Principal risks and their management
Companies are expected to provide a fair,
coherent and comprehensive description of its principal risks together with an
explanation of how they are managed and mitigated. A description is also expected
as regards their likelihood, circumstances and possible effects
Legal base
Article 1 of the DIRECTIVE sets out that the non-financial statement contains information including: d. "the principal risks related to those matters linked to the undertaking's operations including, where relevant and proportionate, its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the undertaking manages those risks;"
A company may consider including specific disclosures on:
- Malfunctioning products with possible effects on consumers' safety;
- Policies implemented to address the issue;
- Remediation measures addressed to consumers already affected by those products.
Legal base
Article 1 of the DIRECTIVE sets out that the non-financial statement contains information including: d. "the principal risks related to those matters linked to the undertaking's operations including, where relevant and proportionate, its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the undertaking manages those risks;"
A company may consider including specific disclosures on:- Malfunctioning products with possible effects on consumers' safety;
- Policies implemented to address the issue;
- Remediation
measures addressed to consumers already affected by those products.
Companies should disclose information on their principal risks and on how they are managed
Those risks may relate to their operations, their products or services, and/or their business relationships. This includes short, medium and long term risks. Companies are expected to explain how principal risks may have an effect on their business model, operations, financial performance and the impact of their activities.
A company is expected to disclose the full range of principal risks, regardless of whether they stem from a company's own decisions or actions, or from external factors over which it has no direct control, and to explain the processes used to identify and assess such risks.
Companies are expected to identify and explain principal risks in a way as specific as possible, including appropriate assessments of likelihood, circumstances and possible effects including where appropriate the use of scenario analyses.
Disclosures, where relevant and proportionate, should include material information on supply and subcontracting chains.
Disclosures should also include how a company manages and mitigates principal risks.
A company is expected to highlight and explain when material changes to its principal risks, or to the way it manages them, have taken place in the reporting year.