2. Communicating risk information: Risk disclosure research Professor Philip Linsley The University of York

3. Session outline How we can research risk disclosure Difficulties in researching risk disclosure

4. REMEMBER It is argued that: Risk disclosure by companies is poor BUT How do we know this?

5. RISK DISCLOSURE STUDIES HAVE OFTEN EXAMINED IF RISK INFORMATION PROVIDED IS: Future or past Quantified or not quantified Good news or bad news

6. HOW? Methodology - content analysis

7. Financial risk Operations risk HR risk IT risk Integrity risk Strategic risk 123456 Monetary/good news/futureA Monetary/bad news/futureB Monetary/neutral/futureC Non-monetary/good news/futureD Non-monetary/bad news/futureE Nonmonetary/neutral/futureF Monetary/good news/pastG Monetary/bad news/pastH Monetary/neutral/pastI Non-monetary/good news/pastJ Non-monetary/bad news/pastK Non-monetary/neutral/pastL CODING GRID

8. How would you code this risk sentence from the Marks & Spencer plc financial report? In recent times, as customers are spending less when they shop and people are moving house less often, customers have increasingly turned to Marks & Spencer for homeware purchases.

9. How would you code this risk sentence from the Marks & Spencer plc financial report? Our competitive prices reassure our customers that they can economise at Marks & Spencer without compromising on quality.

10. Linsley and Shrives (2006) Examined sample of UK annual reports 6,168 risk sentences Most were not quantified More good news than bad news More future than past

11. Beretta and Bozzolan (2004) Examined sample of Italian annual reports QUANTITY OF RISK SENTENCES DOES NOT TELL US ABOUT QUALITY OF RISK DISCLOURES

12. Can we ever measure quality of risk disclosures? Different stakeholders = different needs Different readers = different risk attitudes Different industries = different risks and different approaches to risk

13. How would you code this risk sentence from the Marks & Spencer plc financial report? Our business philosophy is that our products should always be made with the very best ingredients.

14. How would you define risk?

15. Linsley and Shrives (2006) definition of risk Opportunity, hazard, harm, threat or exposure that has impacted or may impact on the company

16. Other problems in risk disclosure studies Cross-country studies Financial versus non-financial firms Longitudinal studies over time

17. MOST IMPORTANTLY What is often forgotten is the very nature of risk