ONLY 18% of the top 100 companies listed on the JSE were able to report who their appointed chief risk officers were, and just a quarter disclosed the companies’ risk appetites, a PwC corporate survey showed yesterday.
A chief risk officer is important, as that person has the task of analysing and identifying matters that are a threat to a company.
The PwC survey, which assessed the application of King 3 principles in the integrated reports of the top 100 JSE-listed companies, showed that 90% of the companies surveyed disclosed risks and how these were mitigated.
But less than two-thirds reported on their assessment of the effectiveness of risk management. The other area that needed to be improved on was information technology (IT) governance, a new focus area in King 3.
The King 3 codes promote good corporate governance and JSE-listed entities have to comply with the principles. These principles include ethical leadership and corporate citizenship, risk governance, stakeholder relationships, and financial controls.
Asked which companies had done well in applying the King 3 codes in their integrated reports, Prof Mervyn King, the architect of the King 3 governance codes, said: "I think Vodacom has done a great job.... It (the Vodacom report) was in clear and understandable language so that any stakeholder could make an informed assessment of how the company was going to sustain value in the long term."
Most companies surveyed had done well in reporting about the governance structures in place to oversee ethics, the classification of board members, and directors’ remuneration.
But improvement was needed in reporting on stakeholder relations. "One of the areas that companies need to improve on is corporate stakeholder relations," Prof King said." Marikana is a great example."
He was referring to the clashes at Lonmin’s Marikana mine, which led to deaths of 44 people and the halting of mining operations.
Another area of concern which the survey highlighted was IT governance. Zubair Wadee, a director at PwC, said companies were comfortable with disclosing matters related to audit committees but less comfortable in reporting on IT governance, a new area in King 3.
"IT governance is not a focus for the board. Given its pervasive nature, we think it’s an important area. Everything that companies do is linked to the IT system."
The survey said there was still room for improvement in the reporting on the actual performances of the boards of directors and their committees.