With growing pressure for greater transparency, companies need to consider just how much they tell their stakeholders about how they are dealing with risk. Chris Lajtha and Pierre Bordage, from the risk and insurance management team at Schlumberger, the Paris-based global oilfield and information services company, have been working with a team of 25 students from the Masters in Risk Management programme at the Bordeaux Business School in SW France, looking at how companies' 2001 annual reports report on risk. Where companies have not made a formal statement about risk management practices, the students have analysed those statements covering environmental and social initiatives that can be taken as proxies for risk management practice. The results of this survey were announced in yesterday's workshop on risk management communication in annual reports.
Lajtha explains that inevitably this first study is limited."Its value will really come when further studies of a similar nature are carried out in 2002, 2003 and so on. The interest will lie in examining trends in each company's reporting practices as the various corporate governance initiatives gain maturity.
"The other interesting aspect of this study lies with the somewhat controversial methodology used to make the comparison in reporting practices. Not everyone will agree that a 'triple bottom line (economic, social and environmental value)' approach to corporate reporting has as direct relevance to risk management practices as we might suggest in this study.
The purpose of the study was to analyse and compare the way certain large European companies communicated about risk and their risk management activities in their 2001 annual reports, and to propose a basis for the comparative analysis of future risk management reporting trends in Europe. The team selected a panel of 47 companies meeting the two main criteria of having raised capital on European stock exchanges in 2001 and known to have corporate risk management functions in 2001. These were measured for financial, environmental and social performance.