Use your objectives and strategy to underpin your reporting and to provide the context for your activities and performance. Strategic statements set in isolation from the rest of your reporting can appear as hollow statements of intent.
Explain your key capabilities and the key resources and relationships you depend on to create and sustain value. Consider both your key inputs/outputs as well as your own activities, and demonstrate how your business model interacts with other key elements of reporting – for example, strategy, risks and KPIs.
Put your results in the context of market trends. Provide management’s perspective on the competitive landscape and macro environment to allow the reader to evaluate your strategic choices and actions along with the quality and sustainability of performance.
Provide clear information for stakeholders on how tax impacts your business, looking more broadly at tax strategy, risk management and the wider impact of tax as well as detailed tax performance in the tax note. Communicate in a simple and straightforward way to help readers of your report understand your tax affairs.
Explain how you make money, generate cash and are funded. Competition for capital is fiercer than ever before so consider including detailed disclosure about your operating cash flow strategy and performance and consolidating your debt disclosure. Provide real granularity into your debt maturity schedule and reconciliation of free cash flow to movements in net debt.
Demonstrate an understanding of the material sustainability risks and opportunities relevant to your organisation and your key stakeholders and how they are integrated into your core corporate strategy. Take a short-, medium- and longer-term perspective, and consider the impact of your business across your entire value chain when considering materiality.
Challenge whether the segment analysis is not just compliant but also makes visible the different dynamics inherent within the business. Consider including a few additional line items such as working capital, operating cash flow and capital employed for each segment.
Explain what is driving financial performance – is growth sustainable or not? Consider using bridge charts to help investors understand what is driving revenue profit and growth. Embrace non-GAAP measures to support your messaging but ensure they are clearly identifiable, consistently defined and reconciled to your GAAP numbers where appropriate.
Highlight principal risks, not all risks. How might they derail your strategy? How are they managed? How has the risk profile changed during the year and what is the sensitivity of underlying performance to changes in these risks?
Identify key financial and operational KPIs used to assess progress against strategic priorities. Explain clearly how management are incentivised, highlighting the link between strategy, KPIs and the remuneration package.
Go beyond compliance and bring governance reporting to life by demonstrating the activities of the board, the skills and experiences each board member brings to the table and how they interact. Focus on what makes your company distinctive and set the tone from the top.
Avoid silos and present a clear, coherent and integrated picture of how your strategy, governance, performance and prospects lead to long-term value creation. Consider how: the description of your business model links to your discussion of external drivers and strategy; strategy aligns with your KPIs and remuneration; and risks relate to the narrative elsewhere.
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