Investors’ expectations for corporate reporting are changing rapidly — here’s what you need to know about corporate reporting as we enter into 2016.
The way that media is distributed and consumed has been changing rapidly over the last decade, which presents a significant challenge for public companies. Just as consumers have heightened expectations of service quality, shareholders now demand more accessible, accurate corporate reporting. So what do modern investors actually want, and how can companies adapt their existing strategies in order to remain in-step with current trends and industry best practices?
Organization and Explanation are Key
Consulting firm PwC recently conducted a survey in order to gauge how transparently and effectively modern investment professionals expect companies to communicate vital information. Somewhat surprisingly, the results indicate that most shareholders are relatively flexible when it comes to communicating accounting policy notes and financial statements, at least as far as frequency or format are concerned — that said, clarity and detail are a must.
The industry experts surveyed by PwC believe that a company’s accounting policies should be clearly organized and easy to find, whether they’re on the company’s website, in their financial statements, or presented alongside other relevant notes. Businesses should explore a variety of organizational methods and determine which one best displays the information their shareholders will most likely be looking for.
But interestingly, the report suggests that providing context and explanation along with data will perhaps be even more important than organization as we enter into 2016. Over 70% of the respondents agreed that notes should be accompanied by detailed justifications within the context of the corporation’s strategy, and any major policy changes should be put forth in an easily digestible manner.
This emphasis on context is a subtle one, but it makes all the difference — and it offers a potential opportunity to win over investors. While we tend to think of transparency as simply the comprehensive reporting of relevant information, just rattling off figures does little to educate or inform. You must connect the dots between figures and offer insights to shareholders much as you would to executives. By providing the right context, you can give investors a peek into the logic behind your company’s direction and inspire their trust in business leadership.
Public companies should focus on drawing links between their current business model and their ongoing financial performance — modern investment professionals are interested in the specifics, and use this this type of reporting to determine whether the current model will translate into future profits. According to the PwC surveys, annual business reports are still effective for disseminating information to stakeholders, but a concerted effort should be made to ensure that these documents are not just comprehensive, but easy to understand and interpret.
Making Use of Digital Channels
The general findings of the report can be summed up thusly: as we move forward into the new year, companies must “be clear, be specific, and link related information.” These basic but crucial tenets of communication hold true for all businesses, though details like the manner of presentation may differ from industry to industry.
As smartphone adoption rates continue to soar across the globe, public corporations must optimize their reporting programs across multiple digital channels — especially mobile-centric platforms like social media and native apps. It doesn’t take an expert to intuit that shareholders will favor instant, one-touch access to vital corporate information over drab, dense reports received once a quarter.
Perhaps most importantly of all, your reporting should come in a user-friendly context, which ought to include a highly intuitive platform. Simply put, public companies must adapt their existing strategies in order to meet the evolving needs and expectations of an increasingly tech-savvy investor base — or they likely won’t be holding onto that investor base for much longer.
(Main image credit: Clarence/flickr)