EY survey shows that CFOs question the benefits of corporate reporting

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CFOs are increasingly losing faith in the effectiveness of corporate reporting. Digitization and the changing needs of different stakeholder groups are presenting major challenges. These were the findings of a global EY survey among about 1,000 CFOs of major corporations.

Zurich, 15 March 2016: This year’s EY annual survey – entitled “Are you prepared for corporate reporting’s perfect storm?” – discovered that CFOs have considerably less faith in the effectiveness of corporate reporting than they did a year ago. Only 55% are convinced that financial reporting is an effective way to meet all expectations and regulations. That figure was 84% last year. Confidence in the company-wide comparability of key performance indicators has also declined (44% compared with 66%): less than half of those polled (45%) consider such statements to be clear and relevant (last year: 67%).

What’s more, far fewer CFOs (39% compared to 68%) are convinced that corporate reporting is cost-effective. Only 48% of respondents said their reporting manages to secure the confidence of their decision-making bodies – a sizeable drop compared to last year’s 71%. Only 43% of CFOs believe their reporting truly meets the expectations of stakeholders outside the company.

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“Corporate reporting has to be everything at once nowadays: relevant, timely and cost-efficient. CFOs must critically evaluate the output of their finance departments and proactively address and answer criticism of the efficiency of their processes and faith in their reporting. Corporate reporting can only fulfil its true purpose in an effective way if the CFO is convinced of its value,” says Alessandro Miolo, a partner and Head of Assurance at EY Switzerland.

Reporting has to meet increasingly complex norms and cover more and more areas, such as sustainability, which is why the demand for information is also growing constantly: 71% of CFOs say that more reports are being produced, although this is partly due to new regulations such as the forthcoming EU directive on non-financial reporting.

Digitization seen as a major challenge
Innovative technologies such as “big data analytics” – that is, the analysis of structured and unstructured data – can provide financial departments with new and additional insights.
CFOs regard these technologies as crucial to successfully performing their duties. As a result, 82% expect increased investment in new reporting technologies over the next two years. At the same time, they see significant weaknesses in existing technology. They complain specifically about inadequate integration of different IT systems (35%), difficulties accessing the right data (34%) and inadequate data quality (32%).

“We have noticed that digitization initiatives are implemented rather sporadically. Opportunities are seized upon too rarely and there is often no broad-based strategy. What we need is company-wide coordination of various initiatives so that we can improve the quality, transparency and speed of financial leadership,” Alessandro Miolo says.

Audit committees and supervisory boards increasingly involved
CFOs are also feeling the impact of increased involvement by audit committees and supervisory boards in reporting. Of those polled, 84% said that audit committees and decision-making bodies had exerted more pressure on reporting over the last three years.

CFOs are increasingly using data analysis to meet the demands of audit committees and decision-making bodies, with 34% stating that they are making good progress in this, while a further 34% are using analytical procedures to only a limited extent. Among those who use analytical procedures, storage solutions for information management purposes (61%), frequent use of automated data entry and data generation (57%) and investment in state-of-the-art analytical and data mining tools (51%) are considered some of the highest priorities.

“Finance chiefs are facing the challenge of how to adapt their reports to the changing expectations of the various recipients. The use of data analytics is an important building block in the ongoing development of our current reporting. CFOs must therefore know the expectations of their stakeholders, employ innovative data analysis tools and expand the skills of their financial team,” Alessandro Miolo says about the challenges currently facing the CFOs of major Swiss corporations.

About the study:
To better understand the challenges associated with corporate reporting, EY surveyed more than 1,000 CFOs and reporting heads of major companies. Over half of these companies have annual sales of more than USD 5 billion, and a fifth in excess of USD 20 billion. The respondents were evenly distributed across the world’s most important economic areas and represent all major sectors of the economy. The online survey, conducted in late 2015, was supplemented by extensive interviews with nine CFOs and eight EY accounting experts. The interviewees are named in the report (1.32 MB). Further information on the topic can also be found on our website.


 

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EY’s organization is represented in Switzerland by Ernst & Young Ltd, Basel, with ten offices across Switzerland, and in Liechtenstein by Ernst & Young AG, Vaduz. In this publication, «EY» and «we» refer to Ernst & Young Ltd, Basel, a member firm of Ernst & Young Global Limited.