Essay Example on Integrated Reporting is a broad piece of Business Framework








Integrated Reporting is a broad piece of business framework including investment decisions both short term and long term It is a strategic and future orientated type of communication on how organisations draw on the different resources and relationships available to them the capitals to create value over time IT helps businesses think realistically about their strategy and plans in the context of their organisation s impact on the different capitals In making better informed decisions and managing key risks taking advantage of key opportunities It also contributes to financial stability and sustainable development Currently the only issue with IR is its lack of usage because it is not yet widely used comparisons are limited and so certain standards have not been met Problems with traditional reporting Short term in focus and on finances only Based on past trends and events Compliance mentality businesses burdened Fragmented approach Reports long complexed and do not tell the full story Investors are not informed properly Capital markets suffering from short termism Lack of trust from stakeholders Businesses require an adequate system for reporting without the complexity of traditional reporting The World Bank and International Monetary Fund IMF require greater focus on risk and future development Benefits of integrated reporting More effective resource allocation

Long term incentives Modern up to date reporting and business models Investors have better understanding of prospects Improved capital allocation Value created and enhanced IR is necessary because the resources used by a company need to be integrated so the senior management and board are able to learn and understand the needs interests and expectations of their stakeholders Mark Carney governor of the Bank of England goes on record to state If IR is achieved it will lead to better informed and more sustainable long term investment for the benefit of the society IR aims to Improve information provided to stakeholders enabling efficient and productive capital allocation Promote a cohesive form of reporting that communicate the full range of factors affecting an organisations ability to create value Improve accountability of the capitals and understanding of their interdependencies Reinforce integrated thinking that focuses on value creation from short term through to long term Integrated thinking considers the relationship between operating and functional units and the capitals involved This leads to integrated decision making The actions that consider value creation over time These include The capitals The capacity Business model and strategy Performance outcomes There are organisations working to globalise integrated business and make it the norm throughout the world such as International Integrated Reporting Council IIRC The IIRC vision is to align capital allocation and corporate behaviour to wider goals of financial stability and sustainable development through the cycle of integrated reporting and thinking As a result the IIRC created the international IR framework The framework governs IR and utilises a principle based approach 

The framework balances flexibility and prescription that recognise the wide variation of circumstances an organisation may face while still enabling compatibility with others IIRC has six broad categories of capital used by companies to produce outcomes which are 1 Financial capital These are the funds available in order to produce the goods and services 2 Manufactured capital These are the physical assets used to produce the goods and services such as the organisation s infrastructure and equipment 3 Intellectual capital These are intangible assets used in the production of the goods and services For example intellectual capital like licences and patents 4 Human capital 5 Social and relationship capital 6 Natural capital The capitals are recognised as stocks that are increased decreased or altered through activities of the business When the organisation is able to create value for itself through these capitals it gains financial capital For example financial capital decreases when a loss is made There is constant flow of interaction between capitals in an organisation 

The capitals also have adverse effects on each other for example the training of employees increases human capital but decreases financial capital initially The IIRC are looking at three transitional shifts in global economic governance 1 Financial capitalism to inclusive capitalism 2 Short term capital markets to sustainable long term capital markets 3 Tradition silo reporting to integrated reporting IR 2018 Below are the principles of integrated reporting underpinning the preparation and presentation of information 1 Strategic focus 5 10 years 2 Connectivity of information understand change in economy legislation to affect the future 3 Stakeholder relationships keep them informed on the in out of the business 4 Materiality minimalize 5 Conciseness report must be concise 6 Reliability and completeness no errors include all pros and cons 7 Consistency and comparability must be consistent over time and able to be compared to other organisations Additionally there are linked content elements 1 Organisational overview and external environment 2 Governance 3 Business model 4 Risks and opportunities 5 Strategy and resource allocation 6 Performance 7 Outlook 8 Basis of presentation Value Creation Value is created by the organisation and its resources but also by the external environment and through relationships with stakeholders This value we talk of has two aspects value created for the organisation and value created for others such as the stakeholders Value creation is achieved through sales customer satisfaction and trade suppliers willingness these can affect value positively or negatively

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