The corporate anatomy
The human anatomy is extremely complex and sophisticated and so is that of a corporate. A corporate entity is a complex collection of systems featuring resources, drivers, interdependencies, cultures and many more facets, operating in an environment where change is a norm. Whilst a human anatomy requires limited interventions, in cases such as decease, an organisation requires management interventions throughout its lifespan. Both the human and the corporate require an integrated approach to effectively administer interventions due to these anatomical complexities.
The need for new knowledge
Knowledge is key to this integration. In order to create and nurture a corporate anatomy, we need to know about its workings — internal interactions as well as internal interactions with external factors — in the short, medium, and long terms. We know that knowledge created through research on corporate anatomy stands well behind the research about the human anatomy. So, in order to improve this knowledge, we need to conduct research and seek technology solutions to elicit more information about the corporate interplays, trade-off impacts and sensitivities.
Reporting on an integrated, complex corporate is beneficial for both the corporate as well as its stakeholders. Internally, such integrated reporting promotes efficient utilisation of resources whilst externally it helps the corporate to communicate with stakeholders more objectively and transparently. Such integrated reporting also helps to synchronise and combine internal reporting with external reporting. The integrated reporting discipline has brought to the corporate anatomy concepts such as value, capitals, integrated thinking, and connectivity.
Building on the integrated reporting concepts, integrated thinking provides even more benefits. Integrated thinking is about the understanding and management of the total corporate anatomy and the behaviour of its systems and resources. The uniform and consistent embedment of integrated thinking in decision-making can bring many benefits including:
Institutionalising integrated thinking
Institutionalising integrated thinking comes at a cost and should therefore be considered in the context of materiality. Some pre-requisites for its institutionalisation include Board commitment:
Examples where integrated thinking can be institutionalised
Overcoming resistance to integrated thinking
The reasons for lack of motivation for organizations to institutionalise integrated thinking include:
Boards should seek to overcome such resistance and provide guidance to embrace integration.
Expending of capitals create a chain of outcomes and impacts. In a world where resources or capitals are limited, we have a moral responsibility to objectively use resources at our disposal. To do this we need to have a full view of outcomes in the short, medium, and long term, triggered by our expending of resources. Therefore, making best use of resources is a moral obligation.
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Mr. Suresh Gooneratne is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and is an alumni of KPMG. He holds a Master of Business Administration Degree from the Post Graduate Institute of Management, University of Sri Jayewardenepura.
Mr. Gooneratne is a member of the Board of Directors of Diesel & Motor Engineering PLC (DIMO) and serves as the Chief Financial Officer.
Suresh, as a participant of the <IR> Business Network, he published a seminal report, on the occasion of the International Integrated Reporting Council’s 10th Anniversary, on the anatomy of corporates which can be found here.
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