Disclosure Management Market Size by Type, By Distribution Channel, And Forecast till 2022-2031

 The Global Disclosure Management Market is expected to grow at a CAGR of 16.32% from 2022 to 2031. Due to the uncertainty in the economic impact of COVID-19, there would be a significant change in the assumptions used to measure the fair value of the assets and liabilities of the company at the end of reporting period including considerable differences in the valuation techniques being adopted by the organizations on account of change in market conditions and related observable inputs, previous redundant information, etc. Companies aim to provide adequate disclosures in their year-end financial statements on current and potential impacts associated with COVID-19 on the results of operations, liquidity, and capital resources.

This gives rise to a need for efficient disclosure management solutions for an accurate assessment of the qualitative and quantitative evaluation of the organization's business activities, financial situation, and economic performance.

Disclosure management in the reporting helps organizations create and edit the extensible business reporting language (XBRL) graphically tagged submissions to a regulatory agency, such as a 10K or 10Q, submitted to the SEC or similar government organizations. Organizations can compile financial statements, commentaries, and supporting schedules in Microsoft Excel or Word and map to and deliver the content in PDF, XBRL, HTML, or EDGAR formats.

The significant purpose of disclosure management is to centralize and manage the necessary documents required in the close cycle to reduce the risk of an inaccurate disclosure significantly. Rather than manually tagging reports every period, disclosure management applications allow the reuse of mapping of reported disclosures to various relevant XBRL taxonomies, enabling the automatic generation of reports in XBRL formats.

Delays and mistakes in financial reporting may lead to far-reaching consequences for companies and their shareholders. The impacts in the US Securities and Exchange Commission (SEC) mandates may include enforcement actions, reviews, penalties, and a comment letter requiring a time-consuming and expensive response. This required filing amendment includes financial restatement and a drop in the company's stock price.

According to a study by the Wall Street Journal, the errors indicating restatements can be anything from a misapplication of accounting principles to a mistake in accounting software inputs or an error in Microsoft Excel schedules. Various instances of data errors in SEC filings, even among high-profile companies like Netflix, have created a demand for efficient disclosure management solutions to help business organizations avoid any such errors resulting in massive penalties.

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Key Market Trends

Cloud-Based Deployment is Expected to Witness Significant Growth

The shift towards digital reporting for various companies globally is underway. The SEC mandate in the US, ESMA mandate in Europe, and the CIPC mandate in South Africa require all public and private entities listed with it to file their reports in the XBRL standard. Companies filing to regulators worldwide are increasingly adopting cloud solutions compliance applications that facilitate collaborative working and enable the process, time, and cost efficiencies. The cloud-based solutions can offer several advantages for collaborative authoring, especially in the context of something as critical as the compliance reporting process.

Furthermore, unpublished financial data has the highest risk of data security. Emails are the most insecure way to send across financial reports, especially if they contain highly sensitive unpublished data. Emails are prone to virus attacks and other cybersecurity risks. Apart from this, humans could also be a point of data misuse. While evaluating SaaS solutions, make sure the platform is hosted on a reliable cloud hosting provider such as Microsoft Azure, Amazon, or Google. There are tight data security measures for data such as data encryption, user access controls that ensure that data is accessible only to authorized users.

The overall preparation process of compliance reports is highly iterative with tight deadlines. The need to deal with a lot of numbers and text with even more edits and iterations could be daunting if the organization does not have an efficient way of working. SaaS solutions offer a centralized way of working where all changes done in the document reflect instantaneously in all output formats, including XBRL, Word, and PDF. Working on a SaaS solution offers an advantage as the organization can always work on the most updated version of the documents and track and review not just the document but also the XBRL.

Moreover, one of the most significant benefits of using a SaaS solution is that organizations can never lose sight of their compliance documents and can get a higher level of control and visibility of the documents, XBRL tagging, including any last-minute changes. However, some companies consider the move to the cloud itself as a limiting factor, both in terms of the hassle and the costs involved. Instead, they are upgrading existing systems rather than migrating to a new environment altogether. Implementing cloud-based solutions can provide better scalability and a considerable reduction in the total cost of ownership over the years.

A significant number of companies in the market, such as Oracle Corporation, SAP SE, Workiva, Inc., etc. offer cloud-based disclosure management solutions. For instance, cloud solutions from Workiva enable accounting and finance teams to connect data from ERP, GL directly, or data warehouses for use in multiple reports with a repeatable process where connected sheets, data, and documents ensure accuracy and improve collaboration for fast, reliable reporting to management, investors, regulators, and the board. In addition to SEC reporting software, Workiva delivers cloud technology in close financial reporting, management reporting, tax reporting, and financial reporting for private companies.

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North America is Expected to Hold Major Share

Contemporary reporting is moving to the Internet, with the regulations in the North American region is requiring company reports to be published in the eXtensible Business Reporting Language, an international business-information standard commonly known as XBRL. Typically, companies initially outsource the tagging of their XBRL reports, thereby adding incremental manual processes and controls and cost and time expenditures, to their efforts. These incremental manual processes adversely affect the quality of XBRL formatted disclosures as recognized by the US Securities and Exchange Commission (SEC), which routinely provides feedback on common and material errors in company reports. Due to this, many companies in the region are adopting disclosure management solutions.

A working paper published by New York University School of Law examined the effects of late quarterly and annual filings on more than 2,000 companies that had never previously delayed SEC filing. They found that accounting issues are the most common reason for late filings and often determine the severity of the impact. Among the sampled companies, delayed SEC filings of Forms 10-Q and 10-K were an average of 41 days late when accounting was involved, more than three times later than the average delay because of corporate events (13 days) or uncertain reasons (11 days), where these delays could be addressed by the usage of robust disclosure management solutions by the company.

As the impact of the global COVID-19 outbreak continues to evolve, the issuers in the North American may find themselves in a position where they are unable to meet annual and quarterly financial statement filing deadlines, particularly as social distancing measures for staff and service providers such as audit teams, disrupt standard course audit or review plans and timelines. In response to these concerns, in March 2020, Canadian Securities Administrators (CSA) has announced its intention to grant blanket relief to market participants, including reporting issuers, extending the filing deadline for several continuous disclosure documents and other exempt market filings by 45-days. This factor is expected to considerably increase disclosure management solutions in the region in response to meeting the deadline.

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Competitive Landscape

The disclosure management market primarily comprises multiple international players such as SAP SE, Oracle Corporation, Workiva, Inc., Certent, Inc., etc. in a moderately fragmented and quite competitive environment. The market is witnessing multiple partnerships by the companies to expand their geographical presence, and the companies are continually updating their existing solutions to withstand the competition.

July 2020 - Part of SAP product strategy for SAP S/4HANA for group reporting, SAP Disclosure Management has been chosen to be the company's software to help customers produce the last mile of reporting. Consequently, the maintenance schedule of SAP Disclosure Management is extended to December 31, 2027.