GoingPublic Magazine: First of all, do all companies or organizations use external expertise figuring out their respective brands? One should assume they know best… wrong or right?
Simnet: We believe an external perspective to how a company articulates its brand is extremely important. Many companies suffer from an ‘internal out’ culture where there is an assumption of understanding of how the business operates. Adopting a more ‘external in’ approach means communication is tailored to the audience’s knowledge and understanding of the business and what they want to hear. The articulation of the brand should be consistent, but with the volume turned up or down depending on the needs of that audience. An external advisor or agency should bring this perspective to the table and take the company’s key brand messages and make them simply to understand to its key audiences.
Kirchhoff: At least most of the listed companies create the annual report with the support of an external advisor. This report still is a key communication instrument which should support the brand and convey the company’s story. The external advisor can give an independent input and use his knowledge of the needs and trends of the capital markets, especially the requirements of the investors.
GoingPublic Magazine: What about corporate reports in particular: What would you regard as recent trends here, be it national or international?
Simnet: From a UK perspective the introduction of the ‘Strategic Report’ to the Companies Act has focused reporters on providing concise, fair, balanced and understandable reporting. The new regulations also put a high focus on the articulation of the company’s business model. Done well, the business model does not only describe how a company creates value, it can also inform the content of the annual report. The fundamentals to a good business model is quite simple: describe what you do as a business – your value chain –, describe the resources and relationships critical to the success of that value chain, link the principal risks associated with the model, and finally describe the outputs and wider outcomes your business creates. A good business model immediately identifies the elements that are material to its success and should form the foundation of the rest of the disclosure in an annual report. It will also act as the foundation to providing a fair, balanced and understandable narrative, focusing on how the business manages and measures those material elements, and discusses the opportunities and challenges these elements create. At Radley Yeldar, we also believe this forms the foundation of integrated reporting.
GoingPublic Magazine: However, demands are still rising.
Kirchhoff: Companies are facing ever higher demands regarding their reporting. An increasing complexity which derives from fast changing markets and the advance of digital media as well as new expectations from global shareholders are changing the annual reports. In Germany more and more companies want to create a so called integrated report, following the IIRC recommendations. But in fact most of these are combined reports of the annual report and the sustainability report. The content the IIRC demands is quite similar to what Brett just described: the annual report should be more strategic, describe the equity story better and focus on what is really material for the financial community. Before companies try to publish a 300 pager with annual and sustainability information about their business they should better try to create a report with the material information the investor needs to assess the company a fair value and to decide about an investment.