The UK Guidelines for Company Risk Reporting−An Evaluation

The study attempts to analyze the ins and outs of the risk reporting guidelines in UK. The guidelines advocate for the voluntary adoption of risk reporting through annual reports of the company. This voluntary reporting of risk will ensure the transparency and efficiency of the company management that eventually help the company to obtain funds from the capital market with the possible lowest cost. They also advise to disclose material / relevant risk information in a proper way so that the users can take their economic decision based on those disclosed information. On the other hand, company need not to disclose the commercially sensitive risk information, as it can give advantage to the rival companies. This risk reporting guidelines are also having some weaknesses. Such as, they mention about inverse relationship between level of disclosed risk information and cost of capital without any empirical evidence. Guidelines give a vague direction about the commercial sensitive risk information because companies can hide some important risk information on the ground of commercial sensitivity if needed. Other lacking include unavailability of suitable / reliable risk identification and measurement tools, expectation about common knowledge and so on.

論説 (Article)