Finance professionals are pressured to deliver better, faster and more insightful information. And business complexities make measuring and reporting more challenging. The Better Finance podcast explores how companies can deliver value in today’s environment.
When it comes to the future of reporting and disclosure, many finance professionals may find themselves in a dilemma.
On one hand, there is now a constant demand for more information, better information and faster information. With new speed and capability enabled by technology, investors and company leaders now want data that is more informative, more understandable and more actionable.
At the same time, more focus continues to be placed on the concept of long-term value and how it should be measured. As a number of institutional investors continue to eschew “short-termism” and overreliance on quarterly earnings, many are examining whether the traditional financial performance metrics and the manner of their communication that the industry is accustomed to are still useful in today’s complex world.
How should finance professionals balance a technology-enabled ability to deliver constant information with a more forward-looking and holistic approach to measuring performance, value and strategy?
In the latest installment of the Better Finance Podcast, we spoke with Neri Bukspan, EY Partner and America’s Financial Reporting and Disclosure leader, about how finance professionals can meet the divergent set of challenges and opportunities defining the reporting and disclosure industry today.
Focus on telling a story
Due to the advent of technology, investors, creditors and internal stakeholders now consume information very differently than they used to. Thanks to globalization and technologies, companies also have to be able to report effectively to a much more diverse and global audience than ever before, sometimes including reporting on information based on divergent accounting standards.
Facing countless variables including reporting complexity around regulatory expectations and the need to deliver quality information at a speed that investors are accustomed to, it can be difficult to prioritize and make meaningful progress.
That’s why, according to Bukspan, finance professionals should focus primarily on telling the right story about their company.
“Businesses operate in a very complex landscape now. The most important thing is communication and the company’s ability to tell its story in such a complex world,” says Bukspan.
What does that mean for reporting and disclosure? As finance professionals begin to tell that story, should they be more focused on the immediate next chapter or the greater narrative?
Unfortunately, there is no “one-size-fits-all” answer to that question. The best answer lies in a perfect combination of both.
Ideally, “there should be a clear long-term strategy with short and medium-term yardsticks that should be reported upon,” said Bukspan.
For example, there are certain items that companies report on that do not change that often. This type of information can live on a company’s website or in other similar means. Alternatively, there are other metrics that various stakeholders care about that should be updated more frequently, potentially even weekly, monthly or quarterly.
Finance professionals should also explain what may possibly change intrinsically during a certain period. If things are changing – whether it’s happening weekly, monthly or quarterly – the company should be prepared to explain how it plans to adjust and respond in time to the underlining currents.
“I believe reporting will become more continuous and also more evergreen,” says Bukspan.
The ultimate goal of reporting, according to Bukspan, should be to help establish a stronger framework to help investors make better decisions.
Having the right metrics aligned to the right strategy will allow finance professionals to help support those better decisions while more clearly sharing them with their capital providers. Whether the traditional cadence of quarterly reporting remains in the future remains to be seen.
“As we evolve to some framework of reporting in the future, the notion of quarterly reporting will become some sort of a misnomer or even a red herring in the context of where the world is heading,” says Bukspan.
For more on disclosure effectiveness, visit ey.com/disclosureeffectiveness.