ASIC hones in on material business risk disclosure failings

The Australian Securities & Investments Commission (ASIC) is calling on company directors to adequately disclose material business risks in annual reports.

Four further listed entities have disclosed material business risks in response to ASIC’s ongoing financial reporting surveillance program and inquiries into 2022 annual reports. This is in addition to five firms that have already had to disclose further risks.

The latest four listed entities to make further disclosures were:

MedAdvisor, which made disclosures in its AGM presentation released on November 30, 2022;
Alcidion Group, which made disclosures in its 2022 AGM presentation released on November 30, 2022;
WOTSO Property (WOTSO), which made disclosures in its Business Update December 2022 released on December 08, 2022; and
Webcentral, which made disclosures in its Corporate Governance Updates released on January 18, 2023.

The disclosures were in response to ASIC’s concerns that the risks had not been sufficiently outlined in the operating and financial review (OFR) of the directors’ reports.

Importance of high-quality operating and financial review

ASIC Commissioner Danielle Press emphasised the significance of a high-quality operating and financial review, including disclosing material risks that may affect the achievement of a listed entity’s strategies and prospects.

“Directors must provide investors with useful and meaningful information about the impact on the current and future performance of changing and uncertain market conditions,” Press said in an ASIC press release.

ASIC reminded investors and other interested parties to review the additional materials disclosed by entities in their OFRs. It also advised preparers of other entities’ OFRs to review the additional disclosures made by the entities as the information may assist them in improving their disclosure.

ASIC continues to review several annual reports on a risk-based approach to ensure entities correctly disclose their material business risks as part of the directors’ report, it said.