FTSE 100 firms are failing to furnish shareholders with sufficient information on the risks facing their businesses, according to a report released today.
The Chartered Institute of Internal Auditors (CIIA) concluded just 32 per cent of the UK’s blue chip companies provided “any tangible metric on risks, or mitigation, within the strategic report section of their annual reports”.
UK legislation mandates all FTSE 100 companies must include a “strategic report” within their annual financial statements. This should contain a description of key financial and non-financial risks facing the firm.
The CIIA said most large cap businesses provide an outline of the risks involved. But less than a third gave any “measurable indicators” to shareholders so they could gain a full understanding of how the risks impact the business.
CIIA chief executive Ian Peters said: “A clear picture on risk is central to a full understanding of a company’s position, the quality of its earnings and potential long-term outlook. It is therefore imperative that the company has rigorous measures to assess risk and that these are reported.”
The strategic report should allow for full review of risk and mitigation strategies. Simply outlining or describing risks faced is not enough – but this is what the majority of companies currently limit themselves to.
“Full transparency means placing a tangible measure or value on the risk and providing meaningful detail on what it means for the business.”