Integrated Thinking and Governance

 Describe the context in which future business leaders must operate

 Describe the role of responsible leadership in the creation of
o a sustainable business, and
o societal value
 Describe the thinking skills needed by future business leaders.
 Describe what is meant by integrated thinking
 Be able to describe the role of the Board in ensuring that Integrated Thinking is practised
within the company
 Be able to describe the role and responsibility of the Board of Directors concerning Integrated
Reporting

 Be able to critique the disclosures made within an <IR> relating to:

o - The Responsibility for an <IR> and

o - Governance
The US military first coined the term "VUCA" to describe the rapidly changing and complex security
environment in the aftermath of the Cold War. The term was used to describe the
increased Volatility, Uncertainty, Complexity, and Ambiguity of the security
environment, and the challenges that this posed for military planners and leaders.

WE(CA) will need to operate in these environments:

Develop the ability to spot trends.
Develop curiosity and life long-learning

Over time, the concept of VUCA has been adopted by the business community to describe the rapidly
changing and complex business environment and the challenges that this poses for organizations and
their leaders.

The term is now widely used in the business world to describe the need for organizations to be more
agile, innovative, and adaptable to succeed in a rapidly changing environment.

This changing business environment also necessitates business leaders to develop specific skills to
enable them to navigate and thrive.

A detailed discussion of the innumerable challenges faced by business today would be beyond the
scope of this topic. We would encourage you however to take a couple of minutes to explore this
resource (click here) The interactive tool was prepared by the Strategic Intelligence division of the
World Economic Forum and summarises the various global risks. Each risk on the wheel is connected
to other risks and concerns, by clicking on each item its interconnectedness with other challenges and
concerns is displayed.
Each risk is a potential business opportunity

The World Economic Forum’s Global Risks Report 2024 explores some of
the most severe risks we may face over the next decade, against a
backdrop of rapid technological change, economic uncertainty, a warming
planet, and conflict. As cooperation comes under pressure, weakened
economies and societies may only require the smallest shock to edge past
the tipping point of resilience.

 Natural ecosystems
 Technology
 Security
 Human Health
 Economic uncertainty
Examples of VUCA
These examples illustrate the dynamic and rapidly changing nature of the modern business
environment and the challenges leaders face in managing them:

1. Volatility:

The rapid changes in the global economy, sudden market shifts, and unexpected events such as natural
disasters or pandemics.

2. Uncertainty:

The lack of clarity and predictability in the future, including economic, political, and social trends,
and unpredictability of consumer behaviour.

3. Complexity:

Interconnectedness and interdependence of systems, challenges in understanding cause-and-effect

relationships, and the intricacy of organizational processes and decision-making.

4. Ambiguity:

Incomplete or conflicting information, unclear decision-making criteria, and multiple perspectives and
interpretations of events and data.

Factors contributing to the Increase of VUCA

The business environment is increasingly exposed to VUCA compared to the past. The
following factors contribute to the increase in VUCA:

1. Globalization:

The interconnectedness of the global economy, cross-border trade, and the spread of technology have
made the business environment more complex and uncertain.

2. Technological advancements:

Rapid technological advancements have disrupted traditional business models, leading to new and
unpredictable market conditions.

3. Political instability:

Increased geopolitical tensions, protectionist policies, and the rise of nationalism have created
volatility in the global political landscape.

4. Climate change:

The effects of climate change, such as natural disasters, water scarcity, and rising temperatures, have
added to the uncertainty in the business environment.
5. Demographic shifts:

The ageing of the population, the growth of the global middle class, and changing consumer
preferences lead to new market opportunities, but also create ambiguity and unpredictability.
The Importance of Responsible Leadership
The role of responsible business leaders in managing VUCA is to provide

 the strategic direction with a clear long-term vision for the company,
 to create a resilient and adaptive organizational culture,
 to design a business model that is innovative and agile, and
 to ensure the well-being of their stakeholders,
 while ensuring a return on investment for their shareholders.

