Risk management
The UK Corporate Governance Code makes the board responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. Boards are also required to maintain sound risk management and internal control systems and have to review their effectiveness at least annually and report on that review in their annual report.
The Sharman Inquiry’s 2012 Final Report into going concern and liquidity risks identified lessons for companies and auditors in this area. As a result, the 2018 UK Corporate Governance Code requires directors to state whether, taking account of the company’s current position and principal risks, they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due, drawing attention to any qualifications or assumptions as necessary. Directors are also required in their annual and half-yearly financial statements to state whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and identify any material uncertainties to the company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements. The FRC’s 2014 Guidance for directors on risk management, internal control and related financial and business reporting sets out best practice in relation to internal control for UK listed companies and assists them in applying these requirements of the 2018 UK Corporate Governance Code. Separate guidance for bank directors providing background information explaining the context of solvency and liquidity risk assessments for banks has also been produced by the FRC.
Financial Reporting Review Panel/Financial Reporting Council
- FRC: Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks) – Consultation – August 2024
- FRC: FRC Lab Report – Digital Security Risk Disclosure – August 2022
- FRC: Supply chain disclosure – Lab Insight - April 2022
- FRC: Thematic Review – Alternative Performance Measures (APMs) - October 2021
- FRC: Thematic Review – Viability and Going Concern – September 2021
- FRC: FRC Lab Report – Reporting on risks, uncertainties, opportunities and scenarios – September 2021
- Financial Reporting Lab Artificial Intelligence and corporate reporting - How does it measure up? – January 2019
- Financial Reporting Lab Business model reporting; Risk and viability reporting - where are we now? - October 2018
- Financial Reporting Lab Reporting of performance metrics - June 2018
- Financial Reporting Lab Project report: Risk and viability reporting - November 2017
- FRC Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks Guidance for directors of companies that do not apply The UK Corporate Governance Code – April 2016
- FRC Guidance on risk management, internal control and related financial and business reporting – September 2014
- FRC Guidance for directors of banks on solvency and liquidity risk management and the going concern basis of accounting – September 2014
- FRC Feedback statement - Revisions to the UK Corporate Governance Code - September 2014
- FRC Consultation on proposed revisions to the UK Corporate Governance Code – April 2014
- FRC’s feedback statement “Implementing the recommendations of the Sharman Panel - November 2013
Sharman Inquiry
- Final report and recommendation of the Sharman Panel of Inquiry “Going concern and liquidity risks - Lessons for companies and auditors” - June 2012
- Preliminary report and recommendations of the Sharman Panel of Inquiry “Going concern and liquidity risks - Lessons for companies and auditors” - November 2011
