>IT< leads to IR

Integrated Thinking >IT< leads to Integrated Reporting <IR>.

According to the International Integrated Reporting Draft Framework Integrated thinking is “the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses and affects.”

Integrated thinking sees the business within its societal, community and environmental context. Seeing the business as “a part of” and not “apart from” is a significant shift in business thinking and linked strongly to a growing understanding that any business impacts and is impacted by the context it operates in.

 If the abbreviation for Integrated Reporting is <IR>, emphasising the holistic view of the business, then the appropriate abbreviation for Integrated Thinking must be >IT<, emphasising that  business leaders need to be open to the context of the business whilst making decisions in the business.

“Integrated thinking leads to integrated decision-making and actions that consider the creation of value over the short, medium and long term.

Integrated thinking can be contrasted with traditional “silo thinking”. It takes into account the connectivity and interdependencies between the range of factors that have a material effect on an organization’s ability to create value over time, including:

  • The capitals the organization uses and affects, and the critical interdependencies, including trade-offs, between them
  • The capacity of the organization’s governance structure to assess resilience against short term disruptions and to respond to stakeholders’ legitimate needs, interests and expectations
  • How the organization tailors its business model and strategy to respond to the opportunities and risks it faces, as well as major changes in its external environment
  • The organization’s value drivers, activities, performance (financial and other), and outcomes in terms of the capitals – past, present and future.”

Here the fundamental purpose of a business is seen as Value Creation – an organisations business model is how it creates value.

“An organization’s business model is its chosen system of inputs, business activities, outputs and outcomes that aims to create value over the short, medium and long term.”

Directors and decision makers in any business design the appropriate business mode, operating model and management model to deliver value. The decisions relating to selecting the elements of each and combining them determine the impact the business as a whole has – and what it impacts. The current view of strategy, risk and governance in organisations is one that emphasises that these are not isolated, independent decisions but immensely important decisions because more than just the organisation itself is impacted. Moving forward the level of liability linked to the wider impact of the organisation is bound to grow.

So a new type of thinking is required for business leaders – one that allows for an integrated approach to the organisation, one that firstly understands the context of the business before making decisions about the business, Integrated Thinking >IT<.

 

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