Annual Reporting: Show your true colours
Analysts, employees and investors alike are not interested in being bought off with your business’ shiny facade. They rather see your true colours. When it comes to the context of your business, your stakeholders want to understand what growth looks like — and what might get in the way of it.
The Annual Report season has come to an end. Or so it could seem. Just as we’re done reminiscing over the year that has just passed, the scouting for upcoming milestones and touchpoints begins. Committed to learning from our experiences, we continue our 365-day journey of annual reporting. During the course of six articles, we’ll present our most essential takeaways regarding performance, purpose, ESG, exposure & opportunities, words & visuals, and format. Using our focus model — How key stakeholders prioritise content and communication in annual reports as our backbone. Here’s what to focus on when scoping your company’s exposure and opportunities in the reporting season of 2023.
Your business is not an isolated island. It strives and is challenged in a particular context. So when scoping your annual reporting, it is crucial to be transparent about the risk, potential changes and surrounding currents your business is exposed to. In the research for our study Trends in Danish corporate reporting vol.2 — Understanding key stakeholders made in collaboration with Simply Revolution, we asked analysts, investors and key employees how they situate your company concerning the surrounding world. How does it tackle opportunities as well as challenges lying ahead — and in the past? You can be confident that your stakeholders will ask these questions when reading through your annual reporting.
Historically, companies have not made the kinds of risks they face very granular or specific in their reports. Risk may be related to climate, people, talent retention, potential market changes, potential regulatory changes, all those kinds of things. Exposure definitely extends beyond looking at credit risk.
Consultant for companies and investors
To answer their curiosity, it’s an essential rule of thumb to communicate not only about potential challenges and opportunities but to be explicit about how your business meets these challenges and opportunities. As mentioned by a consultant in the quote above, it is furthermore apparent to think of your surroundings as a whole. Address exposures and opportunities holistically in your annual report.
If you hear all about the company’s ambitions, without being able to sense what makes them possible, or which challenges might lie in the way, those prospects become quite unbelievable.
Analyst private banking
It can be a good idea to sprinkle a little honesty and humility when scoping your annual reporting for 2023. Don’t bother only to show off — stay true to your business's own imperfections and remember that no one is perfect. You don’t build a trustworthy reputation for your business by only putting successes on display.
“It suits companies to recognise that they do not have all the answers or have not reached the goals yet.”
Employee Press advisor
Transparency is a common denominator for stakeholders on a broad scale. Employees, investors and analysts want to hear about the challenges and the mistakes — and how you overcame them. It paints a picture of a resourceful and resilient business.
“It is valuable to get insight into what opportunities are available to the company and which opportunities pass them by.”
Consultant, For companies and investors
One last time for the ones in the back: Stakeholders come to your annual reports for the ‘big picture’. That includes your exposure as well as your excellent prospects.
Investors, analysts and employees want to understand the bigger picture, what market trends might affect your industry, the risks louring, and how you plan to maximise your potential opportunities.
Let’s exemplify it …
We’ve worked with 11 different companies crafting amongst others 8 annual reports, 2 integrated reports and 4 sustainability reports and a broad variety of other reports.
Throughout the 26+ reports we’ve worked on for the reporting year 2022, it has always been present to us that every single one communicated the whole picture. We all live and behave in the context of others. Other people, businesses, politics, environmental challenges, etc., and evidently, the same goes for any business and industry.
One annual report that has managed to proactively put the company’s exposures and possibilities on display is DSV.
DSV has a responsive approach to new trends and challenges with quick adaption of new technologies.
DSV is transparent in their description of risk management. It uses models for dynamic risk adaptations, key risk heat maps and overview of risk description, mitigation strategies and assessment.
When communicating about the exposure and opportunities in an annual report, it’s important to consider the following touchpoints:
Provide a clear and concise overview: The company should provide a clear and concise overview of the risks and uncertainties that the company may face in the upcoming year — and has faced in the past. This should include any risks and uncertainties the company may face and any opportunities they are pursuing.
Be concrete: The company should provide specific examples to illustrate their position, such as major projects, initiatives, risks or challenges the company is facing. It’s important to leave the stakeholder with a clear idea of how the company in question tackle potential challenges and plan to act on possibilities.
Provide a forward-looking perspective: The company should offer a forward-looking perspective that includes information on their plans for the future, any potential long-term opportunities, and risks the company may face. This can demonstrate their commitment to growth and innovation and provide stakeholders with greater confidence in the company’s ability to navigate changing market conditions — as well as changes related to climate, people, talent retention, potential regulatory changes, etc.
Looking to bring your report up to speed? Talk to Charlotte Madvig Schmidt.