An analysis of risk management disclosure in the consumer goods sector

Abstract

South African companies face governance issues which could expose them to reputational damage. This is due to the regular detection of inadequate and ineffective internal controls, as reported by Auditor General, Makwetu in the media release on the plan to assist government departments in improving governance. In dealing with this challenge, South Africa has established principles of corporate governance which are not legislated but mandatory for listed companies on the Johannesburg Securities Exchange (JSE) to improve corporate governance. These principles are contained in a document known as the King Report on good governance. Within these principles of corporate governance, there is a component of risk management which is a measure of effective governance. The study evaluated the risk management disclosure elements regarding King Report. The target group of the study is on the JSE-listed companies in the consumer goods sector. The study results revealed that a majority of companies in the consumer goods partially complied with the principles of the King III report in 2014. There was a drop as well as inconsistency in reporting disclosures after the 2014 financial period by a majority of listed companies in the consumer goods sector. Out of eleven companies, there was an exception of two companies which achieved full compliance disclosure in 2015. Only one company achieved full compliance in 2016. Some companies reported extremely poor compliance results in all financial periods. They need to review and strengthen their respective reporting practices to align with the principles of the King III report. It is noteworthy to mention that two companies in the sample disclosed commitments in their chairmen's statements to comply with the King III and King IV in the 2018 financial period. Lastly, a lack of disclosure of risk management appetite framework and risk-based internal audit were discovered in the study of common issues not disclosed in the integrated reports of ten out of eleven companies.