Integrated Reporting - How an organisation creates value?

Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)

Shareholder value means an above-the-line
return
Required
Return on
Capital
X

Perceived Risk

Drivers of shareholder value
1.

Increase sales growth

2.

Increase operating profit margin

3.

Reduce cash tax rate

Out of fewer
assets

4.

Reduce working capital as % of sales

5.

Reduce fixed assets as % of sales

At lower risk

6.

Reduce weighted average cost of capital

For as long as
possible

7.

Increase timescale of competitive
advantage

More profit


Drivers of shareholder value
Sales growth
Profit margin
Tax rate

Imp..

The impact of
each driver
will vary for
different
industries
and
companies

Working capital
Fixed assets
Cost of capital
Timescale


Driving value through sustainable
Innovative products to meet
performance
sustainability needs; attract
customers by CR stance

Sales growth
Profit margin
Tax rate
Working capital
Fixed assets
Cost of capital
Timescale

Efficiencies – e.g. in staff costs by
better working conditions; lower
staff turnover; better recruitment;
less wastage; lower energy costs
Global configuration of business activities;
take advantage of allowances
Asset utilization – e.g. fewer factories,
less inventory, more efficient
processes
Risk reduction as a good corporate
citizen and as perceived by investors
CR stance affects ‘licence to
operate’ and also brand
positioning


“What's in a name? that which
we call a rose
By any other name would
smell as sweet”
Integrated reporting … corporate responsibility … CSR …
extra-financial … GRI-style … environmental, social &
governance (ESG) … non-financial …. social &
environmental performance … sustainability reporting …
Business Responsibility Reporting (BRR)… triple bottom
line … three p’s (profit, people, planet) …

Mixture and Compound ...


Integrated Reporting <IR>
Fundamentally, Integrated
Reporting is about
improving the basis of
capital allocation.
The aim of the game is
business communication
for capital reward.
Integrated Reporting will
enable the capital markets
to better understand a
company’s strategy, align
their models with business
performance, and make
efficient forward-looking
investment and other key
decisions.

Ultimately the aim of
Integrated Reporting is
about credible
communication for
capital. It is that simple
– and that complex

The six capitals*
Financial capital
Manufactured capital
Intellectual capital
Human capital
Social and relationship capital
Natural capital


Eight content elements
Organizational
Overview and
External
Environment
Basis of
presentation

Governance

Outlook

Business model

Risk and
opportunities

Performance
Strategy and
resource
allocation

Organizational
Overview and
External
Environment
Basis of
presentation Mission


and Vision

Governance

 Key quantitative information (e.g., revenue and
number of countries in which the organisation
operates, number of employees)
Outlook

Business model

 What do we do & how do we do it

 External factors like legal, commercial, social,
environmental
and
political
that
affect
organisation’s ability to create value in Short,
Medium or Long term Risk and

Performance

Presented by CA. Pooja Gupta –

opportunities
Strategy and
resource
allocation LL.B,
B.Com, FCA,

CS, Masters in Finance (Germany)

Organizational
Overview and
External
Environment
Basis of
presentation

Governance

 Leadership Structure including skills and diversity

Outlook

 Actions taken by those in charge of governance
which monitors strategic direction of the
Business model
organization and its approach to risk management
 How organization's culture and ethics reflect in its
use of and effects on the capital


Performance

Risk incentives are linked to
How remuneration and and
opportunities
value creation in the short, medium and long term


Strategy and
resource
allocation LL.B,
B.Com, FCA,


Organizational
Overview and
External
Environment
Basis of
presentation

Governance

Outlook

Business model

Risk and
opportunities

Performance
Strategy and
resource
allocation


Organizational
Overview and
External
Environment
Basis of
presentation

 Wide view of business drivers

Governance

 Short, medium and long term perspective
 Equally accountable for opportunities and risk
Outlook

Economic
Market
Financial
Political
Regulatory
Social
Technological
Environmenta
l

Business model

 Focus on “make or break” material issues
 Explain context of material issues on ability to
generate value

Risk and
opportunities

Performance


Strategy and
resource
allocation LL.B,
B.Com, FCA,



“Jack be nimble

Organizational
Overview and
External
Environment

Jack be quick”

Basis of
presentation

Governance

 How we have responded to material issues
 Strategic Outlook
objectives and strategic
(initiatives, processes and activities)

enablersBusiness model

 Have we allocated the appropriate resources and
business model
 Short, medium Performance term initiatives
and long
Strategy and
resource
allocation

