As businesses begin to think about the near- to long-term impacts of the COVID-19 crisis, concern turns from triaging the immediate impact, to ensuring they’re ready for regulatory changes set to take place in the next six to 12 months, namely the European Single Electronic Format (ESEF) and updates to the Non-Financial Reporting Directive (NFRD), among others.
Preparing a company to be out of survival mode and back into a state of normal operations means many are taking the opportunity to not just bounce back to status quo business practices, but rather, to thoughtfully determine a better path forward in getting back on track and focused on the long-term.
Optimising for the long term
First and foremost, companies will want to ensure improved resilience is built-in across departments. Those that look to implement sustainable, long-term solutions, as opposed to temporary quick fixes, will be in a better position to ensure seamless business continuity. Additionally, the challenges brought on by remote working could very much be a permanent fixture in our professional lives, and companies need to implement solutions to promote connectivity among employees. In doing so, companies will not only improve efficiencies, allowing employees to spend time working on what really matters – like strategy and digital transformation – but ultimately reduce risk of human error, which can lead to huge fines or potential reputational damage, if unaddressed.
Connected technologies – like connected reporting – are a great way to ensure businesses looking to come out of the COVID-19 crisis are able to operate nimbly, ensure that data is input and managed centrally, and minimise risk of human error while maximising oversight and accountability across teams.
Recent amendments to the European Commission 2020 Work Programme released last month are a great example of how businesses can adjust to the impact of COVID-19 in a way that works for them. The programme – originally focused on high-level, long-term goals around eco-sustainability and a “Europe fit for the digital age” – has had to shift priorities in light of the COVID-19 crisis. This includes adding top priority responses from both a health and economic perspective, but continues to look at ways not to just bounce back to the status quo, but to empower businesses and economies to move forward in line with the original long-term goals.
We’re also seeing reporting-specific regulations beginning to reflect the need for more forward-looking flexibility that accounts for shifts in the economy. ESEF, for example, is still on track for reports dated for this year, and while implementation continues to be slow, it is also steadily increasing: updates to manual reporting are expected next month, and many countries are now rolling out what they expect ESEF to look like in their local markets.
In addition to ESEF’s on-time roll out, we’re continuing to see updates to the NFRD. While the consultation on NFRD is delayed, we can expect to see more changes announced – including updated deadlines – in the near future.
The movement of these deadlines and the shorter resulting timeframe for required changes could be the next big challenge for many companies who are behind or relying on deadline extensions. Businesses must take the lead from Europe’s 2020 Work Programme and prioritise getting their financial and non-financial reporting in order, regardless of whether or not the deadline is pushed back. Businesses need to adopt the “Europe is doing this, so we must, too” attitude as the world continues to move forward and find its footing.
On their own, neither ESEF nor the NFRD seem to have a significant impact on business’ reporting procedures, however, within the current climate, and considering wider regulatory trends, both are set to be crucial regulations for companies to pay attention to. For example, recent comments from ESMA’s response to the NFRD consultation, and a publication from the Capital Markets Union high-level forum, mention both sustainability and digital as priorities, including suggestions for more electronic reporting. What we need to be mindful of as we move through COVID-19 recovery is that current processes likely won’t remain sustainable and resilient as the world continues to change, and businesses will need to be flexible to new circumstances.
Ongoing issues involved in working remotely could continue presenting challenges, for example: processes becoming increasingly de-centralised and difficult to manage, unclear ownership over activity, and the increased likelihood of mistakes. But if businesses think ahead and use cloud software like connected reporting, much of these pain points can easily be addressed, allowing teams to focus on what matters: meeting the ESEF, NFRD, or other local regulatory deadlines.
By Andromeda Wood, senior director of data modelling, Workiva