What will the impacts of Covid-19 mean for reporting? What will the impacts of Covid-19 mean for reporting?

Covid-19 has released a shockwave to the global economy and businesses around the world are assessing the impacts. Many are wrestling with operational continuity, resource allocation, asset protection and have very real questions about viability. This undoubtedly impacts management headspace for regulatory compliance and their approach to stakeholder engagement and communications. And while regulatory authorities have provided some immediate respite for reporters, we argue that the importance of corporate reporting and communications remains critical, and what’s more that the current pandemic is likely to have some major implications for the form and content of future reporting. 


A relaxation of reporting requirements


For those working in the world of corporate reporting, the myriad disclosure rules and requirements are nothing new. In times of ‘normal’ operations, these overlapping demands can be difficult to manage as the year-end process progresses, but as the Covid-19 crisis has developed, it has become clear that the current business environment is anything but normal.


Over the course of the last few weeks an array of announcements and updates have appeared, offering regulatory relaxation and disclosure postponements in an attempt to ease the burden on businesses as they assess and respond to the pandemic. Much like the regulation itself however, the guidance is becoming layered and complex. To help navigate this rapidly changing environment the Salterbaxter team has been monitoring updates and has drawn together the following simple guide:


  • 18 February: The Financial reporting Council (FRC) issues guidance to companies and auditors on risk disclosures related to Coronavirus
  • 16 March: FRC updates audit advice in light of pandemic
  • 17 March: With many companies looking at the practicalities of holding their Annual General Meeting. The Chartered Governance Institute (ICSA), with the Financial Reporting Council (FRC) and Slaughter & May offered guidance  for companies to consider using a hybrid meeting approach, delay or adjourn.
  • 18 March: Following further call for action from the House of Lords, the chief secretary to the Treasury announced the postponement of the implementation of IR35 to April 2021.
  • 21 March: The Financial Conduct Authority (FCA) announced a two-week moratorium on publishing preliminary financial statements, to allow businesses and auditors time to properly assess and consider the developing situation.
  • 24 March: Gender Pay Gap reporting requirements have been relaxed as the Government Equalities Office (GEO) and Equality and Human Rights Commission (EHRC) have said that they will suspend enforcement for 2019/2020
  • 25 March: Companies House announced that companies can apply for a three-month extension to filing deadlines. Any application must however, be received before the original filing deadline
  • 25 March: The SEC issued guidance allowing a 45-day filing extension for companies that face challenges in meeting requirements for certain disclosures – including the 10-K, 10-Q and 8-K. The Division of Corporation Finance also issued disclosure guidance for companies considering the need for Covid-19 disclosures and challenges in the audit process. It also included key questions related to current and future operations.
  • 26 March: Perhaps in response to the disconnected regulatory environment, the FCA, FRC and Prudential Regulation Authority (PRA) published a joint release announcing measures to maintain audit quality, extend publishing deadlines and help businesses and auditors consider report content – particularly around liquidity, viability and solvency
  • 27 March: The ICSA – along with the FRC, Freshfields Bruckhaus Deringer, Linklaters, Slaughter and May, and the Department for Business, Energy and Industrial Strategy (BEIS) – has issued supplementary guidance to companies planning AGMs in light of Government ‘stay at home measures’. Companies will need to consult their Articles Of Association, but for most, achieving a quorate general meeting should be possible.
  • 27 March: ESMA issued a public statement promoting action by national authorities across on financial reporting deadlines across EU markets. ESMA recommends that authorities not prioritise supervisory actions in regard to reporting deadlines for issuers with full-year of half-year reporting  between 31 December 2019 and 01 April 2020. Issuers must maintain compliance with the Market Abuse Regulation.


Across Europe the requirements for electronic filing of reports and financial information under the European Single Electronic format (ESEF) have been adopted for financial periods starting 01 January 2020 and are therefore due to be applied in the next reporting cycle.  Should the Covid-19 situation continue in the medium term, there are murmurs that implementation of ESEF may be delayed. As yet there has been no official announcement but it is an area that we’ll be watching closely.

Maintain meaningful and balanced communications in the here and now


Beyond the regulatory and technical however, businesses must consider carefully how they are communicating with key stakeholders about the decisions that they take. Most large businesses will be taking rapid and tough actions. These actions need to be implemented in ways that adhere to established ethical norms and be backed up with honest and authentic communications. This may seem to be a reputational 101 but we shouldn’t underestimate the stress being placed on C-suite decision makers and communicators. Stakeholders will be looking for clarity and reassurance about both the here and now, and the future, so businesses should focus on meaningful communications – saying the right things, at the right time. They will also need to carefully manage potentially contradictory messages. While the financial community will be looking for clear planning and action to manage costs behind profit warnings, others will be wanting to see that this is being done equitably or seeking reassurances on wider corporate responsibility priorities.


