The lesson we are learning is that the things that break companies are often events that go to the core of their business model. The latest scandal at Volkswagen is testament to a major global company being undermined by risks that its management and board should have captured and dealt with, not by outsiders who quickly brought it down like a house of cards. VW’s business model has been all about quality and reliability and so when that is drawn into question it seizes up like a vehicle at the end of its life.
So we are at an exciting moment in UK corporate reporting history. Under the latest revision to the UK Corporate Governance Code, which is starting to bite for the current cycle of reports, boards are being asked join the dots for their investors and provide their view on the longer term viability of the company. The new viability statement is a brave step by the FRC because they are asking those charged with the stewardship of a company to take an integrated look at the company’s business model, its strategy, markets and risks to formulate an evidence-based assessment of its longer term success. It’s unlikely that it will prevent the next corporate scandal or shield companies from the next downturn but it will force UK companies to pause and reflect. The “unexamined life” it was said was not worth living and perhaps rewording that maxim a little – boards that don’t stop to reflect and properly consider what’s coming down the track may be leading companies that are living on borrowed time.
In this white paper we explain the new viability statement and suggest that this in an important opportunity for companies to be transparent about why they think their future remains positive – showcasing all the good business planning and risk management that has led them to that point whilst acknowledging that the future is yet to be made. No-one can reasonably expect any cast iron guarantees, just some confidence that the board is getting on with the job today but with one eye on tomorrow.
We are hoping to stimulate discussion and debate about how to best meet this new requirement rather than offering a step-by-step guide to preparing a viability statement. We think integrated reporting provides an interesting framework within which to consider a company’s viability. It demands a holistic view of the business, which seems to make a lot of sense given the number of unknowns that will shape the future.
To find out more about the implications of this white paper for you, please contact firstname.lastname@example.org.