Integrated Reporting for Performance Measures · Western Canada GFOA Conference: Integrated...

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Integrated Reporting for Performance Measures Implementation Roadmap Erin Stephen, CPA, CA Director, Risk Assurance Western Canada GFOA Conference 2017

Transcript of Integrated Reporting for Performance Measures · Western Canada GFOA Conference: Integrated...

Page 1: Integrated Reporting for Performance Measures · Western Canada GFOA Conference: Integrated Reporting for Performance Measures How Integrated Reporting Creates Value 75% of leaders

Integrated Reporting for Performance Measures

Implementation Roadmap

Erin Stephen, CPA, CA Director, Risk Assurance

Western Canada GFOA Conference 2017

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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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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%

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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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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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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

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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

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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

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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

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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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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

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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

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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

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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%

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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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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

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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

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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

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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

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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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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

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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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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

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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

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Contact us

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reserved.

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member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Carlie Persson, CPA, CA

Partner, Risk Assurance Services

T. 780.441.6880 E. [email protected]

Erin Stephen, CPA, CA

Director, Risk Assurance Services

T. 780.441.6792 E. [email protected]

Robert J. Reimer, CPA, CA

Partner, Consulting & Risk

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Manager, Consulting & Risk

T. 306.564.4727 E. [email protected]

Alberta Saskatchewan/Manitoba

BC/Yukon/NT

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Partner, Assurance

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