The aim of Integrated Reporting is about credible communication for capital (financial / manufactured / intellectual/ human / social and relationship / natural).
It is that simple – and that complex
2. Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
3. Shareholder value means an above-the-line
return
Required
Return on
Capital
X
Perceived Risk
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
4. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
5. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
6. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
7. Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
8. “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) …
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
9. Mixture and Compound ...
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
10. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
11. Eight content elements
Organizational
Overview and
External
Environment
Basis of
presentation
Governance
Outlook
Business model
Risk and
opportunities
Performance
Strategy and
resource
allocation
12. Eight content elements
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)
13. Eight content elements
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
Presented by CA. Pooja Gupta –
Strategy and
resource
allocation LL.B,
B.Com, FCA,
CS, Masters in Finance (Germany)
14. Eight content elements
Organizational
Overview and
External
Environment
Basis of
presentation
Governance
Outlook
Business model
Risk and
opportunities
Performance
Strategy and
resource
allocation
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
15. Eight content elements
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
Presented by CA. Pooja Gupta –
Strategy and
resource
allocation LL.B,
B.Com, FCA,
CS, Masters in Finance (Germany)
16. Eight content elements
“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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
17. Eight content elements
“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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
18. Eight content elements
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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
19. Eight content elements
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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
20. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
21. SOME TECHNICAL BITS
(a small extract from the many that
are available…)
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
23. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
24. 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.
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
25. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
26. 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
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)
27. 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.
Presented by CA. Pooja Gupta – B.Com, FCA, LL.B, CS, Masters in Finance (Germany)