What is regulatory reporting?
Regulatory reporting refers to documenting and providing official, financial, and operational information about an organization to regulatory bodies and governing authorities. Examples of data types as part of regulatory reporting include activities, financial performance, and legal compliance. Regulatory reporting helps ensure business accountability and transparency.
Compliance professionals use disclosure management software to improve collaboration and increase transparency of disclosure activities. Disclosure management software consolidates compliance information and helps professionals maintain a repository of all documents and reports required for disclosures and regulatory filings.
Basic elements of regulatory reporting
Regulatory reporting comprises components crucial for creating comprehensive detailed reports. The specific reporting requirements vary depending on the industry and particular regulations, but the following are some essential elements:
- The identification information and reporting period. All reports should specify the legal name and details of the reporting entity. Organizations may need to include unique identifiers such as tax identification numbers. Additionally, the reporting entity should specify the reporting period, which could be a quarter, a fiscal year, or another predetermined time frame.
- Financial information. Regulatory reporting includes financial data from the reporting period: financial statements, balance sheets, and income statements, for example. Businesses also share a detailed breakdown of their revenue, expenses, assets, and equity, when relevant.
- Operational data. In many instances, the reporting entity may include information about their operations, like products and services offered, the company's size, geographic disbursement, and other data that will put the reporting data into context.
- Compliance and regulatory information. Companies should share relevant details about their compliance with laws and regulations specific to their industry and geographic location. For example, an organization may specify its compliance with an accounting framework like Generally Accepted Accounting Principles (GAAP).
- Risk management information. Regulatory reporting includes risk management assessments and mitigation strategies for protecting the business against known risks. Some examples include market risk, operational risk, and credit risk.
- Audits or review reports. Many businesses conduct audits of their business data at various points in time. They should include audit and review information from external auditors to support their provided data.
- Certification and signatures. Authorized individuals need to certify the accuracy of the data in the report. Based on the business, authorized individuals might include company executives or compliance officers.
Benefits of regulatory reporting
Regulatory reporting offers several benefits to organizations and authorities. Some of the key advantages are:
- Increased transparency and accountability. Regulatory reporting requires businesses to disclose essential financial and operational information, enhancing transparency for stakeholders, investors, and, in some cases, the public. Regulatory reporting also holds businesses accountable for their actions and identifies potential risks such as non-compliance issues or unethical behavior.
- Legal compliance. Regulatory reporting is a mechanism for verifying m that companies are adhering to laws and regulations relevant to their industry and business. Reporting helps companies identify issues that could lead to costly fines and reputational damage.
- More substantial competitive advantages. Companies can use regulatory reporting information to compare their performance with industry competitors. The data can help organizations find areas of improvement in relation to their peers for better performance and results, leading to competitive advantages.
Challenges of regulatory reporting
Despite the many benefits it provides, regulatory reporting can be complex and challenging for a variety of reasons. Some of the common issues in regulatory reporting include:
- Changing regulations. Regulatory reporting requirements constantly evolve, and maintaining the latest guidelines and standards can be daunting. When businesses are unaware of new or adjusted standards and demands, their reporting may be inaccurate and confusing.
- Inaccurate data. Effective regulatory reporting relies on accurate and quality data. Data discrepancies and errors can lead to compliance violations and penalties.
- Time requirements. Without the right processes and supporting software, collecting business data for regulatory reporting can be time-consuming. Additionally, when organizations store data across various systems and databases and pull it manually, the chances of making errors increase.
Regulatory reporting best practices
Following best practices for regulatory reporting is essential for organizations to meet their obligations effectively. These best practices help ensure the highest likelihood of success.
- Staying informed and up-to-date on all regulations. Organizations should dedicate a team to monitor changes in laws and reporting requirements across the industry and location. Businesses can establish a process for studying and tracking regulatory updates, as well as a communication plan for sharing the updates with relevant stakeholders.
- Maintaining high data quality. Teams should prioritize continuing high data standards and empowering employees to collect and record clean, accurate data. Organizations can also implement data validation processes to identify and rectify data reporting errors before a report is published.
- Assigning clear roles and responsibilities. A clear governance structure is crucial for accurate regulatory reporting. Organizations should hire or identify compliance officers, specify data owners for needed data sets, and recruit or assign reporting specialists to help prepare and organize information.
Learn more about financial statements and what kind of financial information might be included in regulatory reporting.