The Ultimate Guide to Automating Disclosure Management
Market turbulence can dramatically influence the complexity of year-end disclosure processes for the finance team. Economic fluctuations, regulatory shifts, and market volatility will impact financial results and necessitate thorough explanations in disclosures to provide context for stakeholders. Uncertainties in supply chains and operational disruptions can affect the assessment of risks and uncertainties. Market sentiment and investor reactions will lead to shifts in asset valuations, influencing fair value disclosures. So how can you improve your disclosure management practices to adapt to this evolving landscape? Let’s dive in.
What is Disclosure Management?
Disclosure management is the set of processes and policies for collecting, organizing, reviewing, and publishing reports that organizations share with stakeholders like investors, auditors, regulators, and even the public. Effective disclosure management ensures that required information (e.g. SEC filings, annual reports, etc.) is not only accurate, but compliant, consistent, and traceable. It also includes voluntary disclosures, such as narrative commentary, ESG performance, and strategic updates that go beyond what regulators and laws officially mandate.
Types of Disclosures
As alluded to above, financial disclosures are typically categorized into two groups:
- Mandatory Disclosures: Legally required reports like SEC filings (10-K, 10-Q), financial statements (balance sheet, statement of shareholders’ equity), and risk factor disclosures. Their nature usually means mandatory disclosures are subject to strict rules, timelines, and notations.
- Voluntary Disclosures: Additional strategic reports to improve transparency and stakeholder trust, like sustainability reports, CSR reports, and forward-looking disclosures about expectations and projections. While not required, these have become increasingly common with growing interest in areas like AI risk, sustainability, and more.
Both types of disclosures are critical for investors, creditors, and other stakeholders to evaluate a company’s financial health, making more informed decisions.
What is the Purpose of Disclosure?
Disclosure serves to improve transparency, decision-making, and risk mitigation. Fostering transparency via thorough financial reports builds trust among stakeholders. These disclosures provide data for more informed strategic decisions by investors and partners, while audit trails and compliance manage risk more effectively.
Challenges of Manual Disclosure Management
However, disclosure management is generally not an easy process. Even when the market is stable, finance teams face long hours, strict deadlines, and extended focus time on minute details during the year-end period. In many companies, this is because of the legacy manual processes that have unpinned year-end disclosures. This leads to a number of limitations and challenges for the finance team, increasing their workload and stress:
- Ineffective Copy and Paste: Without a single, integrated year-end reporting solution, these copy-and-paste processes are the norm. Manual financial reporting means you have to go back and edit every downstream document.
- Siloed Narratives: Users have multiple systems of record for narrative content, so the data must be manually distributed and is not synchronized across platforms and documents associated with the year-end reporting cycle.
- Complex Collaboration: Multiple systems of record scatter comments across the platforms of geographically distributed teams. Everything is managed across multiple locations, resulting in multiple copies of the same information.
- The Pain of XBRL Tagging: Many companies are still outsourcing the process of adding XBRL tags to year-end reports because they can’t do it in-house. Manual XBRL tagging wastes money and involves extra steps, adding days to your year-end reporting process.
Why Automate? Benefits of Disclosure Management Tools
Thankfully, disclosure management doesn’t have to be manual. Tools like Certent DM help automate processes for more efficient and accurate disclosures, providing a variety of benefits:
- Enhanced Compliance: Mis-tagged XBRL labels or formatting glitches can delay filings and even result in penalties. Disclosure management platforms often execute automated checks that reduce the risk of human error, bolstering data accuracy and consistent adherence to standards like GAAP, IFRS, ESEF, and SEC.
- Higher Productivity: Time savings mean that finance teams can shift focus to more strategic analysis. These tools provide reusable templates, roll-forward capabilities, and dynamic data linking to streamline processes by eliminating tasks that were traditionally done by hand, allowing teams to build reports faster and smarter.
- Better Collaboration: Teams that lack central coordination often struggle with misalignment, version conflicts, and missed stakeholder inputs. Unified platforms like Certent DM have built-in workflows, real-time editing, clear commenting systems, and role-based task assignments to coordinate multi-department efforts from a single tool.
- Accelerated Scalable: As your business grows, so do reporting complexities — meaning that rigid tools you once relied on become obsolete. Modern disclosure management software is adaptable and flexible to accommodate new regulatory taxonomies, ESG disclosures, narrative reporting, and multi-entity disclosures so it can grow with your organization.
- Transparent Auditability: Clear and defensible documentation of who did what (and when) is necessary for auditors and regulators to determine compliance. This is why newer disclosure management platforms automate the logging and versioning of every edit, comment, and approval to highlight changes over time.
