What more should reporters do, in the age of COVID-19?

March and Summer year-end reporters have an extra challenge to meet this year – how to reflect the impact that COVID-19 and the associated lockdowns have had on their business.

Written by
Nicholas White

March and Summer year-end reporters have an extra challenge to meet this year – how to reflect the impact that COVID-19 and the associated lockdowns have had on their business.

Of course, we appreciate that this is tricky – no-one has a crystal ball, after all. And there are no precedents - no ‘best practice’. Most December year end reports were signed off before the pandemic’s explosion, so offer very little perspective on the topic.  But there’s a lot to be gained by saying what you’re able to on the issues that investors will be most worried about in 2020.

As with many reporting-related conundrums, there isn’t a ‘one size fits all’ solution, of course – different sectors will be experiencing very different conditions. Some firms, including the UK’s sizeable grocery and retail sector, are actually seeing higher sales.

Answer investors’ questions before they answer them for you/make their own assumptions

Helpfully, the FRC, PRA and FCA stepped in on 26 March to offer valuable guidance to reporters, which they reinforced on 14 April. They emphasise that investors need to understand a company’s resilience in the face of current uncertainty, particularly around liquidity, viability and solvency; summarised in the FRC Lab’s infographic.

They conclude their advice on the strategic report and viability statement with a call to action: ‘At this time, the need for fuller disclosure is paramount.’

In line with the above guidance, we believe reporters should consider the following in preparing their strategic reports:

  • as always, ensure the narrative has a forward looking perspective, particularly important in the current crisis
  • give the pandemic prominence in the report; e.g. highlighting the key issues in the CEO’s review
  • articulate the possible impacts in different scenarios
  • provide assumptions and judgements made in assessing resilience
  • report on access to cash in the short and medium terms
  • describe the impact on the market environment and any influence on strategy
  • disclose plans to mitigate the effects, and the resources available to implement these plans
  • report on new risks to the company’s resources, assets and relationships, including the protection and retention of staff
  • describe the potential impacts of post balance sheet events
  • describe any qualifications and assumptions in the viability statement
Share more, not less

Understandably many companies will be concerned about how much to report in such uncertain times. Seismic changes have erupted since December year end companies published their reports. COVID-19 is having a devastating global impact on lives, livelihoods, businesses large and small, economies worldwide, consumer behaviour and organisational behaviour.The world isn’t the same as it was a 4-6 weeks ago; many of the impacts will have a lasting affect. Annual reports should, we believe, reflect the new realities and help investors and other stakeholders understand each company’s position and prospects in the new world we all find ourselves in.