Business Model Reporting for Value Creation

Integrated Reporting (IR) plays a crucial role in forging business partnerships and facilitating sound decision-making. Understanding the organizational business model is essential for long-term sustainability and value creation. The global approach to business model reporting encompasses business strategy, value chain analysis, financial performance, and value creation processes. Participants engage in a survey activity to rank components of a business model based on importance. This content highlights the significance of sound business models in creating value and driving organizational success.

• Business Model Reporting
• Integrated Reporting
• Value Creation
• Organizational Sustainability
• Decision-making

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1. Creating a Value Added Service through Integrated Reporting<IR> Fuad A. Hashimi, President & CEO ICAP & CIPFA Public Financial Management Conference Islamabad, May 2, 2016

2. Integrated Reporting <IR> Forges Business Partnering Preamble Coordination Business insights Communication Sound business decisions Better business reporting

3. Thinking About the Organizational Business Model An organization s business model is its system of transforming inputs, through its business activities, into outputs and outcomes that aims to fulfill the organization s strategic purposes and create value over the short, medium and long term. - International <IR> Framework, 2013, 4C Business Model, 4.11, International Integrated Reporting Council In order to make informed decisions and improve business performance, every viable organization must be built on a sound business model The long term sustainability of any organization, whether in the public or the private sector, depends on a successful business model. In the public sector, the business model construct could have a direct impact on social value creation.

4. The Global Approach to Business Model Reporting Approach Description Organizational overview What the entity does, how it is structured or where it operates Business strategy Key aspects of the organization s strategy Value chain Place in the value chain and dependencies on key inputs Financial performance How the business model drives profitability or revenue generation Value creation How the organization s inputs, activities and relationships lead to value and desired outcomes

5. Activity for Session 2 Please find a short survey with the components of a Business Model listed in the left hand column. Delegates are requested to mark these components from most important to least important, in their opinion, by ranking them from 1-6, in the right hand column. The results will be shared at the conclusion of Part III.

6. Corporate Membership (91) PICG A Snapshot Of Engagement Founding Members (16) Corporate Regulator Banks & F.Is 17 17 1 1 Banking Regulator 1 Listed 3 Stock Exchanges 3 Academia Founding Members 16 Professional Institutes 2 Corporate Sector Other 41 2 Non-Banking Financial Sector 3 Banking Sector Director Education Program - Companies Engaged (266 Sessions, 351Companies)* Directors Orientation Workshop Companies Engaged (66 Sessions, 50 Companies) Director Education Program - Participants Engaged (266 Sessions, 1082 Participants)* 95 Banks & F.Is Banks & F.Is Female 10 86 Male 108 Listed Listed 7 33 987 159 Other Other *2007 till date 800 participants have attained Certificate of Director Education of which 279 are from the membership

7. Part I. Value Creation In the Public Sector

8. How Does the Public Sector Create Value Value Creation In Private Sector Value Creation In Public Sector Value is created for a firm s shareholders Value is created for stakeholders Value is created when the firm is able to enjoy a reduction in its cost of capital Value is created when the firm is able to meet its service delivery objectives

9. Public Sector Service Value Chain The Public Sector Service Value Chain consists of three core components: People, Service and Trust This approach of public value chain is analyzed in three dimensions: 1. Employee empowerment and commitment 2. Citizen/client service satisfaction 3. Citizen trust and confidence in public institutions

10. Modeling a Private Sector Value Chain in the Public Sector The private sector value chain can be transformed in to the public sector value chain, such that it: is characterized by high quality and cost effectiveness to create 'public value produces services increasingly more tailored to the needs of users has continued focus on value creation

11. Part II. Communicating Value through Integrated Reporting <IR>

12. What Constitutes Integrated Reporting Integrated Reporting <IR> focuses on performance rather than conformance and seeks to: combine all reporting in one place to communicate a more logical, connected and understandable story connect financial and non financial performance report in terms of the company s value creation The primary purpose of an Integrated Report is to explain to financial capital providers and other stakeholders how an organization creates value over time.

