Happy New Year 2019!
January 07, 2019
Happy New Year!
Basking in a post festive glow of excess it’s time to look to the year ahead and what the future holds for reporting. During the last few months of 2018 it sometimes felt like we were operating in limbo. While there had been significant regulatory developments none of the reporting aspects were effective right away, so discussions were focused more on things to think about rather than act on.
But, with 2019 now here (how did that happen!?!) the various requirements are now finally in effect! So I’ve set out below some thoughts on how to be ready for these new requirements and tips and questions to consider.
As a reminder, for periods beginning on 1 January 2019 companies will have to adopt the 2018 Code, as well as report on stakeholder engagement and everyone’s favorite Companies Act requirement, section 172.
It would be easy to think that these still remain next year end’s problems, and that the only real issue to address from a reporting perspective, is to ensure you have a properly identifiable non financial information statement1. But in my view that would be a naive outlook.
As many of us know, much like Christmas shopping, it’s the preparation that counts. From painful experience, last minute shopping can still do the job, but often the recipient will be left disappointed by either the present itself, or the thought - or lack thereof - associated with it. A very seasonal analogy, I know (and not indicative of any presents I may have received or given *ahem*), but the point is that leaving your approach to adopting the various new requirements until next year is not advised.
Ahead of next year, companies will need to firstly consider how the changes will affect their business and then - to the extent they do not already - implement these changes. It is only then can you effectively report on these processes.
Consider > Implement > Report
In the run up to reporting on the new requirements, you could consider the following questions:
- Do you have the right resources in your business to effectively meet the new requirements?
- How informed are the board of the new requirements?
- How will the new regulations impact your subsidiary governance and procedures?
- Which of the 3 employee engagement mechanisms2 suggested by the UK Corporate Governance Code 2018 will you adopt?
- What current stakeholder engagement mechanisms do you have in place and are they effective?
- Do your current policies and processes require updating?
- What reporting appetite do you have - i.e. how transparent do you want to be?
As part of this thinking we have developed a guide where you can find out more information on how these regulations might affect your business and how my team and colleagues may be able to help.
So, to reiterate - preparation is key!
It will be interesting to see how companies respond in this year’s reporting cycle - what will they or won’t they go early on. With the increased public, regulatory, and political scrutiny on companies to demonstrate their contribution to society, I predict improvements in the quality of governance disclosures around how the ‘have regard’ points in section 172 have been addressed, and an increased number of references to purpose, stakeholders and value creation. But it’s only those companies that prepare early - and actually have this as part of their culture - that will be able to communicate a picture that feels authentic, strategic and integrated.
1 As clarified by the FRC Strategic report Guidance issued in July 2018
2 As per the UK Corporate Governance Code 2018, “For engagement with the workforce, 3 one or a combination of the following methods should be used: a director appointed from the workforce; a formal workforce advisory panel; a designated non-executive director.”
