There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know.
Donald Rumsfeld
In the period leading up to the recession, investors could have been forgiven if they had the same confused impression about the state of organisations as Donald Rumsfeld had about the Iraq war when he gave his now famous quote to a journalist. Company reports were ever lengthening but seemed to be saying less; provisions and explanations abounded but left the reader without a clear understanding of the true state of the organisation. And when the recession hit, it soon became clear that many organisations themselves also had little idea of the true state of affairs within their own business.
Perhaps because of this one of the strongest themes to emerge from the post-recessionary fallout is the need for company reporting to change, to give a clear, concise and fair view not just of the current state of an organisation but of its expected future prospects as well. To this end bodies such as the Financial Reporting Council (FRC) have embarked upon a programme of consultation and guidance which is aimed at changing the face of company reporting.
Some of the changes are in direct response to tangible events. For example, the recent Tesco reporting saga has led to the requirement for organisations to clearly explain complex supplier arrangements within annual reports from 2015 onwards. Other changes are simply aimed at rearranging the content of reports so that relevant information is clearly highlighted and easily visible to prospective investors.
Whilst it may be tempting to leave the content of annual reports to accountants and company secretaries, the new requirements impact every part of an organisation. Clear reporting requires clear processes and this in turn demands that business leaders instil a culture of openness and clarity not just across the board but across the entire organisation. Changes of this nature will inevitably require an element of training input, with communication skills and fair contract negotiation skills coming to the fore.
Many of the changes required by the FRC and other bodies come into effect in 2015 so the sooner organisations start to gear up their internal processes to meet the new requirements the better. Make no mistake, in 2015 when it comes to reporting the known knowns take precedence and companies had better make sure that unknown unknowns are a thing of the past. If you would like to find out more about company reporting feel free to browse our website www.elementalcosec.com or contact Nick on nick.lindsay@elementalcosec.com.
