Post on 08-Jun-2020
Integrated Reporting for Performance Measures
Implementation Roadmap
Erin Stephen, CPA, CA Director, Risk Assurance
Western Canada GFOA Conference 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
The Case for Integrated Reporting
Those charged with governance are increasingly coming under pressure to explain in their corporate reporting how they are developing longer-term, sustainable organizations – and how well they are performing against longer-term goals...
...Many are responding through integrated reporting – a way not only to communicate organizational performance, but also to create more connectivity across different parts of the organization.
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Western Canada GFOA Conference: Integrated Reporting for Performance Measures
The Benefits of Integrated Decision Making
Supporting the growth of more stable and thriving local economies
Driving organizational intelligence for more connected internal decision making
Typical Stakeholders
Other
government
Lenders, banks,
rating agencies
Public Suppliers
Employees
Regional
partners
Customers Media, interest
groups
Integrated reporting can help governments achieve a better dialogue with stakeholders...
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Western Canada GFOA Conference: Integrated Reporting for Performance Measures
How Integrated Reporting Creates Value
Integrated reporting:
• connects internal management of a government’s value drivers to financial performance
• creates a shared organizational language for management and external stakeholders
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Western Canada GFOA Conference: Integrated Reporting for Performance Measures
How Integrated Reporting Creates Value
75% of leaders say that measuring and reporting the total impact of their activities across social, environmental, fiscal and economic dimensions contributes to the long-term success of their organization1.
Sustainability reporting is associated with positive impacts on operational performance and risk management.
Managing both financial and pre-financial performance drivers is in the best interest of stakeholders2.
1PwC 17th Annual CEO survey 2Clark, Feiner and Viehs (2014). From the Stockholder to the Stakeholder: how sustainability can drive financial outperformance
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Western Canada GFOA Conference: Integrated Reporting for Performance Measures
The Strategic Benefits of Integrated Reporting
3Blacksun (2014). Realizing the benefits, the impact of integrated reporting.
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Improved decision making More collaborative thinking Better understanding of risks &opportunities
The Impact of Integrated Reporting3
79% 78% 65%
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Implementation Roadmap
Organizations that fully embrace the concept of integrated thinking and reporting can hope to achieve higher quality stakeholder dialogue
Success in implementation is achieved by moving away from the intended output – the ‘integrated report’ – and focusing on improving holistic organizational management approaches
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Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Implementation Roadmap
Three fundamental foundations:
1. Materiality analysis
2. Value creation
3. Impact evaluation
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September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Implementation Roadmap
Five stages for practical implementation:
1. Engage with stakeholders
2. Refresh your strategy
3. Align internal processes
4. Develop an integrated dashboard
5. Integrate reporting & create dialogue
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Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Materiality Analysis
Develop processes for listening to stakeholders
Gain insight into material issues and understand where value can be created
Gain greater understanding of how external stakeholders perceive the impact the organization is having, both in financial and other terms
Look at the outside world and engage with your stakeholders
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September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Stage 1: Engage With Stakeholders
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Guiding Questions
• Have you identified and prioritized stakeholders?
• Have you assessed how you engage with them?
• Have you considered opportunities and risks arising from disruptors?
• How well do you understand your competitive position?
• How do you assess materiality?
Cumulative Reporting Benefits
• Stakeholder engagement process
• Value chain map
• Analysis of organizational context and competitors
• Materiality matrix
PricewaterhouseCoopers LLP September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Materiality Matrix Example
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Deg
ree
of
imp
ort
an
ce t
o s
tak
eho
lder
s
Degree of importance to local government
direct control
low tax
strong influence
shared control infrastructure
connected community
public trust
some influence no
influence funding cuts
September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Value Creation
Seven connected building blocks:
Determine your stakeholder value proposition and refresh your strategy
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Stakeholders
Key Messages
Risk
Strategy
Value Drivers
Performance
Impact
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Stage 2: Refresh Your Strategy
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Guiding Questions
• How do you define value for stakeholders?
• How do you create value for stakeholders?
• Is your strategy resilient for the short, medium and long term?
• Should you refresh your strategy and goals to reflect all material issues?
Cumulative Reporting Benefits
• Definition of value
• Improved risk reporting
• Value creation process
PricewaterhouseCoopers LLP September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Define Value
Use the materiality matrix as the basis for defining value propositions for:
• opportunities – where the most value can be created
• risks – where the most value can be destroyed
Your risk function should help identify risks that relate to your material matters as part of the regular risk assessment process
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September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Develop the Value Creation Process
Key elements to create value:
• input capitals
• material matters
• related risks
• strategic pillars
• value drivers
• output/outcome indicators
• outcome/impact
Describe the link from stakeholders to strategy & ultimately impact
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Our purpose (why)
Our mission (what)
Our strategy (how)
Our impact
September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Value Creation
Align your internal processes to your strategy
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01 02
04 03
Data Information Systems
Reporting Monitoring
Measurement
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Stage 3: Align Internal Processes To Strategy
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Guiding Questions
• How does your organizational culture and behaviour support delivery of strategic objectives?
• Is your integrated management information enabled by systems & processes?
• Can you link strategic objectives to your suite of management information?
