Risk managers central to non-financial reporting, says Ferma

Ferma made the call in its response to a consultation on non-financial reporting guidelines being drawn up by the European Commission. The guidelines supplement an EU directive on non-financial reporting, which is due to be transposed into national law by December 2016 and go into effect in 2017. Ferma said that the directive will affect many of its 4,700 risk manager members. “It is difficult for specialists in each department to connect different aspects of risk across functions, leaving grey areas where reporting may be incomplete,” said Ferma president Jo Willaert. “We, therefore, urge the Commission to recognise in the guidelines the fundamental role of risk managers and the value of ERM methodology in the reporting of non-financial or corporate social responsibility elements, which require a deep understanding of the business model of the organisation," he said. The EU directive on disclosure of non-financial information is intended to improve corporate disclosure around social and environmental policies and risks.hideThe directive applies to “public-interest entities” with more than 500 employees, such as listed companies, banks and insurance undertakings, as designated by EU member states. It will introduce minimum legal requirements for reporting information on environmental, social and employee, human rights, anticorruption and bribery issues, as well as board-level diversity. According to the directive, affected companies will need to disclose “matters” likely to bring about the “materialisation of principal risks of severe impacts”. The severity of such impacts should be judged by their scale and gravity, it said. Last week the EC’s consultation on the non-binding guidelines on non-financial reporting closed. Announcing the consultation in January, the Commission said: “These guidelines can assist companies in the reporting process, providing them with a methodology that will facilitate the disclosure of relevant, useful and comparable non-financial information.” In its response, Ferma urged the Commission to recognise the fundamental role of risk managers and the value of ERM methodology in the reporting of non-financial elements. According to Ferma, organisations will need help in reporting risks linked to non-financial information, a role best suited to the risk manager. “Risk reporting is a key element of the risk manager's role. Because of the cross-functional nature of the risk manager's mission, he or she is the best placed person in the organisation to provide assurance that the various types of risks, including those related to corporate social responsibility, have been identified and managed,” said Mr Willaert. Having risk managers in charge of non-financial risk reporting makes it possible to validate the strength of an organisation’s response to related threats, said Ferma. “Reporting on these risks cannot be limited to the financial impact,” it said. The federation suggests that the directive’s requirements to disclose “principal risks” are best met through the creation of a risk map, coordinated by the risk manager. Ferma recommended that the Commission’s guidelines refer to risk management frameworks developed by national risk management associations in Europe, including those from AMRAE and Airmic. It also proposed that the process of risk identification, analysis and control, as well as consultation and communication, should be conducted in accordance with internationally recognised standards, such as the ISO 31000 or the COSO ERM Framework. The directive requires the non-financial statement to indicate how an organisation is managing connected risks. Ferma now wants risk management and risk managers to be a part of the guidelines that accompany the directive. "The guidelines should acknowledge the fact that there is already a profession that is particularly well equipped to perform an analysis of the risks linked to various areas like corporate social responsibility (CSO) matters. The risk manager, when deploying an enterprise risk management methodology for the organisation, is already doing what the directive would like to see about CSR related risks," explained Typhaine Beauperin, CEO of Ferma. "If the guidelines are to be practical and helpful for organisations, they need to indicate where to look and how to produce a correct non-financial statement. The work of our 23 associations is very relevant in this field and is very well connected with the business world," she said.

Risk managers central to non-financial reporting, says Ferma

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