- Informed Risk Mitigation: Disclosures build trust with stakeholders and reduce your legal exposure, but they have to be traceable and consistent. Automation tools ensure this consistency, eliminate copy-paste errors, and lock down approved versions for final publishing.
Top Features to Look for in Disclosure Management Software
When evaluating disclosure management tools, there are a handful of key features that all modern platforms should include:
- Easy-to-Use Interface: User adoption is faster when the tool is intuitive, so look for tools that reduce training overhead and feel familiar. For example, Certent Disclosure Management is built as an add-on for Microsoft Office, meaning that teams can continue working in the tools and interfaces they’re already used to.
- Multi-Format Publishing: Different audiences (internal reviews, SEC, auditors, etc.) require different report formats (PDF, Microsoft Word, HTML, iXBRL, etc.), so your tool needs to be able to export to a variety of different outputs from a single source.
- Structured Workflows: Clear pathways for drafting, reviews, and approvals maintain accountability and clarity for who performed which action and when. Your software should provide configurable workflows with standard roles, review stages, automated notifications, and linked navigation.
- Inline Commenting: Feedback is most valuable when it is provided in context to illustrate exactly what it is referring to. Look for features like threaded comments that can be linked to sections and persist across document versions so traceability isn’t lost in the shuffle.
- Task Lists, Attachments, & Due Dates: Complex disclosures have a lot of moving parts, so having built-in checklists and deadlines keeps these components in sync. Your disclosure management software needs to be able to list tasks (preferably with hierarchies) alongside their due dates and associated file attachments to keep work organized and on track.
- Shared Objects: Consistency is key for modern disclosures (whether mandatory or voluntary), so a centralized source guarantees reliability — edit once, update everywhere. Variables and shared objects automatically propagate these updates across sections and reports so you don’t have to manually maintain consistency.
- Roll-Forward Reuse: Reusing structures and tagging for future periods drastically improved efficiency and continuity, which is a major benefit of automating disclosure management. Make sure your tool can roll-forward (or duplicate) structure, tags, workflows, and setup into new reporting cycles to save time.
- Built-In XBRL Validation: Tagging errors can completely invalidate filings, resulting in costly regulatory rejections and disclosure reworks. Any capable modern disclosure management software needs to have built-in validation to prevent this, so look for particular capabilities like real-time XBRL/iXBRL tagging and error-checking.
- Role-Based Permissions: Security is more important than ever, and restricted access by role maintains integrity and separation of duties for compliance. You should have access to granular permissions at report, section, and data levels (plus SSO) to guard sensitive information.
- Audit Trails: Full visibility into changes and approvals is a cornerstone for governance and compliance. Look for a tool that has comprehensive version control, audit trail retention, and change logging to provide your team with accessible traceability and accountability.
Additional Tips & Tricks for Effective Disclosure Management
As new regulations take effect and others appear on the horizon, it’s increasingly difficult to keep up with the changing landscape surrounding financial disclosures (e.g. changes to reporting frameworks like XBRL). Government agencies are applying greater scrutiny than ever, so it’s critical to get reporting right. Follow these additional tips and tricks to ensure that you get the most out of your disclosure management processes and tools to create reports quickly, efficiently, and above all, accurately.
1. Automate Your 409A Processes
When offering equity compensation such as stock options or grants to your employees, it’s critical to pay close attention to IRS regulations, assigning the correct valuations, and reporting those grants properly. Under U.S. law, this is known as 409A valuation reporting and requires that private companies generate a new 409A valuation at least every 12 months (or whenever anything occurs that could substantially impact the value of the company’s stock). For example, closing on a new round of investment or a pending merger, acquisition, or IPO could result in the need for a new 409A valuation report.
There are several methods for establishing a company’s market value under 409A. The most common are the market valuation approach (also known as the OPM backsolve method), the income approach, and the asset approach. Regardless of the method you choose, you’ll need to gather specific information ahead of time to prepare. The meticulous process of collecting all this information can be especially tedious and draining for those involved. Automating your 409A valuations with industry-leading software reduces the workload while increasing accuracy at the same time. By bringing the process in-house, you further ensure the quality and correctness of the resulting 409A reports.
2. Avoid Common XBRL Errors
XBRL tagging is quickly becoming a standard requirement for financial reporting worldwide. It’s mandatory for publicly traded companies in the U.S., and Europe has moved swiftly to adopt it as a requirement, too. In the UK, tax authorities are now demanding XBRL financial reports, even for privately held companies.
