services: managing and reporting on key issues

aanapier consulting can help companies successfully identify, manage and report on issues that can affect future success and corporate reputation.

Our issues management services help clients to integrate potentially significant external issues and challenges into their risk management and strategic planning. This is increasingly recongised as an important part of good corporate governance.

Governments are looking for new ways to improve corporate governance in the wake of recent high-profile corporate collapses and scandals.

Although the British Government has now stepped back from making the Operating and Financial Reviews (OFR) mandatory, it remains in the forefront of those seeking to require the provision of information on how companies manage key issues such as "environmental performance, employee issues, relations with suppliers, customers and local communities – which are crucial to the company’s future success and reputation."

Directors "will want to ensure that they have explored and understood the agendas not only of members but also of other stakeholders that are likely directly or indirectly to influence the performance of the business and its value."

[quote (*) British Government's guidance for directors]

Under the EU Accounts Modernisation Directive (2003), large and medium-sized companies are required to provide “a balanced and comprehensive analysis of the development and performance of the company’s business and of its position …. which shall include both financial, and where appropriate, non-financial key performance indicators… including information relating to environmental and employee matters”. (Directive 2003/51/EC Article 14.b),)

The British Government has also been trying [Company Law Reform Bill, section 156 (3)] to make directors "have regard to the interests of customers, employees, suppliers, the community and the environment."

(pdf) (*) British Government's guidance for directors

Significantly, after a long consultation period all parties agreed that the 'OFR' is intended to provide information for a wide range of interested parties: "creditors who need to have a clear picture of the position and prospects of their debtor; investors (shareholders and creditors) both actual and potential, who wish to know whether to acquire, retain or sell, a stake in the business (“exit” and “entry”); and other stakeholders (including employees) and the wider public, who have a variety of relationships with the business."

"A particularly important issue related to risk is the reputation of the business. This is inextricably linked to the licence to operate and is a critical value driver. Reputation, and thus competitive advantage, may be won or lost through the ability to deliver consistently against explicit or implicit promises made to investors and other key stakeholders, including customers, suppliers and employees. Directors may therefore wish to address in their OFR the link between their strategy and the key attributes upon which the company’s reputation is built." [quote - with emphasis added)

extracts from the British Government's Final Regulatory Impact Assessment on the Operating and Financial Review and Directors’ Report Regulations (2005):

"Assets are increasingly intangible. Business observers and analysts generally agree that some of the biggest contributors to business success are those that are the most difficult to quantify: people, customers, knowledge base, brand, and reputation." (para 18e) "The opportunity costs associated with non-disclosure of information are harder to pinpoint, but have been proved to be a contributing factor in the destruction of value through inappropriate corporate behaviour and/or loss of reputation. A separate 2004 paper issued by MORI, The Rise and Rise of Non-Financial Reporting, made this point referring to billion dollar losses incurred by such companies as Texaco, Motorola and Enron as a result of reputational failure." (para 79)

Several major British companies have produced their own OFR on a voluntary basis and embedded the 'OFR' measurements and reporting into their organisations. This has been reported to have had the effect of giving greater clarity around strategy and better performance management, as well as enhancing their reputation for good governance.
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