This involves:

1. Anticipating change: Leaders must continuously assess and monitor the environment for
potential risks and opportunities and plan for them accordingly.
2. Building resilience: Leaders must foster a culture that can adapt and respond effectively to
change by building a flexible and resilient organization.
3. Empowering employees: Leaders must ensure that their employees have the skills,
resources, and support needed to navigate VUCA and make decisions effectively.
4. Fostering stakeholder relationships: Leaders must build strong relationships with their
stakeholders, including customers, employees, suppliers, and communities, to ensure the
long-term success of the organization.
5. Promoting ethics and values: Leaders must uphold ethical and responsible business
practices, and lead by example, to build trust and credibility with their stakeholders.
Values and attributes of executives and managers( Decision-Making)
Governance: The rules, practices and processes by which a company is directed and controlled

 Risk Management(Stakeholder engagement)

 Strategy(long-term)
 Innovation
 Resource allocation
 Monitoring
 Performance Management
Business model (Sustainable value)
Inputs => Activities => Outputs => Outcomes
Your integrated report is your primary report
 Integrated Thinking: Integrated thinking refers to a holistic approach where organizations
consider the interconnectedness of various aspects of their business (such as financial,
environmental, social, and governance factors) to create long-term sustainable value.

Governance: Governance refers to the systems and processes that guide decision-making and the
behaviour of individuals within an organization. It encompasses the structures, policies, and
practices through which an organization operates and is held accountable. The rules, practices and
process by which a company is directed and controlled.

 Risk Management(Stakeholder engagement)

 Innovation
 Resource Allocation
 Strategy( Long- Term)
 Performance Management
 Monitoring & Control

Business model

Outcomes
Inputs Activities Outputs (sustainable
values)

(Primary) Integrated Report: An integrated report is a comprehensive report that provides a holistic
view of a company's financial performance and its impact on environmental, social, and governance
(ESG) aspects. It includes information on the company's strategy, governance, performance, and
prospects, integrating financial and non-financial information to provide stakeholders with a complete
picture of the company's value creation over time.
Forward looking report and execute our strategy.
Financial statements say how you spend your money, but not where the company is going

A company need information and knowledge management systems

When making decisions it is important to practice integrated thinking (triple context)

Farzad Barkhordari explains the importance of tone at the top when it comes to the success of
corporate ethics and compliance. It is also important when thinking about integrated thinking and
value creation. The board is responsible for ensuring that the entire organisation works towards the
same goals and outcomes.

What is tone at the top?

Tone at the top is critical due to its effect on employees. The term typically refers to the attitude and
message senior management conveys. And if they want to encourage employees to act ethically, leaders
need to embrace a commitment to values and doing the right thing.
The Thinking Skills needed of Board members and Business Leaders
The CA of the Future Competency Framework states that Business Acumen, Decision-making
Acumen and Relational Acumen are the enabling competencies needed to engage in Integrated
Thinking. During your degree program, these skills will be developed further in your various
modules.

We will now take a deep dive into three of the core "thinking" skills you will be required to develop
to become a responsible future business leader:

1. Critical Thinking
Critical thinking is a systematic and reflective approach to evaluating information, arguments, and
evidence to make sound decisions. It involves analyzing and evaluating information objectively and
logically, considering different perspectives and implications, and making well-supported
conclusions.

In simple terms, critical thinking means carefully examining information to make smart choices.

For example, let's say you're considering buying a new phone. Instead of just believing the
advertisements, critical thinking would involve researching different phone models, comparing their
features and prices, reading reviews from various sources, and then deciding which phone is the best
fit for your needs and budget.

Business leaders can develop critical thinking skills through the following steps:

1. Cultivate a questioning mindset: Encourage an open-minded and curious approach to

problem-solving, and be willing to challenge assumptions and conventional wisdom.
2. Gather and analyze information: Seek out diverse sources of information and data, and
critically evaluate their reliability and validity.
3. Consider multiple perspectives: Consider different viewpoints and be open to changing
one's mind based on new information or evidence.
4. Use logical reasoning: Apply reasoning and logic to evaluate information and arguments, and
avoid hasty conclusions or fallacies.
5. Reflect and evaluate: Take time to reflect on the reasoning and decision-making process, and
continuously improve critical thinking skills through self-reflection and learning.

By developing critical thinking skills, business leaders can make informed and well-reasoned
decisions, even in complex and uncertain environments. It enables leaders to effectively analyze and
respond to challenges, and make decisions that align with the long-term goals of their organization.

