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FRCLab Risk Report One Pager 2021

Financial Reporting LAB

Reporting on risks, uncertainties and opportunities

What information do investors want to understand?

Governance and processes

What relevant governance structures and processes are in place
How effectively these have functioned
How quickly a company can modify these to react to external factors

Context

The company's view of the macroeconomic, microeconomic and geopolitical environment and the industry-wide risks and uncertainties faced
How the company monitors external factors and how they are incorporated into scenario analysis and planning for the future

Importance

The company's assessment of the risks (and opportunities) and uncertainties faced through clear reporting
Whether the company's assessment of the risk or opportunity's significance or potential impact has changed and if it has been considered in the viability assessment

Form

The nature of the risks (and uncertainties) faced by a company (i.e. internal, external, strategic, operational)
How a company's classification of risks tie to other areas of the 'front-half' of the annual report

The preceding sections (Context, Importance, Form) describe the Nature of risks, uncertainties, and opportunities.

Linkage

Impacts in the context of a company's business model, strategy and purpose and whether and how key performance indicators (KPIs) and other metrics are tailored accordingly
The company's assessment relating to its viability

The following sections (Linkage, Response) describe the company's Approach to managing and responding to risks.

Response

How the company has factored in the external and internal environment and amended its risk appetite accordingly
Mitigating actions and strategic activities so as to assess how the company may respond to risks and uncertainties in the future
Whether, how, and why risks have evolved over time

Scenarios and stress testing

The different scenarios and situations considered, and stress tests performed, and how these tie into other areas of risk-related reporting and the company's view of the future.

Read more about investors' views in the full project report, available from the FRC Lab's publications page here.