When listed businesses file their financial reports, since 2014, there is a requirement to present a Viability Statement.
This is an overview of risks and long term viability and commitment by the board of directors that their strategy will see the company thrive and survive over a determined time period.
Have a look at some. It may not be easy to find one that cites innovation as a key contributing factor to financial longevity. References to other parts of strategic documents are perfectly acceptable and yet, in a time of unprecedented change we might expect a more positive nod towards disruption having a significant effect on company fortunes.
Let’s not forget the prediction that many of the major companies that populate the S&P and FTSE will be displaced by innovative disruptors over the next decade.
Here’s an example of a viability statement taken from one of the world’s most technologically innovative companies – redacted to maintain anonymity. What do you think?
The Group’s strategic plan covers a five year period, over which the directors have made assumptions regarding the Group’s revenues, operating costs, dividends, cash requirements and capital structure. A five year planning period is appropriate because of the duration of the Group’s product development cycle…
The projections for the first three years of the plan are based on current licensing opportunities and foreseeable royalty revenues. There is inherently less certainty in the projections for years four and five. The directors have therefore determined that three years is an appropriate period for the viability statement.
In assessing the Group’s prospects and resilience, the directors considered the Group’s current business position and risk appetite. The conclusions were stress-tested by analysing the principal risks to the Group’s business model, performance, solvency and liquidity)… The directors believe the principal risks to viability are: a shift in industry practice, the risk posed by the success of a major competitor, and risks to reputation, since crystallisation of these risks would have the potential to damage the Group’s financial position.
Based on this assessment and the mitigating actions described, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to December 2018.”
Future thinking. Future proofing. Innovation justified.