The United Kingdom introduced for debate corporate reporting reforms that would require the country’s largest companies to set out their risk management and resilience strategies as part of required annual reporting.
The draft regulations put forward Wednesday would apply to U.K. companies with at least 750 employees and annual turnover of 750 million pounds (U.S. $964 million) or more. The rules, subject to parliamentary approval, would come into force Jan. 1, 2025.
The U.K. government said the measures “respond to lessons learned from major and sudden corporate collapses in recent years, including that of Carillion.” In January 2018, Carillion failed with £7 billion (U.S. $9 billion) in debts, becoming one of Britain’s biggest corporate governance failures.
“These enhanced reporting requirements will strengthen transparency and accountability in business by providing key information to investors and other stakeholders,” said Mark Babington, executive director of regulatory standards at the Financial Reporting Council (FRC), in a press release.
Regarding the annual resilience statement, companies would be required to explain their management of risks over the short, medium, and long term by:
- Summarizing their strategic approach to managing risk and building or maintaining resilience;
- Describing their risks that could threaten resilience over the short or medium term;
- Providing director-level assessment of the company’s prospects over the medium term; and
- Explaining long-term trends or factors that could threaten the company’s business model or operations.
Other requirements under the reforms would include the provision of an annual statement describing the main measures in place and any new steps taken to prevent and detect material fraud.
The FRC said it is developing guidance to help companies in complying with the new reporting requirements.
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