I've interviewed thousands of people over the course of over 10 years, and at every turn, I hear variations of one main request. People with financial reporting for companies, governments, insurance companies, securities firms, medical institutions, and mutual funds would be easier to understand. A clear explanation of financial terms and materials may make sense to people outside the finance industry. I've written many articles about this topic and have many similar points in my presentations. I've worked with a number of companies to figure out how a professional finance company like me can help make financial reporting better for financial services companies. I've said everything and nothing during interviews. I have so many great ideas that I feel like I'm actually thinking outside the box.
The best thing a financial services company like mine can do to improve its credibility is report financial information clearly and accurately. Too often, financial company employees want to present themselves as knowledgeable and sophisticated, rather than actually practicing financial reporting. We need to get rid of the air of mystery that many financial officials and leaders portray to people who don't know much about financial reporting. They are often operating with an agenda to mislead. The best financial management approach for financial institutions and their leaders is not to make financial reporting and materials understandable to all kinds of people, but to be transparent about every single aspect of the organization's operations. Making management transparent about their own decisions and activities ensures they're not making excuses or it only serves to make their true practices look even more opaque and manipulative. A formal financial reporting structure, like the SPSS model, provides a way for financial institutions to report their own transactions clearly and to provide all of the explanations that are necessary for a comprehensive understanding of how the institution operates.
Financial reporting information is no panacea. It's important that financial institutions make use of it to avoid bad practices, but they need to identify which risks they are going to face that their financial structure can help solve. Otherwise, they might potentially become too unwieldy for their own good.
Components Financial Reporting (CFR) is a core financial reporting model, currently being tested in pilot programs at many financial institutions around the world. It is a set of rules for how financial institutions can make efficient use of their financial reporting systems. Financial institutions can elect to implement CFR before, during, or after restructuring to help with their ongoing organizational reevaluation.
Financial institutions are the better set of businesses to start taking CFR very seriously. Because their mission is to find and help clients with their financial challenges, financial institutions can lead the way in making financial reporting more serious. Their prior experience providing services to customers for generations can be a unique asset in restructuring their financial structures to be more resilient and helpful for people. Other financial institutions can always take the approach and make improvements to help align their own ways of doing business.
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