CFOs ideal to drive integrated reporting

Integrated reporting is about achieving better outcomes from reporting, says International Integrated Reporting Council

By HABHAJAN SINGH

CFOs are ideally placed to drive momentum for integrated reporting, one of the components of the new Malaysian Code on Corporate Governance (MCCG) launched by the Malaysian securities regulators six months ago.

“The CFO and finance function can ensure that integrated reporting is a core activity and not something undertaken in a corner office,” stated a recent report released by the International Integrated Reporting Council (IIRC), a global coalition of regulators, investors, companies, standard setters, accounting professionals and non-governmental organisations.

Integrated reporting is not about more reporting but rather about achieving better outcomes from reporting, noted the 24-page report entitled “Creating Value: CFO Leadership in Integrated Reporting”.

Through enabling better connectivity, integrated reporting is seen as allowing organisations to better understand how value is created, thereby improving board and management information and decision-making. Ultimately, organisations implementing the regime develop strategies and business models better tailored to creating value over the short, medium and long terms.

“The International Integrated Reporting Framework provides principles and concepts to understand and communicate a clear, concise, integrated story that explains how an organisation’s capitals and resources create value in the context of external trends, risks and opportunities, and the business model.

“Integrated reporting responds to current challenges in corporate reporting that have been driven by a compliance focus, that does not provide sufficient clarity on how value is, and will be, created by organisations given the complex, competitive, and resource constrained world in which they operate,” according to the report.

Richard Howitt

Malaysia is joining a long list of countries that recognise the value of businesses adopting integrated reporting, says Howitt

In April, the Securities Commission Malaysia (SC) released the new MCCG, a set of best practices to strengthen corporate culture anchored on accountability and transparency, with integrated reporting being a part of it.

The new MCCG places greater emphasis on the internalisation of corporate governance culture not just among listed companies, but also encourages non-listed entities including state-owned enterprises, small and medium enterprises, and licensed intermediaries to embrace the code, the commission said in a statement.

The code has 36 practices to support three principles, namely board leadership and effectiveness; effective audit, risk management, and internal controls; and corporate reporting and relationship with stakeholders.

In an immediate release, IIRC had welcomed the move where Malaysian companies are being called on to adopt integrated reporting as part of the code, describing it as an “important development in a country which is using corporate reporting and governance reform, to accelerate its ambition to achieve developed economy status by 2020”.

“Increasing numbers of Malaysian businesses are moving towards integrated reporting as a means of attracting capital and enhancing their communication with key stakeholders,” it added in the same statement.

IIRC CEO Richard Howitt said Malaysia is joining a “long list” of countries that “recognise the very real value” of businesses adopting integrated reporting.

The topic will also be discussed at the one-day Corporate Board Symposium 2017 organised by the Malaysian Institute of Accountants in Kuala Lumpur on Oct 25.

Improving Corporate Reporting

Alexsandro Broedel

Integrated reporting can help investors and other stakeholders to develop greater trust in the business, says Broedel

IIRC director Alexsandro Broedel said integrated reporting represents the future of corporate reporting, acting as a catalyst for behavioural change and long-term thinking.

“For me and my peers who are implementing integrated reporting, the business case has proved persuasive. The process of implementing (it) not only improves management and board information, but also breaks down internal silos and encourages more connected thinking across the organisation as a whole.

“Integrated reporting also improves corporate reporting. Far from increasing reporting complexity and volume, integrated reporting provides the opportunity to simplify reporting and tell a more coherent value creation story. Over time, integrated reporting can help investors and other stakeholders to develop greater trust in the business,” said Broedel, who is the group finance director of Itau-Unibanco SA, one of the largest financial institutions in Latin America, where he developed one of the world’s first integrated reports for a financial institution.

“Integrated reporting provides them with the framework they need to meet the expectations of their CEOs, operating units, investors and wider stakeholders. Integrated reporting also plays a role to the existing strengths of finance leaders, who can use their professional skills and experience to make sure integrated reporting delivers on its promise.

“CFOs who embrace the spirit of integrated reporting and set out to implement it within their organisation have the opportunity to make a major impact — not only on how the organisation is perceived and understood, but how it performs in the short, medium and long terms. In doing so they can also enhance their own reputations as true strategic leaders,” the report noted.