Financial communication: The real challenge lies beyond the translation

Financial communication determines trust on the capital market and influences the way in which companies and groups are rated by investors and the media. Annual reports have a decisive influence on share prices; they are one of the most important calling cards that a company has.

Time pressure and coordination loops during the translation phase are massive

says Heike Leinhäuser, Managing Director of Leinhäuser Language Services GmbH. In this interview, she gives an insight into the highly complex processes of financial communication and talks about the “Pandora’s box” that a customer opened when they tried to translate their annual report using AI – an experiment that resulted in a greatly increased workload instead of efficiency.

Heike, only a few language service providers specialize in the translation of financial communication. Why is that?

When it comes to a company’s corporate communication, financial communication accounts for only a fraction. So, we are talking about a relatively small volume that is extremely business-critical and requires a very high level of specialization. For some language service providers, this makes it an exciting niche and a challenge; for others, it is an intimidating hurdle. Anyone who is not up to the task will be left by the wayside and will have to fear for their reputation.  What’s more, a significant part of financial communication consists not of text, but of a highly complex set of figures. Translators have to understand this in the respective context and know the exact terminology in order to translate content correctly. Or to put a finer point on it, they have to map it correctly in the HGB or IFRS accounting systems. 

What is the difference between HGB and IFRS?

Both systems pursue different goals: Publications according to the German Commercial Code (HGB) focus on creditor protection. IFRS, on the other hand, follows international standards that provide investors with comprehensive information. As such, the two systems use different terminology. Generalists cannot do this. We are talking about the rare combination of accounting knowledge and highly specialized translation expertise. 

Financial communication is considered the crown jewel of translation services. During the translation phase, our team is in constant contact with the communications department or investor relations. That requires the courage to spar at eye level.

Are there other reasons why only a few language service providers are active in the field of financial communication?

In addition to the high level of expertise required in the area of accounting, we have to be prepared for a highly intensive work phase during the reporting season. During these weeks, translations are produced, and figures and new texts are continuously updated – all at breakneck speed. And all with maximum precision. Throughput times are extremely tight. Timelines are constantly changing. Every editorial meeting on the customer side involves changes and new coordination. The pressure is enormous, as publication obligations determine the schedule. At Leinhäuser Language Services, we are familiar with the critical stages that occur, especially in the final spurt before publication, and are well prepared for these extreme demands.

Leinhäuser’s most important service to companies and groups in the field of financial communication is unconditional availability. Our teams are well-rehearsed. Our workflows are in place.

And how exactly do you achieve this? 

Over the last ten years, we have increasingly specialized in financial communication. Many of our account managers now have extensive accounting knowledge. Above all, however, we have built up a reliable pool of experts: Around three quarters of the translators available around the world who specialize in accounting work in partnership with Leinhäuser. They know the annual rhythm of our clients when it comes to preparing annual reports and are reliably available to us during these phases. At the same time, they know that our high order volume ensures continuous, predictable business during the reporting season – especially in Q1.

There are tens of thousands of freelance translators on the market. But when it comes to the ones who know accounting – here we are talking in particular about German, English and French – there are just under 100. These figures show that only a few are specialized in accounting knowledge. Around three quarters of the specialists available worldwide work with Leinhäuser.

What exactly is financial communication? Is this “just” the annual report or is there more to it?

The annual report is the central document, the core of financial communication. This also includes all other mandatory publications that need to be available on time for IPOs, quarterly figures or the Annual General Meeting. These include, in particular, press releases on the financial situation and ad hoc disclosures, which must be published immediately in the event of share-price sensitive events. This mandatory financial communication needs to be published in at least two languages – usually German and English. Today, however, translations into languages such as French, Spanish and Chinese are often also required in order to inform investors.

Are annual reports all basically the same? Or are there differences?