Cumulative Reporting Benefits
• Value drivers
• Qualitative disclosures of connectivity
• Insight into cultural alignment
• Relevant KPIs
PricewaterhouseCoopers LLP September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Alignment of Strategy to Organizational Culture, Systems, Processes & Management Information
3 Dimensions of Culture
Understand how to apply your current
internal control framework to pre-
financial information
Use KPIs to set targets for team &
individuals to measure
performance against
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inspire
staff
embed
values facilitate process
30%
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Impact Evaluation
Include information on:
• stakeholders
• key material matters
• key risk indicators
• strategic objectives
• value drivers
• key performance indicators
• targets
• impacts
Develop your integrated dashboard
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September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Stage 4: Develop An Integrated Dashboard
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Guiding Questions
• Can you communicate to the rest of your organization how strategy delivers value to stakeholders?
• Can you ensure management information provides holistic insight to Council & other decision makers?
• Do you make decisions based on holistic management information?
• Do you have the right data to drive your decisions?
• How do you evaluate impact & is it incorporated into your dashboard?
Cumulative Reporting Benefits
• Connected insights into predictive relationships
• Break down of silos between departments
• Reduced reporting burden
• Communication tool
• Aligned internal & external reporting
• Measurement of impact
PricewaterhouseCoopers LLP September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Develop the Integrated Dashboard
1. Assess available information
2. Design the connectivity
3. Construct dashboard
4. Implement in reporting
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Connectivity
September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Connectivity Matrix Example
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Stakeholder groups
Categorize internal & external stakeholders into groups
Key material matters
Relevant matters for stakeholders identified through materiality analysis
Risks
Risks that could prevent the organization from performing on material aspects
Strategic objectives
Strategic objectives should cover the material matters
• Employees
• Customers
• Suppliers
• Public
• Partners
• Etc.
• Property taxes
• Traffic safety
• Infrastructure
• Funding cuts
• Accidents
• Project delays
The most affordable community to safely connect our citizens
Ex
pla
na
tio
n
Ex
am
ple
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Connectivity Matrix Example
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Value drivers
Ensure strategy execution & risk mitigation
KPIs & KRIs
Indicators to monitor progress on strategy execution & risk mitigation
Targets
Future outlook with goals to achieve the strategy in short and long term
Impact
Looking beyond inputs & outputs to outcomes & impacts – understanding your footprint
Working to keep property tax rates competitive & avoid safety focused project delays through proper planning
• Tax rate vs. competitors
• Fatal accidents
• Time from planned to actual completion
Ranked #1 Best Place to Live in Canada
All citizens feel safe & highly connected, feeling it is affordable to live in the community
Ex
pla
na
tio
n
Ex
am
ple
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Impact Evaluation
Indicators capture the impact of your strategy and operations
Use your key performance and key risk indicators to report your value story to stakeholders
Integrate your reporting for more effective and complete stakeholder dialogue
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September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Stage 5: Integrate Reporting & Create Dialogue
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Guiding Questions
• Within existing reporting process, have you nominated a multidisciplinary steering group?
• Has Council provided the group a clear vision of what story to tell?
• Have you nominated one responsible writer?
• Have you started a blank page & determined scope & boundaries?
• Are you using a connectivity matrix as the storyline?
• Is there a clear communication plan to improve use of the annual report within your stakeholder dialogue?
Cumulative Reporting Benefits
• External reporting becomes more valuable for stakeholder dialogue
• External reporting becomes the solid basis for continuous & fundamental improvement of reporting & alignment of internal & external reporting
September 2017 PricewaterhouseCoopers LLP
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Practical Steps to Develop your Integrated Report
Bring your previous activity & outputs together to develop your integrated report:
• make use of your existing reporting processes & governance – be more effective
• nominate one responsible writer who understands the connectivity matrix
• start with a blank page – take inspiration from best practice sources
• tell the story by connecting outcomes to inputs by working through the columns of the connectivity matrix
• determine scope & boundaries by reference to the materiality matrix
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September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures
Measuring Success
Evaluate the process for continuous improvement
Develop a three-year project plan for improving your reporting
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Annual reporting becomes more valuable for your dialogue with investors, and also for the dialogue with other stakeholders
Annual reporting becomes more valuable for your dialogue with Council, and also for the dialogue with other stakeholders
Annual report becomes the solid basis for continuous and fundamental improvement of your reporting & alignment of internal & external reporting
September 2017
Western Canada GFOA Conference: Integrated Reporting for Performance Measures 29
Refresh your strategy
Engage with stakeholders
Materiality analysis
Integrated Reporting for
Performance Measurement
PricewaterhouseCoopers LLP September 2017
Contact us
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Carlie Persson, CPA, CA
Partner, Risk Assurance Services
T. 780.441.6880 E. carlie.person@pwc.com
Erin Stephen, CPA, CA
Director, Risk Assurance Services
T. 780.441.6792 E. erin.stephen@pwc.com
Robert J. Reimer, CPA, CA
Partner, Consulting & Risk
T. 204.926.2442 E. robert.j.reimer@pwc.com
Mewael Eyob, MBA, CPA, CMA, PMP
Manager, Consulting & Risk
T. 306.564.4727 E. mewael.eyob@pwc.com
Alberta Saskatchewan/Manitoba
BC/Yukon/NT
Sarah Marsh, CPA, CA
Partner, Assurance
T. 604.806.7123 E. sarah.marsh@pwc.com
www.pwc.com/ca