Investors want better risk reporting
Posted in Blog articles by Matt Hodges-Long on 11/12/2017
Since the financial crisis of 2008, there has been increased focus on risk management and risk reporting. The requirement for companies to report on long-term risk through the annual viability statement has gone some way to addressing concerns. However, according to a recent Financial Reporting Council (FRC) report (Risk and viability reporting), investors are looking for more.
Risk reporting focal points
The full report provides more detail but, in short, investors are looking for improvements in three key areas:
- Reporting on principal risks that are company specific, with clear categorisation and prioritisation. Investors want to understand where the directors of a business are focused.
- Greater context for risks, including links to further information such as the annual report. Investors want to understand the likelihood and possible impact of risks, along with the reason for any movement in ratings.
- A longer term view of risk through the viability statement, including assessment of issues such as cyber crime, Brexit and climate change.
One investor is quoted as saying, “The more honest and open a company is on risk, the more confident we’re going to be that they’re looking at the issues in the right way and have an intelligence around the table considering it.
If it is all good news, you’d worry that they are burying things. Honesty has to be the best starting point.”
An earlier report by the FRC (Digital Future – a framework for future digital reporting) made some interesting comments. It stated that ‘technology has the power to significantly change the way companies communicate with investors and stakeholders’, but ‘is not currently meeting its full potential.’ Well FRC, when it comes to risk reporting, TrackMyRisks can help!