Nedbank Group CFO reveals three key themes in reporting excellence
Earlier this year, Nedbank received a letter from the JSE acknowledging the banking group's high standards of financial reporting for the year ended 31 December 2018, and in particular, it's IFRS disclosures. CFO South Africa invited Raisibe Morathi, Nedbank Group CFO, to share her insights into achieving such recognition for reporting at this level.
At Nedbank we take great pride in our reporting and communication to shareholders and other stakeholders. For us it is more than just complying with financial and regulatory requirements; it embraces what we do, how we make decisions and how we tell our value-creation story.
Transparent reporting has never been more important than today, with the macroeconomic environment remaining challenging and uncertain, and corporate scandals having eroded trust in South African companies, both listed and unlisted. As a CFO community we need to focus on three key themes when we think about communicating with the external world, namely credibility of financial reporting and good governance; moving beyond financial disclosure; and communicating to a broad set of stakeholders. Let me share a few thoughts on these.
Credibility and good governance
Corporate scandals and misrepresentation of financial results have dented the good reputation of South African corporates among local and international investors. As I reflect on the conversations we have had with the international investment community, there has been a marked deterioration in the perception of corporate South Africa over the past five years or so. No longer are we seen as the poster child of good governance and disclosure in emerging markets; questions are now being asked about the credibility of financial disclosures, as well as accounting and auditing practices.
To regain investor trust the finance community needs to be more open and transparent in their disclosures and embrace balanced reporting. To achieve this, we have to ensure that our organisations have appropriate oversight and world-class governance practices in place and that our finance teams are skilled and supported by effective systems that facilitate clear and insightful internal reporting to ensure one version of the truth with external reporting.
In this context I am extremely proud that Nedbank recently received a letter from the JSE acknowledging Nedbank’s the high standards of financial reporting for the year ended 31 December 2018 and, in particular, our IFRS disclosures. We are humbled by this response.
Moving beyond financial disclosure
Traditionally, a key role of the CFO was to oversee financial disclosures. However, in this ever-changing world, supporting financial reporting with relevant non-financial disclosures has become more important, particularly when it comes to the drivers of value creation on the one hand, and environment, social and governance (ESG) issues on the other.
While Nedbank is regarded as a leader in integrated reporting in South Africa, as acknowledged by multiple integrated reporting awards over the past few years, we continue to challenge ourselves to set a new standard and raise the bar each year. We embrace the International Integrated Reporting Council guidelines, but more importantly we ensure that we address the key issues in which the investment community is interested.
Integrated reporting is beneficial to any organisation, since financial disclosure cannot be credible without being underpinned by integrated thinking to create a golden thread binding together strategy development, target setting, business planning, measurement and tracking of performance, reward and recognition, and eventually external reporting.
Good disclosure and reporting is not limited to what is published; it should extend to engagements with the investment community. As management we dedicate time to meaningful interactions with various stakeholders throughout the year. These are important opportunities for us to obtain feedback and answer questions, but also for stakeholders to assess the quality and depth of leadership – a key investment consideration.
While these engagements are common practice for the management teams of companies, at Nedbank we have extended these engagements to ESG roadshows, during which our chairman and lead independent director, meet with shareholders to discuss environmental, social and governance matters. Through these engagements over the past six years, we have listened, debated and also received valuable feedback. This is clearly evident in the outcome of our annual general meetings where resolutions, in particular about remuneration, receive more than 98% votes in favour.
Communicating to a broad set of stakeholders
While we understand that integrated reporting is primarily aimed at shareholders, we have seen that our reports are widely used by multiple stakeholders, from potential employees and clients, to prospective shareholders, ratings agencies, suppliers, non-government organisations, regulators and society at large. And while we ensure one version of the truth, our reporting and communication is attuned to each group of stakeholders. As such, we always keep our staff informed and before we meet with the investment community (after the release of our SENS announcement) we have a live and interactive broadcast with our employees.
Sell-side analysts want to get their reports out as quickly as possible and we engage based on insightful presentations and one-on-one meetings. Long-term shareholders are not as time sensitive and we usually give them the opportunity to digest sell-side analyst reports, so that subsequent discussions can focus more on the value creation drivers than on short-term financial nuances. Lastly, as a regulated industry we also keep our primary regulator, the Prudential Authority at the South African Reserve Bank, informed of our financial performance – a practice that has now been embraced by many of our peers.
We are proud to serve as a good example of excellent financial reporting and communication in South Africa and as CFO of Nedbank I personally drive continuous improvement and open and transparent disclosure. A special thank you has to go to the Investment Analysts Society and the investment community for recently voting Nedbank Group as a leader in corporate reporting in the banking sector. We hope to inspire the highest quality of corporate reporting industrywide. In so doing, we will be playing our part and truly delivering on our purpose – to use our financial expertise to do good.