Methodology to develop an IR-based DRBV simulation model
| Steps of the process | Synthetic explanation | Additional information |
|---|---|---|
| Layout the resources/capitals | Identify the key resources/capitals included in the <IR> reports and visualize them as stocks | Stocks are represented as boxes (suggesting each box/stock is holding its content) |
| Identify the processes (flows) responsible for building or eroding resources | The information collected has to be codified to recognize and represent the processes causing the resource growth or decrease, i.e. inflows and outflows | Flows are either inflows or outflows. Inflows are represented by an arrow pointing into a stock (adding to it). Outflows are represented by arrows pointing out of the stock (subtracting from it) Valves control the flows Clouds represent the sources and sinks of the flows |
| Identify capabilities | Capabilities originate from either a single resource or from a set of related resources Capabilities can build other resources, generate value by attracting customers or generate activities influencing external stakeholders | The capabilities discovered in the integrated reports may be presented in the resource maps using stock or auxiliary variables. In this study, we used auxiliary variables |
| Portray relationships (direct and indirect) and polarities (positive and negative) | This entails representing the causal links in the organization, specifying their direction and assessing their polarity | Causal links are depicted through the use of connectors (lines), which contain the direction of the linkage and the type of linkage, that indicates a positive impact – an increase in A increases B or a negative one, – an increase in A decreases B |
| Identify feedback loops (reinforcing and balancing) | The resource mapping is finished with the identification of the feedback loops between resources and flows. A feedback process consists of a circular relationship between a set of concepts (or parts of a system) | A feedback loop is formed when two or more variables are circularly connected, e.g. A affects B, then B affects C and ultimately C affects A determining a circular relationship between A-B-C Feedback loops are recognized and labeled as either reinforcing (positive and generating growth) or balancing (negative and inducing stagnation) |
| Formulate the simulation model | After building the map, parameters have to be estimated, causal relationships among variables are to be specified and initial conditions need to be set | Initial values and parameters, as well as quantitative relationships, are derived from the organization’s integrated reports. They may be immediately available (e.g. the initial value of a stock could be provided by the organization’s report) or derived thanks to the information retrieved from those reports |
| Simulate and calibrate the simulation model | The model is simulated to generate dynamics. At the same time, the model is simulated under specific conditions to gain confidence in its reliability | Simulation is performed using specific computer software. The simulation is carried out in reference to a specific time horizon (how far in the future should the model consider?) The simulation results are analyzed to assess if the model reproduces dynamics adequate to the issue and domain under investigation |
| Perform sensitivity analysis and scenario testing | The model is tested performing sensitivity analysis. Specific scenarios can be specified and explored | Sensitivity analysis entails testing the dynamics generated by the model given the uncertainty in parameters. In reference to integrated reports, this is relevant for testing the effects of risk factors and FLI Scenarios are particularly useful to understand the effects generated by changing (or new) environmental and market conditions |
| Develop policy evaluation and formulate recommendations | The IR-based DRBV simulation model is eventually used to gain policy insight | This last step entails assessing the results of the simulation model to gain policy insights, subsequently redesigning rules and strategies |
| Steps of the process | Synthetic explanation | Additional information |
|---|---|---|
| Layout the resources/capitals | Identify the key resources/capitals included in the <IR> reports and visualize them as stocks | Stocks are represented as boxes (suggesting each box/stock is holding its content) |
| Identify the processes (flows) responsible for building or eroding resources | The information collected has to be codified to recognize and represent the processes causing the resource growth or decrease, i.e. inflows and outflows | Flows are either inflows or outflows. Inflows are represented by an arrow pointing into a stock (adding to it). Outflows are represented by arrows pointing out of the stock (subtracting from it) |
| Identify capabilities | Capabilities originate from either a single resource or from a set of related resources Capabilities can build other resources, generate value by attracting customers or generate activities influencing external stakeholders | The capabilities discovered in the integrated reports may be presented in the resource maps using stock or auxiliary variables. In this study, we used auxiliary variables |
| Portray relationships (direct and indirect) and polarities (positive and negative) | This entails representing the causal links in the organization, specifying their direction and assessing their polarity | Causal links are depicted through the use of connectors (lines), which contain the direction of the linkage and the type of linkage, that indicates a positive impact – an increase in A increases B or a negative one, – an increase in A decreases B |
| Identify feedback loops (reinforcing and balancing) | The resource mapping is finished with the identification of the feedback loops between resources and flows. A feedback process consists of a circular relationship between a set of concepts (or parts of a system) | A feedback loop is formed when two or more variables are circularly connected, e.g. A affects B, then B affects C and ultimately C affects A determining a circular relationship between A-B-C |
| Formulate the simulation model | After building the map, parameters have to be estimated, causal relationships among variables are to be specified and initial conditions need to be set | Initial values and parameters, as well as quantitative relationships, are derived from the organization’s integrated reports. They may be immediately available (e.g. the initial value of a stock could be provided by the organization’s report) or derived thanks to the information retrieved from those reports |
| Simulate and calibrate the simulation model | The model is simulated to generate dynamics. At the same time, the model is simulated under specific conditions to gain confidence in its reliability | Simulation is performed using specific computer software. The simulation is carried out in reference to a specific time horizon (how far in the future should the model consider?) |
| Perform sensitivity analysis and scenario testing | The model is tested performing sensitivity analysis. Specific scenarios can be specified and explored | Sensitivity analysis entails testing the dynamics generated by the model given the uncertainty in parameters. In reference to integrated reports, this is relevant for testing the effects of risk factors and FLI |
| Develop policy evaluation and formulate recommendations | The IR-based DRBV simulation model is eventually used to gain policy insight | This last step entails assessing the results of the simulation model to gain policy insights, subsequently redesigning rules and strategies |