Look into the non-financials
INTEGRATED REPORT: DETAILS STRATEGY
Document speaks to the entire organisation’s position, rather than just its finances.
In the past 15 years alone, the world has seen countless corporate debacles – from the banking crisis in 2008 that almost crushed the financial system, to the accounting and fraud scandals that have been experienced in almost every country. South Africa has not been immune to these debacles, experiencing its fair share of corporate failures, notably through Steinhoff, KPMG and VBS Bank.
In all these colossal failures one contributing factor was missing that could have prevented these events: corporate governance. Today, corporate governance is at the centre of board management and leadership practices. Corporate governance has been implemented in different ways, such as a drive for a diverse board of directors comprising of diverse skill, race, gender and age to diversify opinions that could create different solutions.
The reporting profession has also chipped in with new and improved reporting standards that are aimed at increasing corporate governance. Over the past 10 years integrated reporting has grown in popularity to the point where all listed companies release not only financial reports but integrated reports that speak to an organisation’s strategy, operational performance, transformation, social investment and sustainability strategy among others. The idea is to detail a more complete picture of the organisation over and above the financial position and performance of the company.
Integrated reporting is an extension of financial reporting and stems from the simple idea that financial reporting alone, does not give stakeholders enough information that would allow them to make an informed decision.
Financial reporting speaks only to the financial health and performance of the business and not any other non-financial matters. This is flawed because a business is not made up of financial management alone. Case in point is the fact that the majority of companies that failed in the past decade reported good financial performance and health.
For example, Steinhoff released good, to exceptional, financial reports during the years which we now know were the very years that caused the eventual collapse of the company. That tells us that financial reporting alone does not tell the whole story. Financial reporting does not speak of other critical issues such as the leadership dynamic of the board nor the transformational issues such as gender and race employment equity.
An integrated report, however, attempts to address other issues that play a key role in the eventual performance and sustainability of a business.
This becomes vital in affording key stakeholders, such as investors, an opportunity to make informed decisions through better information that speaks to the entire organisation’s position, rather than its finances alone.
Munya Duvera is CEO at Duvera Elgroup.
PUTTING THE PIECES TOGETHER. The idea of an integrated report is to detail a more complete picture of the organisation over and above the financial position and performance of the company.