With reputations being hard won, but easily lost, Luminous believes in taking every opportunity you can to build your reputation. One often neglected opportunity presents itself each year in the form of your annual report. Stephen Butler, Director of Stakeholder Engagement at Luminous, shares his recommendations on how to make the best use of yours.
12 top tips for effective reporting
1. Make a concise statement of how the company creates value
Plainly and simply explain how the business makes money. What are the resources and relationships you draw on? Who are the stakeholders you create value for? What makes you different from your peers and competitors? What are the markets you operate in?
2. Present a clear ‘strategic roadmap’
Understanding a prospect’s strategy is high on an investor’s priority list. So, outline your strategic performance and strategic priorities over the short, medium and long term and show how success is measured through your KPIs.
3. Emphasise stakeholder engagement
Use your annual report to detail the material issues most relevant to your stakeholders. State how you engage with stakeholders and detail the outcome of that engagement.
4. Describe your culture and purpose
Discuss why the business exists (its purpose) and outline its culture and behaviours. It’s important to discuss purpose in the context of both your business model and strategy.
5. Explain how your reward policy is sustainable
Detail how directors are fairly rewarded with a clear link to strategy and KPIs.
6. Show that sustainability is a strategic imperative
Demonstrate how sustainability and your material issues are aligned with business purpose and commercial strategy to demonstrate how integral it is to the business.
7. Evidence how governance drives value
Outline the role of the board, emphasising what was done over how it was done. Describe the board’s role in: supporting strategy and managing risk; setting culture, and values and purpose; and give a clear sense of the company’s commitment to diversity and succession planning.
8. Offer clarity about future uncertainties
All too often, the risks disclosed in an annual report are generic. Instead, clearly outline the strategic risks, both downside and upside, in the context of the strategy and business model.
9. Analyse current performance and future prospects
Detailing performance to date is simple enough. However, a good story addresses the context in which the business operates and where the future drivers of value will come from. Discuss these in the context of your strategy.
10. Make dividend policy disclosures that are relevant to investors
Clearly explain why you have selected a particular policy. What does the policy mean in practice? What are the risks and constraints associated with it? And, most importantly, what is being done to actually deliver under the policy?
11. Outline your capital allocation approach
Capital allocation may be the most critical means of translating corporate strategy into action. Throughout the report, explain how the board makes decisions regarding how capital is allocated across short and long-term priorities.
12. Demonstrate the quality of management
The strength of the management team is an important aspect of a company’s story, yet it is often underplayed or presented only in generic ‘all-our-management-are-highly-experienced’ terms. Clearly communicate what the individual skills, expertise and experience of the C-suite are and how they are used to deliver on the strategy and business model.
Want to read more?
This article appears in our latest edition of ‘Reporting Matters: the new reputational landscape’. For more insights on the theme of reputation, you can access the full e-magazine using the link below.