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Corporate Reporting: Changing the Focus From a “Necessary Evil” to Delivering Business Value

Mar. 4 2014 by Marco Van der Kooij, Managing Director - ForSight Consulting

Reporting & Compliance

The current corporate reporting framework needs to evolve to reflect the wide range of factors that affect corporate performance. The current focus on an organization’s financial statements is insufficient to provide a positive answer to the critical question: “what is the value of the organization?”  Financial reporting covers both financial performance and risk, and this will remain an important part of the corporate reporting scope. It is, however, insufficient by itself to provide all the information users now need for informed, rational, and high quality decision-making.

History tells only part of the story

In an environment where the majority of the information available to investors is historic, they are required to navigate a course around the next corner using only a rear view mirror - as if there were no road ahead. Integrated Reporting <IR> is the route map that supports investment decision-making, reflective of the integrated thinking and decision-making within organizations. <IR> is focused on the value created by the company across the organization and incorporates forward-looking measures.

“It Takes a Village”

The key question is how to make all of this happen - how to bring all the required information for all different stakeholders together. This is not just a technical challenge, but also an organizational one because different people/departments are responsible for reporting on these different perspectives (risk, strategy, performance and future outlook). Finance departments are well organized in corporations to collect and analyse financial data. But with others responsible for non-financial data (e.g. social responsibility) how can it be collected and reported in the same way as financial data? How can completeness, reliability, comparability of data for an integrated report be provided in order to show a holistic view of all activities of the company?
I think that the finance department can be the driver of <IR>, but should not have the responsibility of the entire process to bring together all the information needed to provide that holistic view. I think ONE system should help to achieve this holistic view with contributors and accountability distributed across the organization.

Getting Started on the Road to <IR>

Integrated Reporting is the ultimate goal, but you can start to progress now.  Start with some of the more time consuming, cross-departmental reports that you need to produce today - Board Books, Annual reports, internal management reports. Set the course for reporting on value while addressing the reporting challenges of today.  This gives a quick win and provides value to the organization while you map your route to <IR>.

What are your thoughts ? Are you moving towards an Integrated Reporting environment?

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