CORPORATE REPORTING
Q. Discuss critically the issues involved in Risk Reporting?
Risk reporting is the process of distributing information in regards to risk to the internal and external stakeholders, focusing on the disclosure of risk information. Corporate risk reporting plays an important role for the stakeholders in assessing the risk profile of the company. Helping them to better understand and align the risk profile with their holdings (Berg, 2010). Rules on risk disclosure in the company reports are designed in order to improve transparency and reduce market disorientation. Thereby improving the market efficiency of the capital markets. With the financial crises main focus of attention is directed at the importance and issue relating to risk reporting (Abraham and Marson 2012)
Risk is driven by internal and external factors and is viewed by ASB and ICAEW as an uncertainty on the amounts of benefits that includes both gains and exposures to loss. According to Beretta and Bozzalon (2004), risk disclosures are the consequences to the explanation that communication of factors has a potential to affect expected results (Abraham and Marson 2012) So in order to understand what disclosure information is required for risk reporting, it is important to understand what kind of risk is affecting the organisation. The main goal of having financial instruments is to make profits and prevent losses; there is always uncertainty on whether this goal is achieved (Sutton, 2004). This uncertainty can be divided to three main categories: credit risk, liquidity risk and market risk that looks into currency risks, interest rate risks and other price risks. The main reason for risk reporting is due to agency theory, information asymmetry...
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...t: Procedures, Methods and Experiences”, vol. 1, 2(17)
• Accounting Standards Board, (2003), Operating Financial Review (revised), Kingston upon Thames: ASB Publications.
• Norman Marks on Governance, Risk Management and Audit, Risk reporting, Accessed from : http://normanmarks.wordpress.com/?s=risk+reporting
• Norman marks on governance, Risk management and Audit, KPMG reports major problems on how risk management is understood, accessed from: http://normanmarks.wordpress.com/2011/05/27/kpmg-reports-major-problems-in-how-risk-management-is-understood-and-practiced/
• Philippe, J. (2002), “How information are value-at-risk disclosure?”, the Accounting review, vol. 77, pp. 11-31
• Reporting Business Risks: Meeting expectations, (2011), Financial reporting faculty, ICAEW.
• Sutton, T. (2004), “Corporate Financial Accounting and Reporting”, Prentice Hall: England
Department of health (2007) say that there are 3 types of risk assessment:the unstructured clinical approach, the actuarial approach and the structured clinical approach (DOH 2007). Many Mental health Professionals over the past years have used the unstructured clinical approach to risk assess. This is based on your experience and judgement to assess the risk. However this way has been criticized for not being structured and this then leads to inconsistency and to be unreliable (Turner and Tummy 2008). This approach would not be useful for the case with Julie as she is not known to services and every person is different as you may not have seen her symptoms before if you base the risk assessment on experience.
The government designates certain professionals within society as mandated reporters. This means that if a person, who holds a position identified by the government, suspects that a child is being abused or neglected, they must go through the process of reporting the abuse/neglect to their local Department of Health and Human services office (“Michigan Child Abuse Laws”, 2017). This policy is relevant not only to those working within the social work field, but also to those who work closely with children, such as teachers and day care workers. Michigan’s Child Protection Law identifies citizens in the following positions as mandated reporters:
El-Gazzar, S. M., Fornaro, J. M., & Jacob, R. A. (2008). An examination of the determinants and contents of corporate voluntary disclosure of management’s responsibility for financial reporting. A Journal of Accounting, Auditing & Finance, 23(1), 95-114. Retrieved from http://library.gcu.edu/
Obviously, financial establishments can endure breathtaking misfortunes notwithstanding when their risk management is top notch. They are, all things considered, in the matter of going out on a limb. At the point when risk management fails, be that as it may, it is in one of the many fundamental ways, almost every one of them exemplified in the present emergency. In some cases, the issue lies with the information or measures that risk directors depend on. At times it identifies with how they recognize and impart the risks an organization is presented to. Financial risk management is difficult to get right in the best of times.
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
No firm can be a success without some form of risk management. Risk are the uncertainty in investments requiring an assessment. Risk assessment is a structured and systematic procedure, which is dependent upon the correct identification of hazards and an appropriate assessment of risks arising from them, with a view to making inter-risk comparisons for purposes of their control and avoidance (Nikolić and Ružić-Dimitrijevi, 2009). ERM is a practice that firms implement to manage risks and provide opportunities. ERM is a framework of identifying, evaluating, responding, and monitoring risks that hinder a firm’s objectives. The following paper is a comparison and evaluation to recommended practices for risk manage using article “Risk Leverage
Financial risks include general ledger accounting, accounts receivable risk, accounts payable accounting risk, the risk of payroll, fixed assets accounting risk, cash management risk and cost accounting risks.
The risk management process needs to be flexible. Given that, we operate in the challenging environment, the companies require the meaning for managing risk as well as continuous improvement in identifying new risks that will evolve and make allowances for those risks that are no longer existing.
Solomon, J (2013). Corporate Governance and Accountability. 4th ed. Sussex: John Wiley & Sons Ltd. p.7, p9, p10, p15, p58, p60, p253.
Woolworths LTD has commissioned EA partners for auditing their supermarkets chains. Therefore it is important to prepare a risk analysis report to be added in the audit plan in order to identify and analyze possible events that could have an impact in achieving the company’s objectives. The element of risk is embedded in every business, the risk of not achieving the company objective. Risk assessment is important to the effective operations of the company. Risk Assessment is increasingly in demand today because of the increase demand in transparency that revolves around risks. The business is under continuous scrutiny of whether the correct mechanism was in place at the time of the crisis or whether the correct information was delivered and so on. This is why risk assessment has become a part of the business auditing today.
Identify the potential risks which affect the company and manage these risks within its risk appetite;
Over the past decade, risk and uncertainty have increasingly become major issues which impact business activities. Many organizations are raising awareness to minimize the adverse consequences by implementing the process of Risk Management Framework which plays a significant role in mitigating almost all categories of risks. According to Ward (2005), the objective of risk management is to enhance a company’s performance. In particular, the importance of the framework is to assist top management in developing a sensible risk management strategy and program.
As has been discussed before, risk identification plays an important part in the risk such as unique, subjective, complex and uncertainly. There are no two identical leaves in the world; similar, there are no two exactly the same risk either. Hence the best risk manger could not identify risk completely. Besides, risk identification assessment is done by risk analysts. As the different level of risk management knowledge, practical experience and other aspects between individuals, the result of risk identification may be difference. Furthermore, the process of identifying risk is still risky. Once risks have been identified, corporations have to take actions on limiting risky actions to reduce the frequency and severity of risky. They have to think about any lost profit from limiting distribution of risky action. So reducing risk identification risk is one of assessments in the risk
Risk Management is the process of identifying, analyzing and responding to risk factors throughout the life of a project and in the best interests of its objectives (Stanleigh, 2015). This paper is focused on the trends and methods of managing risks in a project. It also analyzes different ways of mitigating risks in a project and why risk management is important in an information technology (IT) environment.
In this competitive world, companies have to deal with various types of risk all the time with there projects. Generally, it affects the budget and schedule of the project. So it is important to keep in mind the risk management strategies while creating an initial project plan.