PwC Finds Companies Aren't Reporting on Risks

New research from PwC reveals some disturbing details which suggest that most companies aren't necessarily providing investors with a complete view of the strategic opportunities and threats to the business.

Even though there's considerable uncertainty in global markets these days, PwC's new study showed that less than half (45 percent) of the 350 largest listed UK companies clearly explain the potential impact of the risks they have identified or how they intend to buffer their effects.

What's more:

Only 16 percent of the FTSE 350 clearly based their reporting on their strategy throughout their accounts,

Just 35 percent clearly align their key performance indicators with strategic priorities and

Two-thirds are failing to clearly define their business models in their annual reports.

Although these statistics may seem concerning, the study also uncovered a bright side: In many ways, reporting has improved from last year. For instance, back then, a mere 18 percent of the companies studied were clear about the impact of their risks.

In other positive developments:

97 percent are reporting principal risks.

84 percent discuss future market trends.

93 percent explicitly identify key performance indicators.

In addition, PwC found that some companies are pioneering highly inventive reporting. For example, Puma's environmental profit and loss account put a cost on its use of carbon and water across its entire operations (including the whole of its supply chain). As PwC points out, Puma's management sees this as essential information to inform its future strategy from product development to the shape of its business model. It is also the first phase of the company's plan to innovate across all its reporting and take stock of its social and economic impact in a similar way.

"Management teams today are constantly having to re-evaluate their business strategies at a time of significant economic uncertainty and changing market dynamics," Charles Bowman, partner on the UK assurance leadership team, PwC said. "Investors are also having to keep a very sharp eye on their investment strategies. Understanding the issues and having a clear strategy in place to respond to the changing dynamics whether they are caused by financial crises, more global competition or resource scarcity is essential to maintaining competitive edge."

TAGS: Finance
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