2022: Why should companies make annual reports?
An annual report is the primary source of information for investors looking to understand an organisation’s performance, strategy, governance and outlook. It is the most comprehensive form of communication between organisations and their stakeholders. Hence, it is rightly called ‘the pinnacle of corporate communications.
An annual report is the primary source of information for investors looking to understand an organisation’s performance, strategy, governance and outlook. It is the most comprehensive form of communication between organisations and their stakeholders. Hence, it is rightly called ‘the pinnacle of corporate communications.
So, getting down to brass tacks, why does your organisation need to publish an annual report?
1) Mandatory regulations — Many countries have made it mandatory for organisations to disclose financial information, to protect the interests of shareholders and encourage better economic decisions.
In India, it is mandatory for all companies registered under the Ministry of Corporate Affairs (under section 217 of The Companies Act, 2013) to submit an annual report every year. The report should include the disclosure of a balance sheet at the end of the financial year, a profit and loss account, cash flow statements, and a statement of change in equity.
In addition to providing financial information, companies have become proactive by increasing the scope of their annual reports to include sections on sustainability, CSR activities, and corporate governance information, acknowledging the importance of this importance to investors.
2) Company branding — Annual reports, as a positive portrayal of company branding, is the new norm.
While fundamentally being a medium for the dissemination of accurate information to stakeholders, your organisation’s annual report can become the mirror that reflects your company’s brand and values. The way you present your numbers, goals, accomplishments and ethos go a long way towards creating a reputation for your company and building its brand personality.
This would essentially mean that your annual report would double-up as a creative branding exercise, by being a narrative of your organisation’s story when combined with an imaginative design.
3) The apex of business communication — The annual report presents your organisation and its leadership with its best opportunity to communicate with stakeholders in a clear and compelling manner.
From elaborating on your business strategy, performance and culture to using infographics and content to better explain financial data and the CEO’s vision — the annual report reaches out to all stakeholders explaining decisions taken and growth achieved.
In addition to addressing your existing shareholders, customers, employees and investors, your annual report also speaks to potential stakeholders looking to learn about your organisation, its growth strategy, activities, and performance.
The intention, therefore, is to reassure current stakeholders, that their interests have been taken care of, while also encouraging future stakeholders to invest in your organisation.
4) Products, services and financial breakdown — While disclosing financial statements of the organisation is mandatory, the annual report presents a chance to delve deeper into specific product and service-related information.
This is an opportunity for your organisation to reintroduce stakeholders to the entire range of your products and services, with specific details on the revenue growth of each, along with business metrics used to adjudge success.
In addition, your annual report would be a great medium to introduce stakeholders and potential investors to new products launched during the year and future product expansion plans. This has the dual purpose of showing growth in the financial year ended while giving a roadmap for the future, to ensure sustained value generation.
5) Highlighting achievements — Your annual report would be the ideal tool to highlight your organisation’s achievements. This may range from awards won by the organisation, teams or individuals for business-related activities to sustainability and CSR actions that helped make a positive impact on the environment and society. Highlighting your achievements will tell stakeholders that you are not only the best at what you do in terms of business, but your work also extends beyond the organisation towards the society.
An annual report is no longer a mere spiel of numbers, but a rendezvous between organisations and all its stakeholders, including potential employees and investors.
A great annual report is its own reward. A well-thought-out and structured report with a combination of truthful data, compelling story, creative visuals and infographics, and sophisticated design can positively change how your organisation is perceived by the general public, stakeholders, and the market.
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