The Federation of European Risk Management Associations (FERMA) has told the European Commission that enterprise risk management (ERM) is the best method for larger companies to report non-financial or corporate social responsibility risks.
The comment is a part of FERMA’s response to the commission consultation on non-financial reporting guidelines.
Under the Non-Financial Reporting Directive, which goes into effect in 2017, large public interest entities, such as listed companies, should disclose in their management report relevant and useful information on their policies, main risks and outcomes.
A large number of the 4,700 European risk and insurance managers, represented by FERMA, work for companies that are within the scope of the directive.
FERMA president Jo Willaert said: “It is difficult for specialists in each department to connect different aspects of risk across functions, leaving grey areas where reporting may be incomplete.”
“We, therefore, urge the commission to recognise in the guidelines the fundamental role of risk managers and the value of ERM methodology in the reporting of non-financial or corporate social responsibility elements, which require a deep understanding of the business model of the organisation.”
“Risk reporting is a key element of the risk manager’s role. Because of the cross-functional nature of the risk manager’s mission, he or she is the best placed person in the organisation to provide assurance that the various types of risks, including those related to corporate social responsibility, have been identified and managed.”
In addition, FERMA has also told the commission that the value of reporting risks connected with non-financial elements of business conduct goes far beyond concern for reputation management.
In the submission, FERMA said: “Being in control of these risks opens the way for productivity and efficiency gains over the long term. The creation of a complete, company-wide risk management policy, including non-financial aspects, that leads to thorough risk knowledge should be seen as a global decision-making tool for the board.”
