May 06, 2020
We’ve had quite a start to 2020. This decade has been anticipated for a while, with predictions for what Finance would look like and the degree of innovation we’d reach.
But so far, we’ve all been significantly impacted by the COVID-19 pandemic—the tremendous change, the uncertainty, and the need to reimagine how we all work almost overnight.
These unprecedented complexities were introduced after several years of increased public and shareholder scrutiny for large corporations. In the 10 or so years since the 2008 financial crisis, irresponsible corporate behavior and unnecessary risk-taking have become less and less acceptable—particularly in the eyes of investors, who need oversight of anything that could influence long-term financial performance.
So, we decided to delve deeper to discover how Finance and Accounting organizations can begin earning greater investor confidence in their numbers. Working with independent research firm Censuswide, we asked over 760 institutional investors what made them doubt the accuracy of the financial data at their portfolio companies.
Here are some of the key takeaways.
There are a number of factors that make investors wary of accepting financial data at face value. While high profile misreporting and fraud scandals undoubtedly add fuel to the fire, it turns out that many investors have already been burned by a bad experience.
Over a third of investors globally said a lack of visibility over how financial data is gathered, checked, or analyzed makes them doubt its accuracy. More than half (58%) of those surveyed confirmed they were becoming increasingly concerned by this lack of transparency, suggesting that the current status quo is not sustainable.
While evidence of transparency and accuracy in financial reporting helps to reassure investors, understanding the roles and responsibilities of those involved is equally as vital.
Essentially, when it comes to increasing investor confidence in financial data, it isn’t all down to the numbers. Who signs off on them is also important.
Almost two-thirds of investors said that if a company in their portfolio misreported its finances, they would demand to know who was being held accountable for the errors. Accountability appears to be particularly important for US-based investors, where nearly three quarters said the same.
When we asked investors who they think bears ultimate responsibility for ensuring that financial data and reports are accurate, the answer was unanimous: the buck stops at the top.
Globally, 79% of investors indicated that the CEO should be held accountable for a company’s financial reporting errors, while nearly 38% thought the CFO should also be held to account.
Read the full report to discover more of our findings from the survey, including BlackLine’s take on investors’ key concerns.
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