Benefits of comprehensive integrated reporting: by standardizing disparate information sources, financial executive can eliminate the narrow perspectives of the elephant and the blind man parable--and "see" beyond merely information silos or reports.

AuthorPhillips, David
PositionFINANCIAL REPORTING

Financial executives are responsible for managing a wide range of information regarding organizational strategic objectives, governance, risk and performance. It's a complex task.

Accessing, analyzing, managing and communicating the critical information can be a costly, inflexible and often manual, error-prone effort requiring a wide range of methods and documents.

Due to internal barriers--most notably, the high cost of information access and reuse--many financial executives often focus more narrowly on the information required for regulatory compliance. Unfortunately, managing a business on required regulatory compliance information may not be fully aligned with creating long-term corporate or personal value.

Integrated reporting redefines the scope of information relevant to strategic corporate objectives and provides a broader method of accessing, analyzing, managing and communicating strategic information both internally and externally. Integrated reporting refers to the integrated representation of a company's performance, in terms of both financial and nonfinancial results.

Companies are providing integrated reports as a means to seek new business opportunities, safeguard reputation, maximize competitive advantage and mitigate operations risk.

This holistic supply chain approach provides transparent alignment of company strategy with underlying business risks, key performance indicators (KPIs), business and risk developments, incentive programs and other relevant internal and external information. (See the diagram on page 30.)

Benefits of Integrated Reporting

Those familiar with the Indian parable about blind men and an elephant might agree it provides a useful paradigm for many current reporting processes. In the telling, each man's perspective of the elephant was dependent on what part of the elephant they happened to be touching. For example, its side felt like a wall, its tusk a spear, its leg a tree trunk.

Many financial executives currently are faced with similarly narrow perspectives based on distinct information silos or reports, reflecting information that is oriented to its specific, largely compliance purpose such as financial, tax, management, governance or environmental.

[ILLUSTRATION OMITTED]

For many multinationals, information problems go well beyond access to disparate internal silos. They include inconsistent definitions of commonly used terms--full-time equivalent, sick days, square foot, customer and others. Of course, financial executives are not the only ones translating disparate definitions into common terms.

Further, the ability to understand and act on external market drivers (competitive, economic, technological, etc.) is important to managing business risks and opportunities.

The common lack of a comprehensive approach to relevant, consistent, quality internal and external information obscures the holistic picture company financial executives seek to effectively manage the sustainable performance of their business and respective investments.

Integrated reporting moves beyond today's common "elephant view" of individual company financial attributes toward a more comprehensive assessment of company value and performance and addresses a broad range of financial, value, social and strategic disclosures.

The primary benefit of integrated reporting is a more holistic view of information relevant to the company and its value proposition and strategy. As outlined in One Report: Integrated Reporting for a Sustainable Strategy, by Robert G. Eccles and Michael P. Krzus, this approach promotes a wider perspective of the information vital to a company's long-term strategic objectives. As a result, financial executives have an opportunity to transform corporate processes and enhance long-term corporate value.

Information standardization provides new information-processing capabilities that facilitate the more comprehensive...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT