The last couple of years the financial world have been hit by a string of scandals, which has resulted in governing bodies working hard to try to rebuild the reputation of the industry and create a more controlled market. Not only are regulators and policy makers taking a much tougher line with businesses that fail to combat risk but there is a growing trend to hold senior managers accountable for the successful implementation of basic financial controls.
As part of this process, the International Integrated Reporting Council has started working on a new model of transparency and reporting for business. In April, the consultation draft of the International Integrated Reporting Framework was launched in South Africa and 14 other destinations worldwide. 100 Businesses across the globe took part in a pilot programme to test and help develop the integrated reporting framework.
Until now, corporate reporting has primarily focused on bottom-line dollars. Integrated Reporting requires organisations to also report on their governance and strategy in the context of their internal and external environments – including their workers and environment.
The council's Integrated Reporting initiative has the potential to change the relationship between business, society and the environment by changing the way accountants and boards, in particular, think about business success and strategic-decision making.
"I believe integrated reporting is vital to properly communicate the way we do business today, rather than 50 years ago," said Richard Sexton, global assurance leader elect at PwC
However, integrating new elements into financial reporting will require businesses to rethink existing data management processes and assess whether they have access to the right information and if it is stored in the relevant form so that it can be easily reported on. Internal processes will then need to be redesigned so that financial information can be integrated with other data streams within the business.
Just as most of the world has moved steadily toward the adoption of International Financial Reporting Standards, the progression toward a single, global, common framework for integrated reporting seems all but inevitable. Although there are various challenges to this process, it is those businesses that embrace the movement towards integrated reporting, which will be the ones to benefit from the wider impact that good financial reporting can provide. In addition, it will keep them one-step ahead of competitors.
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