The demand for corporate reporting to be more transparent is a reality. Dictated by the key role it plays in telling investors the story of value creation, corporate reporting is a way for companies to gain the trust of themselves and other stakeholders, as Florentina Susnea, Managing Partner at PKF Finconta.
Promoting this transparent approach requires a broader shift in attitudes towards a balance of financial (eg, turnover, profit, loss, etc.) and non-financial (eg number of innovation processes, sustainability indicators). The latter should be as credible and reliable as the financial data. However, there are two main challenges facing finance department leaders when developing an approach based on trust in non-financial data.
The first challenge is the ability to extract value from non-financial data, while managing any associated risks, including confidentiality and respect for data protection.
The second challenge is the reliability, objectivity and credibility of the data behind non-financial reporting, especially when technologies such as robotic process automation (RPA) and artificial intelligence (AI) are used in data collection and analysis.
In order to gain confidence in data analysis, the following two aspects are important:
- Implement advanced tools for data capture and analysis – RPA can support imposed and time-consuming tasks to be performed more effectively and efficiently, and AI can provide new depth of perspective for reporting. However it will take longer for most financial teams to move beyond isolated pilot projects and start tackling these technologies on a large scale.
- Trust that the information resulting from the analysis of data performed by advanced systems is accurate and reliable – Many of today’s financial systems have a certain level of trust and assurance built into them, yet AI does not enjoy the same level of trust. Most finance leaders express concerns about the quality of data produced by AI and the associated risks.
Promoting this more transparent approach to reporting requires, in turn, changes not only in terms of methodologies and practices, but also in the mindsets and culture of the company. The organizational culture will play an increasingly important role in corporate reporting in two ways: first, as financial teams play a central role in conducting transparent reporting, they create an open and responsible culture that responds to rapidly changing reporting requirements.
Second, by providing investors and stakeholders with a meaningful, credible and relevant, data-driven perspective on the organization’s performance and culture, the company demonstrates the link between the company culture and its performance in value creation.
There are three areas of action that are likely to be key to stimulating a culture of openness and accountability in corporate reporting:
- Emphasis on a sound approach to a company-wide reporting culture
- The talent mix required to stimulate the change of financial culture and overcome resistance
- Building trust and ethics regarding the use of support technologies (RPA and AI)
Companies can respond to the need for transparency expressed by investors by adopting a new organizational culture of corporate reporting and mindsets about the information they share with investors and stakeholders. By creating reports that include financial and non-financial indicators to gain stakeholder confidence, by building a company-wide reporting culture, and by building trust in data analytics with advanced technologies, companies help increase confidence in the business environment.