The UK Financial Reporting Review Panel of the
Financial Reporting Council (FRC) says there should be more clarity
and disclosure of principal risk in directors’ reports.
The FRC panel found that many reports do not state how the company manages its
principal risks or lacks clarity in indentifying those
risks.
Financial Reporting Review
Panel chairman Bill Knight said that any board should be
able to describe in their accounts, simply and clearly, the
principal risks and uncertainties facing the company. “Many boards
do this, but too many do not. Boards who retreat behind boilerplate
give the impression that they have not themselves understood the
risks they face,” Knight said.
The Panel has issued question guidelines based on its findings to
help and encourage company directors to better explain and describe
the principal risk.
Increasing transparency in risk disclosure has
become a very common suggestion from different parties within
financial reporting with auditors, audit committees and company
boards being asked to increase risk disclosure.
