The Financial Reporting Council (FRC) issued Thursday a report for companies that describes the information that investors want on risk, uncertainties, opportunities, and the use of scenarios.
The report by the FRC’s Financial Reporting Lab — Reporting on Risks, Uncertainties, Opportunities and Scenarios: Closing the Gap — said there remains a gap between the information users want and the disclosures that organisations provide. This disclosure gap, the FRC said, “looks set to widen with climate-related uncertainty and an increased demand for enhanced environmental, social, and governance (ESG) reporting”.
“Investors look for principal risk and uncertainty reporting that is specific to the company and that avoids boilerplate disclosure and jargon,” the Lab’s report said. It added: “Investors seek to understand both the principal risks and uncertainties identified by the company and how these are being managed.”
In addition, the report said, investors gain confidence in management when such reporting is linked to the business model, shows any changes in risk year-on-year, and gives some indication of potential impact.
The FRC also produced a report summary.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.