Risk and Governance Reporting: Challenges for Effective Disclosures

Interview with Wim A. Van der Stede, CIMA Professor of Accounting and Financial Management, London School of Economics and Political Science

CFOaktuell:What are the challenges for effective disclosures related to risk and governance reporting today?

Van der Stede: Every major corporate crisis tends to be followed by a wave of regulatory reform. These reforms often come as calls for enhanced disclosures, based on the premise that transparency fosters market discipline. Following the most recent financial and economic crisis, calls for enhanced disclosures have honed in on risk management and corporate governance. Such risk and governance reporting will have important implications even for roles that were traditionally deemed mostly internal decision-making oriented. As such, the enhanced disclosures are likely to turn aspects of management accounting and control ‘inside out’ to a greater extent that has been the case before. The design of incentive systems, the robustness of risk approaches, just to name two, will receive more external scrutiny, and thus require more than some cosmetic response to satisfy ostensibly vigilant share- and stakeholders, or the outfits acting on their behalf.

Stating the obvious, but very hard to accomplish, disclosures should be useful for all involved; that is, for the firms (which I broadly ...