To put it simply: No, not all annual reports are the same.
There are clear differences: from a legal, content and communication standpoint. The distinction lies in the legal framework and the associated publication obligations, in the target groups, and also simply in the size of the company. An SME annual report is often short and pragmatic, focuses on building trust and serves as a communication tool. For us, this usually means that we receive a text that has already been finalized for us to translate. Group reports, on the other hand, require a great deal of coordination, are highly regulated and involve auditing companies. We are now seeing many integrated annual reports from corporations that also include the sustainability report. For us at Leinhäuser Language Services, this is no longer a question of texts and their translations, but rather of projects that sometimes run for months and require and tie up manpower. We act as an extension of the corporate communicators’ desks.

What are the biggest challenges when it comes to the actual translation of an annual report?

Annual reports consist of several parts: This includes the management report and, if applicable, the image and management section. These sections are the core content of the annual report and describe, among other things, the business model and strategy, the economic environment, opportunities and risks. The formal legal part is the annual financial statements with the notes. This consists of extensive continuous text in combination with tables. As already mentioned, these have to be translated into the target language in the respective accounting system using the appropriate terminology, that is to say HGB or IFRS. The notes can be around 100 pages long. However, the tricky part is not so much the volume, but the individual words. For example, there are four different terms for the German word “Abschreibungen” in English alone. To find the right translation, our specialists need to understand the context. The challenge lies in the perfect symbiosis of specialist knowledge, ad hoc availability and practiced responsibility in terms of correctness and data security. Not a single figure or word is allowed to be leaked before the official publication.

The TISAX® certification guarantees our clients that their data and information is safe with us. Nothing gets out before the official publication. With structural security precautions, encrypted transmissions and trained teams, we have installed our own Fort Knox at Leinhäuser.

Do customers ever underestimate the complexity of financial communication?

Our contact persons in the companies are all professionals. Nevertheless, there are always times when coordination gets stuck because they are unable to assess their own colleagues. When the timelines break, we don’t just have to act quickly, but as quickly as possible. This is now a calculable risk for us. We know that timelines are always shifting. 

Is it true that the former management section of the annual report has been replaced by the sustainability report? What significance does sustainability have in corporate reporting?

I wouldn’t say replaced. But there has been a shift. Content from the field of corporate communication has been increasingly incorporated into sustainability reporting for years. Thanks to the EU’s Empowering Consumers Directive, this part has now also become increasingly sober and number-heavy. In order to counteract greenwashing, today sustainability reports are not based on pleasant words, but on verifiable facts and figures. The importance of sustainability in corporate reporting has grown accordingly; sustainability communication is now an integral part of financial communication. 

Let’s talk about efficiency: Do you use AI in financial communication at Leinhäuser? 

Due to the IT security requirements in financial communication alone, we hardly use AI in this area. It is our responsibility to protect data and information from being leaked. Internal tools such as our own translation memories nevertheless give us a high advantage in terms of efficiency. Returning customers in particular benefit from the fact that we can store and reuse already approved content and formats from the previous year in our tools. This saves an enormous amount of time and the technology is absolutely safe. 

Are there companies that nevertheless demand the use of AI in financial communication?

Not so far. DAX companies in particular have a completely different awareness of the sensitive nature of financial communication than SMEs. They often even have their own intensity scale for communication, in which the use of sensitive terms is precisely defined. That said, last year, a customer tried their hand at translating their own annual report using AI – and came back to us this year. It was anything but efficient. They were unable to access our tools, which first adopt the released version from the previous year and then integrate the new figures and data. So, they had the original version translated by AI and then had to check all 120 pages word for word. Without our workflows, without our know-how and without our multiple review-principle, it was an excessive amount of proofreading. 

AI is not suitable for financial communication: AI is inconsistent in language, does not adhere to formatting guidelines and is faulty when it comes to proofreading. Financial communication belongs exclusively in the hands of professionals – not in the hands of generalists and not in the hands of AI.

What is your most important advice for companies when dealing with financial communication?

I have no advice for the companies themselves. They are all professionals. As a partner, we do our part to ensure that the information is published on time. I have more of a message for ourselves, for our teams at Leinhäuser Language Services: “Remember, you are as solid as a rock. You are trained for this”. And from this comes a message to companies that are currently facing the challenge of the annual report: We will accompany you professionally, work efficiently and keep a cool head – day and night if necessary.