporting Council, PWC has been an advocate of more transparent reporting for a decade or more, sponsoring the annual Building Public Trust Awards in the UK.

The findings of their research show that the overall trend among UK FTSE listed companies of all sizes is positive with many FTSE 250 companies judged as producing reports that match the quality of their larger FTSE 100 peers.

But there is still an alarming gap between the best reporters and those who have not grasped the opportunity to communicate effectively with their stakeholders. PWC say the latter typically focus only on historical financial information and statutory compliance rather than the type of information that investors and others want to understand the business and its markets.

Weaker reporters were also judged to be less able to keep in step with new requirements such as the UK Corporate Governance Code, less adept at defining and describing their business model in plain English, poor at explaining the link between key performance indicators and executive remuneration and vague about exactly what the board and its committees have done during the year. Damning comments indeed, as poor reporting reflects badly on both the quality of top management, – and the top finance team!

As a way forward PWC recommend companies address some of the key challenges by:

  • Improving the way they articulating their strategy and business model.
  • Introducing better ways to collect and collate data so that it is consistent and reliable – particularly across disparate  businesses and segments.
  • Reducing the amount of laborious and cumbersome work in compiling a report. In a previous study on Financial Effectiveness, PWC found that top performing finance teams spend 17% less time on data gathering and 25% more time on analysis than their peers and surmise that when it comes to writing financial reports many companies probably expend so much time putting together the basics that there is often not enough time to spend on gaining real insight.

Automation with solutions such as SAP Disclosure Management directly addresses the second and third of these challenges, – and I’d argue that by the improved productivity gives finance time to work with senior managers to address the first.  Improving reporting is not achieved overnight though; moving from reporting that is merely compliant to reporting that is compelling involves a process of incremental improvements. But surely the place to start is by improving productivity to free up time needed to work on the softer issues, just as PWC suggest.

Meanwhile here’s a summary of their 12 top tips. Each is explained in detail in the PWC report together with an excellent example of best practice taken from a recent report of a UK FTSE listed company.