Look into the non-fi­nan­cials


The Citizen (KZN) - - Business - Munya Du­vera

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.

Pic­ture: Shuttersto­ck

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.

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