Before Covid-19 was declared a pandemic, there were sporadic mentions in corporate disclosures. As things developed, a huge number of RNS announcements appeared as businesses seemed to want to say something. We would argue that the value of these announcements was questionable, but in recent weeks we have seen much more meaningful statements. This started with companies in sectors more immediately affected like hotels and airlines, moving into restaurants, leisure and retail. Across all sectors, we are now seeing announcements on AGM logistics, share buyback and dividend suspensions. This seems like a sensible step as businesses consider government guidance on health and hygiene, cash flow and access to finance, but reputational issues are also at play. easyJet has been criticised for their £174m dividend payments. While the CEO defended this as legally required, in a sector that has jettisoned people and as some airlines likely request Government support, it really isn’t a good starting point.


A focus on executive remuneration will also surely follow in the coming weeks. While some Execs have taken voluntary reductions in fixed remuneration, there will be scrutiny of how Remuneration Committees apply discretion during these uncertain times. Indeed, PIRC has written a blog outlining their view and recent letter to companies advising restraint.


There are also very real considerations around the corporate calendar – whether that is understanding how to undertake the AGM and shareholder vote, engaging with investors or preparing Q1 trading updates that remain balanced and accurate given the current uncertainty. 


There will be many tensions to manage in the coming weeks and months. While there aren’t any clear answers, we will continue to monitor how companies across sectors are responding and communicating with stakeholders. As an agency focused on corporate reporting and sustainability strategy and communications, we are engaging with a number of our clients on how they manage their messaging for different audiences.

The implications for corporate reporting moving forward


As the world responds to Covid-19 and business returns to normal, corporate reporting will revert to the regular disclosure rhythms of financial and non-financial reporting. However, there can be little doubt that the content itself will shift substantially, in particular in the medium term. Companies will need to consider the long-tail of macro and market implications of Covid-19, including customer behaviour and need, supply chain resilience, risk profile and mitigation, and strategic/operational response. The FRC Lab recently published a graphic outlining five key areas of focus for investors, but the wider stakeholder landscape must not be forgotten. 


As well as assessing and reporting on the more direct market impacts of the pandemic, there will likely be more fundamental shifts in how business considers both its exposure to and its role in mitigating the other big global challenges that lie in wait – the adoption of more sustainable models and the ‘E’ and ‘S’ of the ESG will surely be more closely scrutinised. Perhaps for the first time a more genuine alignment on the importance of ESG will emerge between financial and wider societal stakeholders – as the former extrapolates the economic impacts of the current crises into their analysis of the climate crisis.

What does this mean for those still to report this year?


For those who are yet to publish their 2019/20 annual reports, there are immediate considerations about how best to tell the story of the year. Across an annual report narrative, the touchpoints with the current pandemic will be many and varied. As well as the very practical steps companies are taking to protect their Balance Sheet, assets and people, there are many other considerations. This may include a review of the Viability Statement and perhaps Going Concern; the implications of which could be significant.


While a large part of the annual report’s purpose is recording what has come before, now more than ever the forward-looking nature of a Strategic Report is vital. Investors and other stakeholders will want to understand how Covid-19 is affecting the business and how you are responding. These messages must be conveyed consistently across channels for different audiences, and use an appropriate tone. We should also continue assessing the annual report content through the lens of materiality and report on the specifics of impact and mitigations to the particular industry and particular business, avoiding repeating general knowledge content.


Beyond the discussion of performance and value creation, how might the virus drive conditions outside of your control that affect your operating environment (the context that influences your strategy)? Are there impacts on macro and market trends, supply chain, consumer behaviours and demand for goods and services that may materially impact trading? How does all of this affect your understanding of the risks faced by the business – and the likelihood of potential scenarios considered in the Viability Statement? As we have said above this will become increasingly important over the medium term but it’s something to start addressing now. 


With Section 172 statements now a requirement, understanding how your key stakeholders are responding and how you are engaging with them is crucial. In recent weeks Boards will have made numerous decisions that have significant impact on different stakeholder groups, so now is the time to be clear confident in communicating decisions made, actions taken and understanding impacts.

Questions to consider


Building on these thought starters and proof points we would love to explore the following questions in the first of our CONNECTED video conversations: 


  • What questions are you receiving from your investors and other stakeholders?
  • How are you evolving your reporting and other corporate communications in response to the pandemic?
  • What changes have you made to tackle the immediate issues, are you changing timelines, what projects/tasks have taken a back seat?
  • How are you planning for the AGM or other anticipated events?
    What are the responses from peers and wider businesses that are impressing you the most?

To register your interest in our CONNECTED video conversation series, click here We hope you can join us!


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