How quality of reporting impacts stakeholders’ view

Organisations have been described as inanimate and incapacitated, with no soul or conscience by Mervyn King. He explains further that leaders in an organisation are the ones who provide the organisation with a soul and conscience as well as the capacity required to operate. As a result, the views about an organisation, whether good or bad, rests on the conscience of its leaders.

The leaders of an organisation get to define the organisation’s purpose and the role the organisation plays in society. They set the strategy based on the material issues contained in the mission statement, the business activities, and the key performance indicators (KPIs) used to measure performance and reported on by the organisation.

Therefore, as an organisation provides reporting on its activities, financial performance and position to stakeholders, the leaders in organisations should begin to appreciate the linkages on how the quality of the organisation’s reporting influences stakeholders’ view of management. Some quality aspects of reporting that could influence stakeholders include the following.

Tailored disclosures

An organisation’s approach to compliance with corporate reporting regulations, standards and frameworks is an aspect that provides stakeholders with a view of management. Stakeholders expect organisations to comply with regulatory requirements and ensure that their reporting is compliant to avoid regulatory penalties.

However, organisations that comply with reporting rules in a bespoke manner can tell a unique story. Applying a tailored approach to reporting provides stakeholders with critical organisation-specific information and disclosures that enable a better understanding of the organisation.

Organisations that make it a habit of using boilerplate disclosures and information could be perceived by stakeholders as uninvolved and having little knowledge of reporting regulations.

Management must ensure that information and disclosures in their report are made deliberately with an understanding of the information needs of their stakeholders. This way, the stakeholders will find the organisation’s reporting relevant and taut.

Comprehensive purpose

Stakeholders want organisations to inform them of material issues impacting the organisation. The PwC latest global CEO survey results show that the top threats facing many businesses today are non-financial.

They include cyber risks, health risks, macroeconomic volatility, climate change, geopolitical conflict, and social inequality. It implies that organisations must define success in a way that goes beyond profit-making but addresses these other non-financial matters that impact the financial fortunes of the organisation.

Consequently, stakeholders will regard organisations who report on a comprehensive basis that incorporates material non-financial issues as being responsible and taking a leadership role in problem-solving.

Organisations that fail to take this approach could be perceived by their stakeholders as oblivious and myopic in their understanding of the changing business environment in which their organisation operates.

Smart targets

To build trust and encourage transparency with stakeholders, leaders should recognise that stakeholders are interested in information about the organisation's past, present, and future outlook.

Leaders across an organisation that provides stakeholders with information on SMART (specific, measurable, attainable, relevant, and timely) goals about not just the past and present, but the future will help build trust with their stakeholders and society.

For instance, organisations are quick to include SMART quantitative measures of the past and present targets and goals but stop short of doing the same for future outlook targets.

Organisations that keep their future outlook targets and goals SMART stand out in the eyes of stakeholders.

By appreciating how the use of SMART targets could impact and influence how stakeholders view the leaders of an organisation, it is up to the leaders within an organisation to ensure quality reporting. The pace of change in the current business environment demands this approach to corporate reporting.

Awodumila, Associate Director at PwC Kenya. An author who writes and speaks widely on corporate reporting topics

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