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Few changes to risk disclosure in wake of financial crisis, study finds

The Bay Street sign is shown in the heart of the financial district as people walk by in Toronto, May 22, 2008.


The global financial meltdown didn't change much in the way Canadian non-financial companies treated their disclosure of risk, says a new study.

A content analysis of the 2007 and 2008 annual reports of Canadian non-financial corporations listed on the S&P TSX Composite Index indicates that the level of risk disclosure increased only slightly during that turbulent period, according to the analysis by the CGA-Canada Accounting and Governance Research Centre.

"A change in the financial headwinds has to affect risk disclosures," Daniel Zéghal, director of the CGA-AGRC at the University of Ottawa's Telfer School of Management, said in a news release Wednesday.

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"If there is no impact, it's very likely that the analysis of risks is not thorough enough, or risk communicating strategies used by companies are ineffective."

Closer attention should be paid to the quality of risk disclosures, he adds.

The study identified 14 types of risk. Their disclosure was studied at three levels: level of exposure to risk, risk consequences and risk management.

Despite the economic and financial turmoil around the world, the total number of risk disclosures increased by only 3.6 per cent from 2007 to 2008, says the study, which was recently published in the International Journal of Risk Assessment and Management.

Changes in the disclosed levels of risk were even less notable, the analysis found.

Even in the two categories where there was a noticeable change in the magnitude of risk consequences disclosed by firms – economic and credit risk – the adjustments were "marginal," says the report.

CGA-Canada is the Certified Accountants Association of Canada.

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