2. Integrative Thinking
Integrative thinking is a problem-solving approach that involves combining seemingly disparate or
opposing ideas and perspectives to create a new and more holistic solution. It is a way of breaking
down silos and thinking beyond conventional boundaries to find novel and innovative solutions to
complex problems.
In simple terms, integrative thinking means blending different ideas to come up with a better solution.

For example, imagine a company facing a dilemma: they want to reduce costs, but they also want to
improve employee satisfaction. Instead of just cutting employee benefits to save money, integrative
thinking might involve brainstorming ways to boost morale and productivity while also being cost-
effective, such as implementing flexible work hours or offering remote work options.

Integrative thinking involves the following steps:

1. Identifying and understanding different perspectives: Understanding the different

perspectives, assumptions, and values that underlie a problem.
2. Examining trade-offs: Evaluating the pros and cons of each perspective and considering the
trade-offs involved in each decision.
3. Synthesizing: Combining the insights and knowledge gained from each perspective to create
a new and more comprehensive solution.
4. Refining and iterating: Continuously refining and improving the solution, taking into
account new information and feedback.

Integrative thinking enables leaders to effectively navigate the complexities and uncertainties of the
VUCA environment, by fostering innovation and creativity and promoting a more holistic approach to
decision-making

The holistic consideration of an organization's various sources of value, including financial,

environmental, social, and governance factors.

What skills should a responsible business leader develop in order to effectively manage VUCA
Communication skills
Emotional intelligence
integrate thinking
3. Systems Thinking
Systems thinking is a holistic approach to problem-solving that recognizes the interconnectedness of
systems and their impact on each other. It involves considering the interrelationships, feedback loops,
and long-term consequences of decisions, rather than focusing solely on short-term outcomes.

In simple terms, systems thinking means understanding how different parts of a situation affect each
other.

For example, let's consider traffic congestion in a city. Instead of just blaming road construction for
delays, systems thinking would also consider how public transportation, urban planning, and even
weather patterns contribute to the problem. By looking at the bigger picture, solutions might involve
improving public transit or implementing flexible work hours rather than just adding more lanes to the
roads.

Business leaders can develop systems thinking skills through the following steps:

1. Broaden perspective: Seek to understand the broader context of a problem, including its root
causes and potential long-term effects.
2. Identify interconnections: Consider the relationships and interconnections between different
parts of a system, and the impact of decisions on the whole system.
3. Look for feedback loops: Pay attention to feedback loops, both positive and negative, and the
role they play in shaping the system over time.
4. Consider long-term consequences: Evaluate the long-term impacts and consequences of
decisions, taking into account the dynamic and evolving nature of systems.
5. Collaborate and engage: Collaborate with other stakeholders and engage in ongoing dialogue
to understand their perspectives and build a collective understanding of the system.

By developing systems thinking skills, business leaders can effectively address complex, interrelated
problems and make decisions that have a positive impact on the long-term sustainability of their
organization and the wider system in which it operates.

Systems thinking helps leaders to think holistically and take into account the interconnectedness of
different parts of a system, making it a useful approach for navigating the complexities of the VUCA
environment.
Developing your Leadership Acumen
In this module, we aim to provide you with opportunities to develop your leadership- and relational
acumen, to enable you to become responsible business leaders!

We will work on the following skills to develop your leadership acumen:

1. Strategic agility: The ability to think creatively and make decisions quickly in a rapidly
changing environment.
2. Adaptability: The ability to adjust to new circumstances, processes, and technologies as they
arise.
3. Emotional intelligence: The ability to understand and manage one's own emotions, as well as
the emotions of others, to build strong relationships and foster a positive organizational
culture.
4. Communication: The ability to effectively communicate with stakeholders, both internally
and externally, to build trust and ensure understanding.
5. Collaboration: The ability to work effectively with a diverse group of individuals, including
employees, customers, suppliers, and communities, to find solutions to complex problems.
6. Resilience: The ability to bounce back from adversity, maintain a positive outlook, and
persevere in the face of challenges.
7. Ethical leadership: The ability to lead by example, make decisions based on moral and ethical
principles, and build trust and credibility with stakeholders.
How does integrative thinking differ from critical thinking?
How does integrative thinking differ from critical thinking?
Integrative thinking and critical thinking are related but distinct problem-solving approaches. Both
involve evaluating information, considering different perspectives, and making well-supported
decisions, but they differ in the following ways:

1. Focus: Critical thinking is focused on analyzing and evaluating information to make a well-
supported conclusion. Integrative thinking, on the other hand, is focused on combining and
synthesizing seemingly disparate or opposing perspectives to create a new and more holistic solution.

