In this article, we’ll explore what modernized disclosure management requires and the tech that can help you get there.
The last mile of finance isn’t the longest mile, but it’s arguably the most important to get right: the disclosures, reports, and narrative that make up the last mile must go the distance because they’re what investors, stakeholders, decision-makers, consumers, boards, and leadership make decisions from. They’re what regulators evaluate. Get your disclosure reports wrong, and there’s a lot at stake, including penalties, legal action, and your company’s reputation.
Disclosure management has changed a lot over the last few years. Stakeholders and regulators alike are demanding more insight into the nonfinancial aspects of companies. ESG, lease, and tax data have made their way into the office of finance, and require commentary and insight into direction, but many disclosure management and reporting approaches have not yet been brought up to speed.
In this article, we’ll explore what modernized disclosure management requires and the tech that can help you get there.
Let’s level-set: Narrative reporting vs. integrated reporting vs. disclosure management
Corporate reporting is comprised of three components: narrative reporting, integrated reporting, and disclosure management. Let’s level-set on how each of these contribute to corporate reports.
Narrative reporting
Think of narrative reporting like performance storytelling. A report’s narration paints a picture of the company’s performance, market position, strategy, opportunities, and challenges.
Typically, narration is part of both internal and external reports. For example, in the annual report, there will be narrative reporting in the chairman’s statement and the strategic report. In an ESG report, there would be narrative reporting in the mission and goals.
Narrative reporting gives businesses an opportunity to provide more context into performance and provide stakeholders with a better understanding of the business.
Integrated reporting
Financial reports are essential, but they often paint an incomplete picture. Enter integrated reporting, a holistic approach that weaves financial data with operational information from the rest of the company via narrative elements to tell a richer story about your company.
Integrated reporting is also a framework developed by the International Integrated Reporting Council (IIRC). According to IFRS.org, the <IR> framework aims to “bring together material information about an organization's strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context in which it operates.”
Disclosure management
Disclosure management is often referred to as the last mile of financial management. Essentially, disclosure management is the process of reporting a corporation’s information to stakeholders.
There are two types of disclosure management: voluntary and statutory. Voluntary is where a company chooses to share facts, narrative commentary, and information about their performance and operations. Statutory disclosure is where a publicly traded company must disclose certain information about the company to regulators, investors, and the public.
Disclosures can be:
Financial: Profits, losses, and performance of the business
Operational: Business activities, market share, values, mission
Strategic: Strategic goals and future objectives
Risk: Exposure to employee retention, cybersecurity, compliance, sustainability, and financial risks
Narrative disclosures: These disclosures describe the results, guiding readers through the results in a story-like format. They include analysis and discussion of the results and point to desired outcomes.
As you can gather, narrative reporting, integrated reporting, and disclosure management are all interlinked. Narrative reports include financial disclosures, and financially-driven reports can include narrative disclosures, all while fulfilling integrated reporting’s goal to communicate how an organization creates value over time.
