Culture and trust to shape future corporate reports, EY says
Investors are demanding more transparency and actionable insights from company reports, but a majority don’t trust that data produced by AI can be trusted as much as data from usual finance systems.
According to the sixth EY Financial Accounting Advisory Services (FAAS) global corporate reporting survey, although the majority of finance leaders (79 per cent) say they have the data volumes today to give stakeholders the insight they want into company culture, only 37 per cent report quantifiable key performance indicators (KPIs) in this area.
The report, Does corporate reporting need a culture shock?, highlights the growth of investors’ demands for more transparency and actionable insights from company reports, at a time when the potential to use artificial intelligence (AI) and ever-growing volumes of data offer a transformation in the accountability of businesses.
Peter Wollmert, EY Global and EY EMEIA FAAS leader, said, “Finance leaders are under no illusion that the shift in investor focus toward company culture means there is a pressing need for them to realign corporate reporting to focus more on long-term value.
“No longer seen as a ‘soft’ issue that has little to do with the value of their organisations, 83 per cent of EY survey respondents say that a healthy corporate culture in which values or behaviours are consistently embraced is critical to building trust, and 81 per cent say it helps reduce risk.
“But despite this acknowledgement, what we see is a lack of action turning the need for these insights into reality.”
The survey found a willingness among CFOs to use technology to meet the needs of greater transparency and more insight into company culture, but also highlighted concerns about progress in building trust into data analytics and AI.
Sixty per cent of group CFOs say that the quality of finance data produced by AI cannot be trusted in the same way as data from existing finance systems. 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.
“Transparent, forward-looking information – based on a wider balance between financial and non-financial information – requires changes, not only to frameworks and practices, but also to mindset and culture,” said Mr Wollmert.
“In other words, a change of attitude is required if corporate reporting is to offer stakeholders open and transparent information about value creation.”
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.