This awards has created an industry-wide benchmark, as well as an opportunity to give teams the recognition they deserve. Judged by a panel of experienced in-house practitioners, communication agency directors, analysts and business and financial journalists, the Corporate and Financial Awards were established by Communicate magazine, the UK’s leading magazine for corporate communications and stakeholder relations.

The event marks a benchmark of excellence in all aspects of City communication -to the buyside, the analysts, business & financial journalists, and the wider stakeholder communities that influence them.

Andrew Thomas, publisher of Communicate magazine said: “This is the inaugural year of the Corporate and Financial Awards. We felt it important, considering the convergence in communications that has happened in recent years, to rectify the lack of any effective benchmarking of communications to the city and those who influence the city. We have been delighted with the calibre of response, the awards can only get bigger and we would like to say congratulations to all those who have been shortlisted in the first year.”

The awards celebrate excellence in all aspects of city communication and provide a true benchmark of companies’ communication with the City and its influencers. The projects were judged by a cross-section of experienced in-house practitioners, communication agency directors, analysts and business and financial journalists.

The category winners will be revealed at a gala dinner on 15 May at The Light, Bishopsgate. Fingers crossed from the team here at Addison!

More details regarding the Corporate & Financial Awards 2012 can found here.

Now in its sixth year, the annual Strategic Value in Corporate Reporting Awards 2012 will take place on 23 April at the Royal Overseas League, London. The Society focuses on how the annual report is a basis for comparability between companies; a source of added value and a means of differentiation. To select the winners, the Society applies FutureValue’s Strategic Value Analysis technique, with its individual comparative assessment of FTSE350 companies.

For more information, please see the  Strategic Value in Corporate Reporting Awards website.

The revised UK Corporate Governance Code, published in June 2010* by the Financial Reporting Council, sets out for the first time an explicit requirement for companies to explain their business models – put simply, to help investors understand how they make money.

It states:

“The directors should include in the annual report an explanation of the basis on which the company generates or preserves value over the longer term (the business model) and the strategy for delivering the objectives of the company.” [1]

 *The new Code applies to accounting periods beginning on or after 29 June 2010.

A useful tool or a regulatory straitjacket?

A clearly-explained business model, presented early on in the annual report, can be a very useful tool in helping potential shareholders to understand a company’s investment case.  Warren Buffet recently revealed that he had started building his $10bn stake in IBM after reading the annual report and being impressed by the strength of the company’s competitive advantages in finding and retaining clients. [2] Buffet’s epiphany ended his long-standing refusal to invest in technology stocks (on the grounds that he had not previously understood them). [3]

However, some corporates are less than enthusiastic about the new requirement.

In our discussions with companies, we sometimes encounter the assumption that explaining their business models is unnecessary – because people ‘just know’ what we do, don’t they?  There can also be a lack of consensus within companies about what constitutes their business model, how to describe it and what the areas of focus should be.

But an informative and thoughtfully prepared description of the business can have a broader appeal than purely for the company’s shareholders.  For employees (current and potential), it’s an opportunity to identify where their contribution fits into the big picture.  For partners, suppliers and customers it’s a chance to see how and where the company adds value through the supply chain and in its products and services, and it can give all stakeholders an opportunity to understand how sustainable the business is.

From an investor perspective, a company that cannot explain straightforwardly how it makes money and, in doing so, how it creates shareholder value will struggle to articulate a compelling investment case.

How can you add value to your business model explanation?

The best business models are the ones that help the investor to understand not just what a company does and how, but also what differentiates it.  They answer the question, ‘why would investors, customers, employees and partners choose that company rather than its competitors?’.

Will business models still be needed if the Government’s latest proposals on narrative reporting are adopted?

In a word, yes.

The Government recently set out a series of proposed changes to narrative reporting for UK companies, including a Strategic Report that will be designed to focus on key messages for shareholders:

“Therefore the Strategic Report will cover the essential information about the business: its strategy, its business model, performance and key financial data, significant changes to governance, and principal risks.”

Department for Business Innovation and Skills (BIS): The Future of Narrative Reporting: Consulting on a New Reporting Framework (September 2011). [4]

Would you like some help with crafting yours?

It looks as though the business model is here to stay.  If you aren’t sure where to begin and you would like some ideas to get you started, we can help…

Addison is a leading European corporate communications agency, providing consultancy and design expertise in corporate communications, corporate reporting and digital media.

We provide an independent and provocative view of the major issues affecting corporate communications and reporting. We use this understanding to bring real insight to our clients’ specific communications challenges – providing consultancy that genuinely adds value.

If you’d like to get in touch please call Georgina Herdman on +44 (0)20 7940 4510 or email georgina.herdman@addison.co.uk.

1. http://www.frc.org.uk/documents/pagemanager/Corporate_Governance/UK%20Corp%20Gov%20Code%20June%202010.pdf

2. http://www.bbc.co.uk/news/technology-15728306

3. http://www.guardian.co.uk/business/2011/nov/14/warren-buffett-buys-ibm-stake

4. http://bis.gov.uk/assets/biscore/business-law/docs/f/11-945-future-of-narrative-reporting-consulting-new-framework.pdf

• simplifying the narrative reporting framework;
• removing duplication and inconsistency;
• increasing transparency; and
• building on the coalition commitment to increase the quality of companies’ social and environmental reporting.

We wholeheartedly agree with the Government that these are objectives worth pursuing and we think there’s a lot of sense in many (if not all) of the detailed proposals. You can read our full response below.

But two things surprised us about the consultation.

Firstly, whilst there’s plenty of discussion about narrative reporting, communication hardly gets a mention, with the word putting in an appearance only twice in the whole document (pages 17 and 40).

High-quality disclosure is achieved not just by setting out and signing off a laundry list of essential regulatory requirements (strategy, direction, business model, risks, forward-looking analysis of challenges and opportunities, key social and environmental information and high level financial and remuneration information are all on the BIS list).  The annual report can improve shareholder perception of value when it helps investors to find, analyse and understand what the Board thinks is important. 

Just as pertinent as the information to include is, we think, tackling the communications challenge of making it accessible and relevant – the “how” as well as the “what”.  This means highlighting the most significant elements of information (for example, through logical structure and navigation, clear presentation, use of the most appropriate formats for data), explaining how they relate to one another and helping readers to understand what has changed (and why).

By making information accessible, high-quality corporate reporting provides the essential context that allows investors to assess the performance of the company and its management. 

Secondly, clear communication is just as important in the financial statements, and limiting the scope of the consultation to narrative reporting feels to us like a missed opportunity.

The approach that has been proposed for narrative reporting (organising the content into key highlights for shareholders and then providing more detailed supporting data elsewhere) could equally be adopted for the accounts.

Many companies, when publishing their preliminary results, already focus on the material that they think is most useful to investors.  The notes to the financial statements in the prelims (which are provided to meet the needs of shareholders and analysts rather than to address compliance), often only amount to one third or fewer of the notes eventually published in the full annual report.

Given the willingness of companies to take this pragmatic approach when they can do so, we think the regulatory framework for corporate reporting could be updated to allow for greater simplicity and relevance throughout the whole annual report, not just the narrative sections.

Standard Chartered’s Annual Report emerged as a winner for a number of reasons, including the clarity of its disclosures, the presentation of the bank’s strategy throughout the report and high quality of a number of individual sections, particularly risk, strategy and board disclosures.

Further information on the awards can be found here.

For more details, please contact Georgina Herdman, Business Development Manager, on +44 (0)20 7940 4510 , or georgina.herdman@addison.co.uk.

More information can be found here.