Chief financial officers (CFOs) are increasingly the face of investor relations and should focus their communication efforts on building trust and confidence in the company, not just the numbers.
Findings from a new study simply titled Stakeholder Communications conducted by KPMG in Singapore, CPA Australia and the Singapore CFO Institute suggest that Singapore-listed companies need to do better in stakeholder communications, in areas such as timely notification of results announcements and annual general meetings.
Companies also need to be more forthcoming about providing the market with early guidance about their earnings. In addition, integrated reporting is likely to change the way in which companies communicate with their stakeholders.
Close to 91 percent of companies in the study communicate with the public through their corporate website.
The study also highlights the importance of timely stakeholder communications. Only 14 percent of companies notify the market ahead of time on the release of earnings results. Only 21 percent of companies issued profit warnings.
While companies gave shareholders an average of 19 days notice, there is room for improvement to keep with the spirit of early and timely stakeholder communications, says the report.
The report also finds that Chief Financial Officers (CFOs) are increasingly the face of investor relations and should focus their communication efforts on building trust and confidence in the company, not just the numbers.
More than 68 percent of about 700 companies studied have a separate operating financial review or management discussion and analysis section in their annual report.
Online is the preferred mode of communication.
About 91 percent of companies surveyed communicate with the public through their corporate websites. News releases came a distant second at about 70 percent of companies. Least preferred modes were company visits, newsletters and snail mail.
“Trends in online media make it inevitable that information to be communicated to shareholders must go beyond the traditional channels of communication. Companies need to embrace and learn the most effective strategies in relation to online communication. If employed correctly, online communications can be an effective risk management tool in responding to market rumours,” said Irving Low, Partner, Head of Risk Consulting at KPMG in Singapore.
Communications and information can be more forthcoming
On average, Singapore-listed companies report their results within 39 days from the end of each quarter or the first half year. For full year results, they took an average of 54 days after the year-end to unveil their report cards.
While within regulatory requirements, industry observers cited in the report said it is important to improve the timeliness of communications. It also noted that CFOs need to help stakeholders distil the facts from the noise and from “popular opinion” and provide better guidance for investors to make informed investment decisions.
“In an age of 24 by 7 communications, retail investors are constantly bombarded with information. Their difficulty is separating fact from fiction or market speculation. This is where CFOs, increasingly the face of investor relations, can do their part – communicate clearly and simply and dispense with confusing jargon,” said Mr Melvin Yong, Singapore General Manager, CPA Australia.
The survey also found that messages can be made clearer. For listed companies, unclear communications sometimes led to clarifications sought by the market regulator, Singapore Exchange.
Based on available data from disclosures made by 177 listed companies, about 4-in-10 had to respond to queries by the regulator about their annual reports. About 40 percent were also asked to clarify their full year results, and between 20 and 32 percent of companies had to reply to queries on their quarterly earnings numbers. Just over a quarter had to explain what the regulator felt were unusual trading activities.
Integrated reporting is here to stay
In Singapore, there is great momentum and practical support for integrated reporting. A quarter of annual reports reviewed had a section that focuses on other stakeholders and key performance indicators. About 10 percent produced a separate sustainability report.
“Integrated Reporting takes a holistic view of corporate reporting, and will fundamentally change the way companies communicate with stakeholders. As a thought leader in accounting research, the Accountancy Sector Research Centre (ASRC) has identified Integrated Reporting as a critical item on its research agenda. The ultimate goal is to build Singapore into a regional hub for Integrated Reporting and to provide technical support for organisations that aim to adopt Integrated Reporting.” said Dr Vincent Chen, Head of Accountancy Sector Research Centre, Singapore Accountancy Commission, which supports the Singapore CFO Institute.
Effective stakeholder communications is an art
Real conversations and timely management response to stakeholder questions and concerns are cornerstones of effective stakeholder communications.
In this regard, CFOs will need a clear understanding of the company’s stakeholder engagement process in order to develop an effective communications framework. The ensuing communications plans should enable CFOs to pro-actively engage their stakeholders in areas that matter to them.