A healthy corporate culture is critical to building trust and corporate reporting can play an instrumental role in driving a culture of openness, authenticity and accountability to help build that trust, a new EY Global report has revealed.
As many as 95 per cent of finance leaders in India said corporate culture — where values or behaviours are consistently lived — and trust have become critical priorities that will shape future corporate reports, according to the report, titled ‘Does Corporate Reporting Need a Culture Shock’.
By embracing the role of culture in corporate reporting, finance leaders can provide the transparency that investors and other stakeholders require, building a new era of trust, the report said.
Robust approach
To embed the critical role of culture in corporate reporting, the report advises businesses to put in place a robust approach to culture reporting, invest in the right talent mix to drive change and build trust and ethical algorithms into AI that can provide the insights that investors increasingly require.
Simply put, transparency in corporate reporting holds key to earning the trust of investors and other stakeholders.
The report conveys the findings of a survey among 1,000 Chief Finance Officers (CFOs) or financial controllers of large organisations globally with 40 respondents from India to understand the challenges they face in corporate reporting.
Sandip Khetan, National Leader and Partner, Financial Accounting Advisory Services (FAAS), EY India, said, “Driving culture transformation in finance is imperative to presenting a forward-looking corporate reporting based on a wider balance between financial and non-financial information. 95 per cent of survey respondents from India said healthy corporate culture is critical to building trust. This is key to decision making for present and potential investors.”
As many as 80 per cent of respondents from India said that investors use non-financial information in their decision making.
Advanced tools
The survey also indicated two priorities: first, putting in place the advanced tools to gather and analyse large amounts of data; and second, building trust into advanced systems, including artificial intelligence for building trust in data analytics and Artificial Intelligence (AI).
The findings further highlight concerns about progress in building trust into data analytics and Artificial Intelligence (AI).
As many as 95 per cent of Indian respondents indicated that governance, controls and ethical frameworks still need to be developed and refined for AI. As many as 85 per cent of finance leaders in India (globally- 65 per cent) said they have concerns about the risks using AI in finance and reporting, from security threats to regulatory risk.
The report highlights growth of investors’ demands for more transparency and actionable insights from company reports. In India, 98 per cent respondents (globally – 79 per cent) say investors want more insight into corporate culture; and 80 per cent of finance leaders (globally – 74 per cent) surveyed say that investors increasingly consider non-financial information in their decision making and for supporting long-term value creation.
With both financial and non-financial information key to transparency, non-financial data should be as credible and trusted as financial data. However, finance leaders face several challenges in building a trusted approach to non-financial data.
The top risks cited in relation to turning non-financial data into reporting information are: maintaining data privacy (33 per cent), data security (29 per cent), and the lack of either robust data management systems (21 per cent) or controls (17 per cent) for non-financial information.
