What we found is that many companies are embracing opportunities to communicate more effectively, while satisfying increasing regulatory demands.
74% of the companies surveyed are acting to improve their financial reports. From our findings, we listed the top 10 actions companies should consider when evaluating the effectiveness of current disclosure processes.
- Start early. Starting as early as possible in the reporting cycle is important, as most changes require time to design, review, approve and implement.
- Engage relevant stakeholders from the start. Engage key stakeholders within the company, such as senior executives, controllers, heads of SEC reporting, investor relations and in-house/external counsel to ensure they understand the plan and provide feedback.
- Discuss your plans with the audit committee. Increasingly, disclosure effectiveness is being added to the agenda. Discuss their views on maters they care about and share what other companies are doing to improve financial reporting.
- Challenge yourself and ask, “how can our disclosures be more effective for investors?” Taking a fresh look at opportunities to make disclosures more understandable, meaningful and effective can help improve the alignment of your vision and strategy across all your communication channels, which ultimately can translate into greater market confidence.
- Addressing a “low-hanging fruit” may provide a good start toward building momentum. Removing immaterial information, redundant disclosures and outdated information may provide a good start for disclosure improvement, but consider plans for more robust efforts, including holistic changes across all financial communication channels.
- Consider content and presentation of the information. In addition to improving the content of information, consider ways to improve the presentation of information through greater use of bullet points, tables, charts, graphics and infographics. Communicate, rather than simply disclose.
- Don’t be afraid to consult. Consider proactive communication with key stakeholders, including the SEC and your external auditors, so they understand the rationale for any changes made.
- Optimize the use of technology. Investors are adapting to technological advances in how they consume information used in decision-making. Consider opportunities to leverage technologies to enhance the content and messaging provided on your website and specifically, the investor relations page.
- Remember that disclosure effectiveness is a continuous process. Financial reporting improvements are a continuous process, as reporting constantly should adapt to changes in the business, regulatory environment, accounting rules and technology.
- Set the right tone at the top. Empower management and proactively support efforts to focus on disclosure effectiveness.