Findings from a global analysis of 270 larger listed companies’ reports, highlighting weaknesses and good practices in the presentation of business strategy and performance
Financial reporting plays a central role in shareholder communication, but it cannot present a complete picture of business performance and prospects on its own. Addressing this will require something greater than merely tweaking financial reporting standards. Instead, the answer lies in the presentation of a broader range of business-focused information that addresses the operational performance of the company, allowing investors to form their own assessments of business prospects.
In the second edition of the survey, Room for Improvement, we look at the six must-do’s for communicating business strategy and performance in companies' annual reports.
We are seeing gaps between the scope of information currently being reported by companies, and information that investors need to support their investment decisions. Investors and shareholders often rely on key performance, risks and other operational information where there is no existing framework of how this information is compiled. In addition, investors have long recognised the importance of financial and non-financial key performance indicators (KPIs) in assessing the value of a business, but assurance has primarily remained focused on information presented on financial statements. As a result, investment decisions are often made based on unassured information that has not been through rigorous traditional financial reporting processes.
Your success is driven by both financial and non-financial performance. You use KPIs to help manage your business and to report on important trends and industry-based comparators. Which raises the questions: Can the KPIs that your organisation and your stakeholders (including investors, key customers and business partners) rely on provide insights into the company’s business and operational performance? How accurate are those KPIs and how can they be used in managing the performance of your operations?