FSN: FTSE FDs not yet adapting to new regulatory demands

FTSE FDs not yet adapting to new regulatory demands

29th August 2005
New research released by FT Research on behalf of Cartesis, the performance management software house suggests that many companies are heavily focussed on internal management reporting. New regulatory initiatives such as the OFR and expanded Directors' Reports require companies to disclose more information about their performance but FD's do not seem to have embraced the need to raise their game for external reporting.

Financial directors are only reaping a fraction of the benefits of their internal performance management solutions, according to research by Cartesis. A survey of financial directors from the FTSE 350 carried out by FT Research shows that most are focused heavily on internal processes and planning. While this is important as a foundation it means that many are neglecting compliance demands and crucial external factors and audiences, says Cartesis.

The introduction of new legislation - the Operating and Financial Review (OFR) - means that commentary about the trends and factors affecting future performance is a legal requirement. Therefore, companies must act now and communicate externally to secure confidence and future investment, says Cartesis. Overlooking the need to communicate externally on how a business is performing, will have serious negative implications for compliance, corporate governance and shareholder relations they say.

The research, found that the top three drivers for performance management investment were: to guide day-to-day decision making (84%), to develop long term strategy (73%) and to control the organisation (69%). However, only a third of respondents chose 'reporting performance externally' as an advantage of performance management. Additionally, none of the respondents believed that their investment helped improve corporate governance or communicated achievement.

Some observers were not surprised by the results. Nick Groves of Deloitte told FSN, "Companies have been much burdened with IFRS and may not have turned their attention fully to the new reporting requirements."

James Fisher, of Cartesis conceded that the survey findings may be attributable to the timing of the research which was carried out earlier this year. He told FSN, "There is an element of timing reflected in these results. The need for ongoing compliance has not sunk in and this represents a significant challenge."

"In a world that is dominated by corporate governance companies cannot afford to be as internally focused as this research indicates. Internal finance reporting is just the tip of the iceberg when considering what stakeholders need to see when reviewing investment and performance. Companies that are serious about their business performance and are required to meet regulations, such as the OFR, must go beyond internal updates on financials," said James Fisher, Director at Cartesis.

About Us