In: Finance
Integrated thinking takes into account the connectivity and interdependencies between the range of factors that affect an organization’s ability to create value over time, including:
• The capitals that the organization uses or affects, and the critical interdependencies, including tradeoffs, between them
• The capacity of the organization to respond to key stakeholders’ legitimate needs and interests
• How the organization tailors its business model and strategy to respond to its external environment and the risks and opportunities it faces
• The organization’s activities, performance (financial and other) and outcomes in terms of the capitals – past, present and future.
Can someone please explain the 4 drivers in detail ??
Integrated thinking will be considering various factors that will affect the organisational ability to create value over time including-
A. The capital used by the organisation- an organisation will be using various kinds of capital structure based upon the needs and the cost so there should be a proper use of debt capital and equity capital in order to generate the value for the company and its capital should be helping in generating a rate of return which is higher than the cost of the capital.
there should be a proper combination of debt capital and equity capital and especially debt capital will be having an interest tax benefit associated with it so the benefits should be traded with the the cost of financial distress.
B. The capacity of organisation to respond to the key stakeholders needs and interest and it should always be trying to protect the interest of those stakeholders by appropriate public disclosure in order to help those public to generate higher shareholders value and organisational value.
C.the organisational structure of the business in order to respond to various macro risks which are present in the overall environment like inflation risk and interest rate risk along with political risk which are beyond the control of the organisation in order to manage to generate higher rate of return and create an organisational value for its stakeholders.
D. Organisational activities and performance along with outcome is also important because there have been a trend of the organisation in order to perform with the standards and synchronise its overall performance with that to the benchmark that the organisational should be following in order to find out whether the organisation is effective in order to maximize its rate of return and help itself to generate a value for the shareholders in the long run.
so these are the four drivers of the integrated thinking which will be helpful in order to connect various dependencies of factors upon one another for creating value of organisation over a long period of time.