2. Objectivity: Critical thinking involves evaluating information objectively and logically, without
personal bias. Integrative thinking involves a more subjective approach, considering the personal
values and emotions that may influence a decision.

3. Scope: Critical thinking is used to evaluate individual problems and make specific decisions.
Integrative thinking is used to tackle complex, systemic problems that require a more holistic and
systemic approach.

4. Outcome: Critical thinking results in a well-supported conclusion or decision. Integrative thinking

results in a new and more comprehensive solution that takes into account the different perspectives
involved.

While both approaches are useful, integrative thinking is particularly relevant in the VUCA
environment, where conventional approaches may not be effective. It enables leaders to effectively
navigate complexity and find innovative solutions that account for the interconnectedness of different
Developing your relational acumen
Relational acumen is critical for business leaders because it enables them to understand and respond
to the perspectives, motivations, and emotions of their employees, colleagues, customers, and other
stakeholders. With strong relational acumen, leaders can build trust and engage others effectively,
collaborate on complex problems, and achieve shared goals.

Some ways to develop relational acumen include:

1. Improving emotional intelligence: Practice self-awareness and self-regulation, and seek

feedback to better understand how one's actions and emotions impact others.
2. Enhancing communication skills: Improve listening skills, learn to ask questions, and express
oneself effectively to build rapport and understanding with others.
3. Building relationships: Make time to connect with others and invest in relationships, both
within and outside the organization.
4. Developing empathy: Seek to understand the perspectives and experiences of others, and
practice active listening and compassion.

By developing relational acumen, business leaders can foster positive and productive relationships
with their stakeholders, navigate complex interpersonal dynamics, and lead with empathy and
emotional intelligence.
Holding the Directors responsible through Integrated Reporting
We have already seen that the board of directors need to employ integrated thinking and integrated
decision-making, and how looking at how the company creates, preserves and erodes value over
time facilitates integrated thinking.

Open the International Integrated Reporting Framework (you will find a copy in the course reading
list- here).

Please sign into the course reading list first (you can find it under Learning Resources and AF Quizes
- General Resources. You will be asked to sign in, and you will then be added as a participant)

We will use the Framework throughout the module, it is also your primary text that should be used in
both your A1 and A2 assignments. You must become familiar and comfortable interacting with the
framework.

Read the following sections:

a) About Integrated Reporting pages 2 to 3.

You should be able to answer the following questions:

1. What is the goal of Integrated Reporting?

2. What is Integrated Thinking?

3. What are the types of factors that could affect the organisation's ability to create value over time?

b) 1G Responsibility for an Integrated Report p 14

You should be able to answer the following questions:

1. Who is responsible for the integrated report?

2. What should those responsible for the integrated report and governance disclose?

Hint:

When reading the Integrated Reporting Framework - items printed in bold represent specific
disclosures (questions that must be answered) within a company's Integrated Report. The rest is
background/supplementary information.

c) Glossary page 54: Those charged with Governance

You should be able to answer the following questions:

1. Who are those charged with governance?

Consider all that you have read to determine:

1. The reason why the board might be required to take responsibility for the Integrated Report

2. Exactly what the board of directors is responsible for

3. How this may link to the requirement to make decisions using integrated thinking.

Disclosure Responsibility for the IR

 Different reports

 The board of directors statement on Oceana Group Limited`s integrated report

o Acknowledges responsibility to ensure integrity of the integrated Report

o Material matters

o Short, medium long term

o With which standards it complies with

o When approved by directors

Governance Disclosure

 Diversity of the board

 Experience of the board members

 What they prioritise

 Age (succession planning)

 Years of service

 Race

 Tenure

 Gender

 Give targets regarding points above