This year’s Financial Reporting Outlook conference focused on the rapidly changing business world and highlighted the key role the finance function should play in interpreting those changes for stakeholders.
EY’s 2016 Financial Reporting Outlook event in London on 7 November had a number of compelling themes: how technology is empowering companies across the world; the challenge facing governments and regulators tasked with stimulating growth while protecting the public interest; meeting the test of demographic shifts; and maintaining the primacy of corporate reporting in a restless and dynamic world.
But the overriding theme was that of change: driving it, adjusting to it, surviving it and thriving as the pace of it increases. Moreover, while unceasing change and disruption can be viewed as a threat, for finance professionals they may in fact present an opportunity to redefine the role of the reporting function in a world in need of assurance and clarity.
“We are witnessing disruption everywhere,” said Hywel Ball, Managing Partner for Assurance at EY UK & Ireland (UKI). “Old industries are dying, new ones are emerging and we’re seeing the development of industry 4.0.”
So it’s no surprise, Ball concluded, that many finance leaders will find their role changing: “What may challenge some, however, is the pace of that change.”
His views were echoed by Lord Turner, the former Chairman of the UK Financial Services Authority, who predicted that the global economy still had a long way to go before re-establishing pre-2008 levels of stability and growth.
“The fact is that global markets and sentiment are still shaky,” he said, “and some of the headwinds and demographic shifts mean that finance functions in corporates across the world are in for a busy few years coping with that.”
“The changing nature of the corporate landscape demands we change with it, but that means far greater weight will be placed on our ability to communicate clearly on what really matters.”
The theme of digital change was taken up by researcher and futurist Sophie Hackford, who explained why artificial intelligence (AI) may finally be the game changer that many experts have been predicting it would be, and went on to outline some of the megatrends that will affect business strategy in the next 10 years. “AI is going to fundamentally change the way we do business and live,” Hackford forecasted.
For many, the focus was on understanding where emerging threats are beginning to manifest themselves. A focus group on cybersecurity heard from Stuart Whitehead, Head of Cyber Security at EY UKI, on how this threat has evolved from nuisance to business-critical issue in a short space of time.
Whitehead believes that the most cyber-prepared companies are now adopting a posture of “active defense,” which involves moving away from simply building a firewall and passively monitoring it. He told delegates: “It means identifying critical assets in need of protection, understanding the threat and designing targeted defense systems to minimize risk, protecting the organization’s brand, reputation and shareholder value.”
So what does all this mean for financial professionals seeking to communicate and report how their businesses are coping in this brave new world? The challenge, as laid out by Doug Johnston, Partner, Climate Change and Sustainability Services at EY UKI, is understanding the underlying value of the business and effectively communicating that, not just to shareholders but to the whole range of stakeholders.
In a session headlined “Market value: Beyond the financials,” Johnston led a conversation that centered on the opportunity that now presents itself to the finance community. “In an age of more confusion and volatility, where industries are being disrupted constantly, the credibility of the finance function to understand and explain the fundamentals is even more critical,” he said.
Reporting will play a significant part in that process. As one delegate put it: “The changing nature of the corporate landscape demands we change with it, but that means far greater weight will be placed on our ability to communicate clearly on what really matters — and that has to be a great opportunity for us to redefine how corporate reporting fits into the grander scheme.”