As shareholders and stakeholders receive reports on the performance of organisations, whether financial or non-financial, one important question on their minds is how the organisations they are involved with are navigating the uncertainties in their operating environments.
For example, while organisations may have performed well financially today, investors require more than just backwards-looking financial results to understand the organisation’s future prospects for delivering sustainable financial returns.
This is where the quality of disclosures in corporate reports plays an important role. The growing complexity of the world today and high levels of interconnectedness remain major sources of uncertainty for businesses.
Other sources are geopolitical conflicts, macroeconomic volatility, supply chain disruptions, effects of climate risk and regulatory actions.These sources of uncertainty make it difficult for businesses to plan for the future.
In times of uncertainty, organisations need to focus on transparent disclosure that provides users with clarity into the rationale for their decisions. While organisations are not expected to predict the future, they can arm users of their reports with greater insights through quality disclosures that help them navigate uncertainty.
Organisations should focus on developing the link between their financial and non-financial performance. Helping stakeholders understand how material non-financial issues, sustainability risks and opportunities impact an organisation's financial fortunes provides them with a picture of the organisation's situational context within society.
Organisations must also avoid boilerplate disclosures and tailor the information provided to their unique position.
Users of these corporate reports expect the same level of diligence in the accuracy of non-financial information as in financial information. Finally, the timeliness of information availability is an important factor in the quality of disclosures.
While organisations face high unpredictability, they need processes that ensure the timely delivery of accurate, transparent information that meets their stakeholders' expectations. Building trust with stakeholders should remain paramount for organisations, particularly in times of extreme uncertainty. This is why quality disclosures should be a priority for organisations.
The writer is a partner at PricewaterhouseCoopers. He is an author who writes and speaks widely on corporate reporting topics.
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