13. Value Creation and the Six Capitals of <IR> Six Ps of Value Creation Six Capitals Profit Financial Product Manufactured People Human Patents/ goodwill Intellectual Partnerships/ stakeholders Social and relationship Planet/ environment/ nature Natural The Capitals are stocks of value that are affected or transformed by the activities and outputs of an organization.

14. Value Creation and the Six Capitals of <IR>

15. Connectivity of Information through <IR> What information needs to be connected in an Integrated Report: Seven Content Elements Organizational overview and external environment Governance Opportunities and risk Strategy and resource allocation Business model Performance Future outlook Seven Content Elements Management information Financial and Qualitative and quantitative information non financial information Board information Information reported externally

16. Integrated Reporting is Driven by Integrated Thinking Functional Operational Financial Manufactured Intellectual Human Social and relationship Natural

17. What Is Integrated Thinking SAICA Exploratory Survey on Integrated Thinking Responsible leadership at board level Responsible management for long term value creation Strategizing for the short, medium and long term Creating value for a range of stakeholders Effective decision making through interlinking financial and other information systems The concept of Integrated Reporting was first raised in South Africa through King III Report issued in 2009. It is now mandatory for South African listed companies to publish an Integrated Report. King IV Report now out for public comment emphasizes integrated thinking at a strategic level first, so that reporting is then a logical outflow of this process.

18. Part III. Technology and the Global Adoption of <IR>

19. Technological Development in Public Financial Management Big Data is using new techniques in data analytics to find useful patterns in the vast volumes of data that organizations collect. Technological Management will drive the availability of ever larger volumes of data. development in Public Financial According to IBM, to extract meaningful value from big data, you need optimal processing power, analytics capabilities and skills.

20. Using Big Data to Improve Service Delivery According to Oracle, governments around the world see big data as an important new tool to help them meet their mission goals. Big data has the potential to deliver new services, reduce costs, and optimize existing IT investments. Public sector organizations can make highly informed policy decisions by incorporating big data and prescriptive analytics. Demand for data and analytics resource is around 4.4M jobs globally but only one-third are likely to be filled resulting in the need for Data Scientists to fill the skills gap

21. Digital Connectivity through <IR> Communications technology is playing an ever more important role in corporate reporting. <IR> can establish connectivity between various data sources to produce an Integrated Report. An Integrated Report could help set a baseline for effective corporate reporting since it provides a strategic rather than a data driven perspective.

22. Digitization Of Public Financial Management Integrated Transformation in public sector would result in improvement in service delivery. Improvement in service delivery would follow from: Thinking and Digital shedding legacy IT systems investing in a new and agile systems development approach that focuses on customer needs changing mindsets internally breaking down intra agency silos

23. Connected Government through <IR> Service delivery becomes more efficient through incorporation of digital technologies and processes into day-to-day operations Technology plays a key role in this integration making direct connections between citizens and governments over internet systems easier <IR> helps the implementation of a common vision supported by integrated objectives, outcomes, information and process flows

24. Extending the Benefits of <IR> for Private Sector to Public Sector The benefits of <IR> for private sector organizations can be extended to public sector organizations by, for example: using an Integrated Report to increase engagement with external stakeholders including investors; using an Integrated Report to drive collaboration between various departments such as finance and IT; seeing <IR> as part of a long term change to think about an organization s economic impact

25. <IR> Framework Defines Value Creation Value created by an organization over time manifests itself in increases, decreases and transformations of the capitals caused by the organization s business activities and outputs. That value has two interrelated aspects value created for: The organization itself which enables financial returns to the providers of capital; Others (i.e. stakeholders and society at large) - International <IR> Framework, 2013, 2B Value creation for the organization and for others, 2.4, International Integrated Reporting Council

26. Value Creation through Connecting the Capitals Source: Philips Creating value for our stakeholders diagram, Annual Report 2014