Unfortunately, it’s all too easy to accidentally introduce errors into your XBRL reports. For example, over one-third of errors identified by XBRL U.S. arise from invalid member axis combinations. This happens when a member (such as a parent company or a non-controlling interest) is used in combination with an axis (such as a geography or a legal entity) that simply doesn’t go together. Given the number of axes and members in the US GAAP Taxonomy, there are numerous ways to accidentally submit incorrect combinations.
Other common problems include invalid negative values (concept reported as a negative value but expected to have a positive value), missing values, or when concepts are tagged with incorrect dates in relation to the end date of the reporting period. An XBRL validation tool is a great way to check and validate for these errors — with the right disclosure management software, you can prevent them from happening in the first place.
3. Enhance Your ESG Reporting
ESG reporting (environmental, social, and governance) is becoming increasingly central to disclosures as regulators, investors, and corporate partners around the world request to see this information on a regular basis. First, get to know how the new requirements may apply in your circumstances. Different industries may be affected in various ways, and much of the pressure to adopt ESG is coming from large investors who control access to financial resources, rather than just government regulators.
From there, map out where the relevant data is throughout your organization, who is responsible for updating it, and how you might be able to automate the process of collecting, collating, and reporting on it in the future. For example, Certent Disclosure Management can improve your ESG reporting by capturing real-time changes to your data and automatically updating key elements of your reports. This keeps your numbers consistent and fully up-to-date across all reports.
Top Essential Resources for Enhancing Your Year-End Close
Below, we’ve compiled resources to equip you with the knowledge for effectively navigating disclosures. They cover issues like automating reports, tightening controls, data consistency, system collaboration, having the right narrative, and much more:
- Compliance Confidence With a Single Source of Truth (white paper): Explores how disclosure management software has become essential in centralizing and managing necessary year-end close documents through a single source of truth. Learn how to avoid the pitfalls of versioning and data entry, so you can speed up your year-end close cycle and reduce the risk of inaccurate disclosure.
- Multi-User Collaboration Empowers LifePoint Health (case study): LifePoint Health uses a disclosure management solution to increase its year-end close reporting efficiency while ensuring its disclosures meet regulatory requirements. After implementing a disclosure management solution for year-end reports, the finance team has a much more efficient process and can utilize Excel to update tables in their documents immediately.
- Better Business Reporting With Certent Disclosure Management (article): Explains the benefits of integrating disclosure management into your already functioning in-house system. Learn how to meet the demands of the increasing, nuanced complexities of electronic year-end reporting with a tool that complements your current system, is cost-effective, is easy to implement, and gives you what you need.
- The Growing Importance of Automation in Narrative Reporting (article): Details how efficient narrative reporting can significantly reduce disclosure risk. Understand the advantages that come with the ability to combine words and numbers for publication, and exercise much greater control over high-frequency, recurring, multi-author reports. Bring speed, accuracy, and consistency to your laborious, error-prone, uncontrolled year-end process.
- Automate Reports & Effectively Communicate Business Performance (brochure): Discover how to overcome traditional year-end management reporting challenges such as versioning overlap and risky manual processes. Learn how you can produce automated and scalable recurring reports that include narrative around the numbers to effectively communicate business performance to important stakeholders.
- LV= Tightens Controls Across Internal and External Reporting (case study): With a new year-end disclosure management solution in place, LV= experienced a significant reduction in time spent producing recurring internal and external reports. The finance team increased controls around the process, gained a vote of confidence with their auditors, and reduced overall risk. Find out how the solution gives them a single source of truth for their year-end disclosures.
- Resilient Narrative Financial Reporting and Remote Collaboration (video): For many CFOs, the remote working shift and the ensuing need for secure collaboration highlighted a key gap in digital transformation strategies. See how finance teams have navigated the challenge of connecting data sources and enabling remote collaboration during the year-end close process. Learn how they ensure data consistency across finance, sustainability, and investor relations for end-of-year reporting cycles.
- How to Avoid Year-End Overload With Automated Reporting (article): Discover four ways to more efficiently manage financial year-end disclosures. By automating and integrating your reporting disclosure processes, you can eliminate vast amounts of manual effort and relieve your team of the overload that is often associated with year-end processes.
Enhance Disclosure Management with Automation & Data Unification
Disclosure management can be tricky to get right, but its increased prominence for larger organizations makes it necessary to incorporate. In the age of AI, performing these tedious activities manually puts you at an immediate disadvantage to your competitors, so it’s paramount to find tools to streamline processes and automate key areas for faster insights. Certent Disclosure Management is a leading tool in this space, helping companies just like yours collect, organize, review, and publish accurate disclosures for internal and external stakeholders. Learn more about the platform here, or request a demo to see how Certent DM can help your team today!
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