In the lead up to Risk Leaders 2017, Prof. Mervyn King (right) shares some insights into why there is "No more business as usual".
"There have been some major shifts in the corporate world of the 21st century. Boards no longer look at strategy through a financial lens alone and markets have moved away from a financial capital market system to an inclusive capital one.
The drive to earn profit at any cost based on Milton Friedman’s doctrine of “the sole purpose of the company is to make profit without deception or fraud,” has changed to a drive for sustainable capital in a resource deprived world.
Boards have also come to realise that to discharge their duty of accountability to report their annual financial statement according to IFRS and a sustainability report according to GRI Standards is divorced from reality because companies do not operate with their financial capital and other sources of value creation in separate components. The use of sources of value creation and the relationship between a company and its stakeholders are interconnected or integrated 24/7. Consequently they should be reported as such. Hence the change to strategic reporting in the UK and the global movement to integrated reporting. The world has moved away from the primacy of the shareholder to a value creation process which must be sustainable. There is a focus on long term corporate health rather than the maximisation of short term profit.
In consequence value is no longer looked at through a financial lens but through a value creation lens. Further, corporate governance cannot continue to be a mindless checklist of rules but a mindful value-add which has critical outcomes for a company.
It is no longer an option to carry on business as usual with diminishing natural assets and increasing population growth.
The risks involved in simply looking at a company through a financial lens are apparent from an analysis of companies listed on the London Stock Exchange which shows that intangible assets are given a greater value than the tangible ones which are additives in a balance sheet according to IFRS."
No more business as usual
Risk Leaders 2017: Behaviour, technology and political upheaval
|Thursday 23 November 2017, 09:00 - 17:00|
|Inmarsat Conference Centre, London, EC1Y 1AX||Book Now|
|IRM Members: £395 / Non-Members: £595|