Firms' Risk Disclosure and Reporting: A Comprehensive Framework

increasing complexity and competitive in business has led to emphasize on organizations to provide a higher volume and more qualitative information in order to promote transparency and reduce information asymmetries. These changes have meant that the usefulness of the information provided by the traditional financial statements to their potential users becoming less and less valuable, leading to a higher demand of relevant information and an effort by standard regulators to improve quality and timeliness of the information. Risk information play an important role in the decision-making process and evaluation of the company. In this sense, the information about risks can contribute to manage changes, reduce the cost of capital, report on the future path of the business model, and allow companies to communicate the risk messages that they wholly understand their own risks and have developed practices to manage them. In addition, information about risk helps investors to valuation of the firms and in the assessment of management's work. Accordingly, this study explores establishing a theoretical and comprehensive framework for risk disclosure for the firms listed in Tehran Stock Exchange (TSE), and determines various risks empirically.  

For this purpose, a quantitative survey research methodology was exerted, and the attitude of auditors, academics, and financial analysts, towards the framework for risk disclosure were investigated. Required data were obtained by questioner from sample of 203 preceding individuals in 2016, 2017 and analyzed by using comparative, T test, Wilcoxon, and Friedman tests.  

Results showed that risks information need to be provided to different stakeholders including investors, financial analysts, creditors, government, managers, suppliers resources (non-financial) and customers. The purpose of providing this information should be aimed at assisting decision making and disclosure of risks information must be mandatory. Qualitative characteristics of risk disclosure including relevancy, reliability, comparability, understandability, and materiality and costs- benefits should also be determined. In regard to qualitative or quantitative risk disclosures, a concise and approved guideline is required for quantitative disclosure and different quantification techniques to risk disclosures also required. In addition, for assimilation of risk information, forward-looking and backward- looking and negative and positive information about risk must be considered with focusing on negative and forward-looking information.  

According to research findings, all types of risk, including financial, strategic, operational, integrity and empowerment are required and must be prioritized according to their importance and impact. This research identifies a number of issues for regulator and standard setter to establish requirements for risk disclosure. In addition, the findings can be used by professional associations to provide suggestions for risk disclosure.