Risk and
opportunities



“What gets
measured gets
done”

Organizational
Overview and
External
Environment
Basis of
presentation

 Measure and mange the
operationalization of strategy

Governance

execution

&

 Performance metrics specific to strategic
initiatives Outlook

Business model

 Balance between lead and lag indicators
Strategic objective

Performance

Lead indicator
(pro-active
execution of
strategy)

Risk and
opportunities of in
Increased brand
Number
awareness
store
Strategy and
promotions
resource
allocation

Lag indicator
(resultant
performance
indicator)

Brand
awareness
index scoring


 Targets set for short, mediumOrganizational
and long term
Overview and
External
Environment
performance – the

 Focus on controllable
Basis of
will determine uncontrollable factors
presentation

market
Governance

“If you don’t
know where
you’re going
you’re highly
unlikely to get
there”

 Will the strategy and business model in place get
us there

Outlook

Business model

Risk and
opportunities

Performance
Strategy and
resource
allocation


Organizational
Overview and
External
Environment
Basis of
presentation

Governance

 Materiality determination process
 Reporting boundary
Outlook

Business model

 Significant framework and methods used to
quantify or evaluate material matters

Risk and
opportunities

Performance
Strategy and
resource
allocation


Why <IR>
Users and preparers have become frustrated with the
volume and lack of transparency of current corporate
reporting
Capital markets need the right information to be delivered
in the right format at the right time with the content that the
markets believe in

<IR> allows capital markets to better understand a
company’s strategy and performance ‘story’

Additional potential benefits include grater organizational
clarity and streamlined reporting processes, at lower cost

By taking the first step towards better business reporting,
companies can bring greater clarity, consistency and
reliability to their corporate information


SOME TECHNICAL BITS
(a small extract from the many that
are available…)


1

4

2

3


Why <IR>
o Address shortcoming in existing corporate reporting
o Market led principles based solution
o Align business reporting with business value
o Improve investor decision making
o Improve business performance reporting
o Focus on strategy and ability to generate value

The capitals
o Financial capital – The pool of funds that is:
• available to an organization for use in the production of goods or the provision
of services
• obtained through financing, such as debt, equity or grants,
or
generated
through operations or investments
o Manufactured capital – Manufactured physical objects

(as distinct
from natural physical objects) that are available to an organization for
use in the production of goods or the provision of services, including:
o buildings
o Equipment
o infrastructure (such as roads, ports, bridges, and waste and water treatment

plants)
o Manufactured capital is often created by other organizations, but

includes assets manufactured by the reporting organization for sale or
when they are retained for its own use.

The capitals
o Intellectual

capital –
intangibles, including:

Organizational,

knowledge-based

o intellectual property, such as patents, copyrights, software, rights and

licences
o “organizational capital” such as tacit knowledge, systems, procedures
and protocols
o Human capital – People’s competencies, capabilities and

experience, and their motivations to innovate, including their:
o alignment with and support for an organization’s governance

framework, risk management approach, and ethical values
o ability to understand, develop and implement an organization’s
strategy
o loyalties and motivations for improving processes, goods and services,
including their ability to lead, manage and collaborate

The capitals
o Social and relationship capital – The institutions and the

relationships within and between communities, groups of
stakeholders and other networks, and the ability to share
information to enhance individual and collective well-being.
Social and relationship capital includes:
o shared norms, and common values and behaviours
o key stakeholder relationships, and the
o trust and willingness to engage that an organization has developed

and strives to build and protect with external stakeholders
o intangibles

associated with the brand and reputation that an
organization has developed

o an organization’s social licence to operate


The capitals
o Natural capital – All renewable and non-renewable

environmental resources and processes that provide
goods or services that support the past, current or future
prosperity of an organization. It includes:
o air, water, land, minerals and forests
o biodiversity and eco-system health.


Presenter’s contact details
CA Pooja Gupta
capooja@yahoo.com

www.capoojagupta.blogspot.in

Integrated Reporting

Integrated Reporting - How an organisation creates value?

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (20)

Similar to Integrated Reporting - How an organisation creates value?

Similar to Integrated Reporting - How an organisation creates value? (20)

More from Pooja Gupta

More from Pooja Gupta (7)

Recently uploaded

Recently uploaded (20)

Integrated Reporting - How an organisation creates value?