Nonfinancial information help you to convince your stakeholders that you are actively managing risks. Nonfinancials in corporate communication provide investors a good overview of all different risk aspects. You show, that the “business risks” are comprehensively analyzed and that you implemented tools that allow the monitoring of these risks.
Important nonfinancial parameters are:
- Human Resources (eg a strong health and safety culture)
- Brand Reputation
- Investments (R&D, Intellectual Capital)
- Governance & Compliance
- Competitors
Giving your stakeholders a comprehensive and holistic picture of material nonfinancial aspects help you to build trust. It’ll have positive effects on your brand and investor relations as the value drivers of your business are disclosed. You may think that there’s also a risk in disclosing to much information and of course you’re right. This being the reason, that you should concentrate on your most relevant and material aspects, only.
Linking nonfinancial information to a financial outcome help your stakeholders to understand the full picture: eg: the impact on your cost structure (lower costs), an improved supply chain with less reputational risk and a better productivity of your workforce. Sometimes it could also be beneficial to show a concrete outcome of your process management: eg: less product recalls, no public protests on labour and consumer safety issues, no boycotts.
Today’s modern investment processes include not only: Financial Analysis, Valuation, Management Interviews and Qualitative Assessments but also an assessment of material Non-Financial Factors. Going IPO and/or issuing bonds will further drive the need to disclose nonfinancial information of your company.
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