New plans push risk assessment to the front of annual reports

Business leaders and lobby groups agree with revised layout, so long as regulation is minimal
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Listed companies will have to post detailed assessments of potential risks to their businesses at the start of their annual reports, under plans being developed by the Government.

Business minister Ed Davey met with major corporates, such as Tesco and United Utilities, and lobby groups such as the CBI, Friends of the Earth and the World Wildlife Federation on 15 November to discuss the plans. Accountancy firms, regulators, investment groups and the Trades Union Congress also attended.

A source said that the 20 people attending were unanimous that company reports should start by detailing potential risks rather than with the chairman's annual review.

"There was agreement that the front bit of an annual report should allow a company to tell its own story in its own way," said a source. "It has to allow a more forward-looking consideration of the risks that a business faces."

There was some concern that the coalition might try to legislate to enforce changes. It is understood that most attendees felt that companies needed to be encouraged rather than regulated. For example, government-supported awards, overseen by the Financial Reporting Review Panel, could be used as "a stick", said the source. "People didn't think that this should be too prescriptive. They felt that, by regulating too much, people would not tell their story properly." In other words, companies would use a standard template and not address the individual problems they faced.

The meeting took place at the end of The Future of Narrative Reporting consultation. The Government is looking to use the review to introduce an agreement for companies to have more stringent reporting on their environmental and social impact.

Mr Davey has promised that the David Cameron premiership will be "the greenest government ever", but the CBI has argued that further environmental reporting standards are neither required nor justified.

The coalition is likely to combine the results of several consultations in the spring, so any new guidelines will not take effect until late next year, or, more likely, 2012. The spring announcement may also lead to another consultation that will end in the autumn.