Rebounding regulations: Ensuring businesses meet deadline requirements post-COVID-19
First published on Global Banking & Finance Review, 09 September 2020, by Andromeda Wood, Senior Director of Data Modelling, Workiva.
Businesses are wondering what their futures look like in light of the global upset caused by COVID-19. Regulatory extensions on deadlines gave companies more time and leeway to deal with the first half of the year while they contended with shifting factors like changes in demand for products and services, and the workforce being relegated to remote working. However, when considering the regulatory changes and shifting deadlines that are set to take place in 2021, forward-thinking businesses must address the medium- to long-term impacts of COVID-19. Namely, the European Single Electronic Format (ESEF) and proposals for updates to the Non-Financial Reporting Directive (NFRD) have both been priorities for businesses coming through the COVID-19 haze.
Most importantly, companies will need to ensure improved resilience has been built in across all departments, whether through process efficiencies, tech integration, or improved workflow. Companies that implement sustainable, long-term solutions, instead of temporary ‘quick fixes’ will have long-term advantages when many adjustments caused by COVID-19 prove to be permanent. When considering the challenges with remote working, businesses should prepare for permanent change to the workplace, and companies will need to create solutions to keep employees connected and keep business moving forward. These often cloud-based solutions have the power to reduce the risk of human error, which can lead to huge fines or potential reputational damage if unaddressed, and can also improve efficiencies, allowing employees to spend more time working on what really matters – strategy and digital transformation.
Connected technologies – like connected reporting – are a great way to ensure businesses are able to operate nimbly, to manage data from a central location, and to minimise the risk of human error while maximising oversight and accountability across teams.
The regulation game
The EU recently highlighted ways that businesses can adjust to the effects of COVID-19 – in a tailored way – in the changes to the European Commission 2020 Work Programme, released last month. This programme’s original focus was on top-level, long-term goals around eco-sustainability and a “Europe for the digital age” but has since had to shift priorities in light of COVID-19. The new focus includes adding top priority responses from both a health and economic perspective, and in addition, continuing to look at ways not to just bounce back to the former normal, but empower businesses to confidently move forward with the original long-term goals.
Furthermore, we’re also seeing reporting-specific regulations begin to reflect the need for more forward-looking flexibility that accounts for shifts in the economy. The Financial Conduct Authority (FCA) in the UK this month just announced they’re considering pushing back the ESEF deadline in order to allow businesses time to adequately prepare, but for EU countries, there are no signs of an extension in sight. With that in mind, updates to reporting guidelines were put in place back in July, with many countries now rolling out what they expect ESEF to look like in their local markets ahead of deadlines.
In addition to ESEF’s on-time roll out, we’re continuing to see movement around the Non-Financial Reporting Directive (NFRD), the consultation which was also delayed when COVID-19 hit. However, we can expect to see more changes announced – including updated deadlines and changes to longer-term requirements – in the near future. Many companies that have put off addressing their reporting have ended up behind schedule, and relying on deadline extensions may pose a challenge to many to get on the front foot and operate within a shorter timeframe to meet these deadlines.
Following the lead from the European Commission’s 2020 Work Programme, businesses must prioritise finalising their financial and non-financial reporting regardless of whether or not the deadline is pushed back. Businesses need to adopt the ‘Europe is doing this, so we must too’ attitude as the world continues to move forward and find its footing.
Behaving flexibly post-COVID-19
Neither ESEF nor the NFRD seem to have had a significant impact on business’ reporting procedures – yet – however both are crucial regulations for companies to pay attention to, particularly considering the current, shifting climate and wider trends. For example, sustainability and digital transformation are mentioned as priorities in recent comments from ESMA’s response to the NFRD consultation, and a publication from the Capital Markets Union high-level forum, also included suggestions for more electronic reporting. However, current processes likely won’t remain sustainable and resilient as the world continues to change, which is something we need to be mindful of and adjust to as we move forward.
For many businesses, connected, cloud-based solutions hold the key to streamlining operations, workflow, and taking the pain out of moving reporting deadlines.
Transforming to a digital-first system
Before COVID-19 rocked the global economy, global productivity was at a mere 0.8% and now, thanks to automation, it is predicted to increase annually at 1.4% according to a McKinsey Global Institute report. Companies that want to move forward will have to implement solutions where mundane or repetitive tasks, such as standardised data entry, will be automated. This will allow companies to focus on value-added business activities such as strategic support and growth, as providing better data for statutory reporting and compliance is a shared commitment that calls for a collaborative data revolution.
Regulated entities across the globe have been subject to an increasing amount of fragmented regulatory regime changes, legislation, reviews, and queries. There are so many variables and complexities, that businesses need innovative solutions to support them in streamlining their workflows. This shift demands a tech- and data-driven approach for monitoring activities, including the heightened use of AI, machine learning and other cloud-based systems to create a more open, integrated, and holistic compliance model. The goal is for businesses globally to embrace the power of automation and connection to streamline reporting processes, regardless of region or regulatory framework. Only then can businesses make better and more informed decisions.
Currently, executives are demanding more meaningful data, and more time for analysis. We need to be at a point – before the January 1st ESEF deadline – where we can drive technological adoption across compliance and business reporting into transparent, actionable, and dynamic changes. This will further prepare us for a future already in progress.
Unless businesses start to think ahead and use cloud solutions like connected reporting, the challenges of remote work – processes becoming increasingly de-centralised and difficult to manage, unclear ownership over activity, an increased likelihood of mistakes – will continue to persist. Taking the manual effort out of many reporting functions allows teams to focus on what really matters: meeting the ESEF, NFRD, other local regulatory deadlines, or the next crisis.
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