This report is the third report in a four-part project examining what investors want from corporate reporting and how organisations are responding to their needs. It explores trends in the speed of internal and external financial reporting, and assesses the pros and cons of a move towards real-time, or ‘near-to-real-time’, reporting to investors and other stakeholders.
Technology, competition and the pace of business are changing the way in which companies think about internal management information. A proliferation of structured and unstructured data is fostering a new approach to decision making, in which trends such as big data and analytics are playing a prominent role. The provision of real-time data is now becoming feasible and is helping to give companies a competitive edge. These trends have, however, been slow to cross over into external corporate reporting. For now, audited reporting remains episodic and follows the traditional quarterly and annual rhythm.
Now that real-time information is starting to become more important for management decision-making, so questions are beginning to be asked about whether investors can expect a similar acceleration in information provision.
On the face of it, faster information provision and reporting would seem beneficial to many investors. Accessing information more quickly about corporate performance would lead to a more accurate assessment of a firm’s prospects, without the time lag that characterises the gap between closing the accounts and publishing a report. Yet this is an area that is fraught with challenges. At a time when policymakers are extolling the virtues of long-term thinking and seeking to discourage a focus on short-termism, real-time reporting would suggest a move in the other direction. It may lead to greater volatility, and a greater emphasis on investor churn.
Ultimately, a balance needs to be struck, and it seems clear that a trend towards faster closing will be difficult to resist. Timely publication of accurate corporate performance information helps to reassure the market – if a company is able to close in 30 days, rather than 90, then that reflects well on its broader governance and management capabilities. Faster reporting is inevitable – and largely desirable – but investors, regulators and auditors must consider carefully where the boundaries should lie between speed and assurance/accuracy.