27. Value Creation through the Business Model Clients Solutions Income Value Strengths Sustainability Building deep relationships Source: Standard Chartered Bank Annual Report 2014

28. Value Creation through Trust SLIDE 9 SLIDE 9

29. Measuring Public Value The Public Value Approach Delivering actual services Achieving social outcomes Maintaining trust and legitimacy of the agency --- Mark Moore, Creating Public Value, 1995

30. Measuring Public Value Trust and legitimacy in public agencies serves several positive functions: Compliance Cooperation Raising of public funds

31. Session 2 Survey Results Components of the Business Model Discussion and Interpretation of Survey Results

32. Part IV. Value Add through Integrated Reporting <IR>

33. How <IR> Can Add Value to Reporting In developing countries like Pakistan, public sector value is disrupted by resource scarcity. To highlight the public sector s role in value creation across society, a different kind of reporting regime is required. Integrated Reporting <IR> could provide that alternative framework that has the capability to work around resource scarcity.

34. <IR> to Promote Accountability World Bank views sees significant value in increasing awareness of <IR> as the key to promoting public and private sector accountability. CIPFA s Good Governance in the Public Sector Framework aims to encourage better service delivery and improved accountability in the public sector. IIRC s Public Sector Pioneer Network has been established to explore why and how the public sector should be adopting <IR>.

35. <IR> To Promote Service Delivery Some of the most successful public sector institutional reform efforts involve local government and community organizations. One example is the OECD Water Governance Initiative This stakeholder approach can be used to reform social service delivery in the public sector. <IR> can demonstrate this approach through reporting.

36. An Integrated Approach to Service Delivery and Accountability Indonesian Jasa Tirta I Public Corporation became a model for anti-corruption initiatives by: Transparent reporting to stakeholders through the use of IFRS Adopting quality management systems to maintain, conserve, and develop water resources Installing integrity tools for employees to track petty corruption

37. Why Public Sector Should Adopt <IR> Public sector should adopt <IR> because: First, <IR> helps to create meaningful reporting to build business confidence by reestablishing the connection between a business and its principal stakeholders. Second, <IR> promotes greater reporting cohesion and efficiency by rebalancing reporting in favor of the report reader/user.

38. How Public Sector Could Adopt <IR> The annual ICAP-ICMAP Best Corporate Report Awards have led the evolution of corporate reporting criteria in Pakistan. There is now marked emphasis on Management Discussion & Analysis, Information, and Corporate Governance criteria. This is in keeping up with innovations in corporate financial and nonfinancial reporting, and ensuring adequate transparency. Disclosure, Stakeholder

39. <IR> Reflects Impact Outcomes may be viewed as the impact of the goods and services, including the redistribution of resources, provided by a public sector entity in delivering its objectives. Defining outcomes, therefore, involves the specification of the intended impact or changes outside the entity. This may be immediate or over the course of a year or longer. Achievement of those intended outcomes may be affected by factors beyond the control of the entity concerned. - Good Governance in the Public Sector Framework, 2013, p21, C1 Defining outcomes, second paragraph, The Chartered Institute of Public Finance and Accountancy

40. <IR> Reflects Impact Outcomes are the internal and external consequences (positive and negative) for the capitals as a result of an organization s business activities and outputs. - International <IR> Framework, 2013, 2D The Value Creation Process, 2.25, International Integrated Reporting Council An Integrated Report goes beyond the input-output- outcome model to explain how the organization changes the outcomes of the people it serves. An Integrated Report should not be an outcome in itself, but rather a means to achieve improved outcomes.

41. Adapting to the Changing Landscape of Corporate Reporting Companies that have embarked on <IR> view it as a change process. The production of an Integrated Report creates a value added service for investors, shareholders, and various stakeholder groups alike. To embrace this change, public sector companies will have to continuously strive for improved maturity in systems and processes.

42. Thank you! Questions?