IRM produces 10-step template for comprehensive viability statements

The Institute of Risk Management has published a ten step template as part of its analysis of a sample of Longer-Term Viability Statements, which includes recommendations on how listed companies should structure their longer-term viability statements.

The requirement to confirm that the company is a ‘going concern’ has been in place for some time, however, listed companies are now (since September 2014) also required to confirm that they have assessed their prospects further into the future.

This requirement to report on future prospects is embedded in the obligation to produce a ‘longer-term viability statement’. Usually, this statement covers at least the next three years and sometimes longer.

Technical director at the IRM, Paul Hopkin says such a statement assures shareholders and other stakeholders that the company believes it will be viable for at least the period it has selected. "Shareholders, suppliers, contractors, customers and others can then decide how much exposure they are willing to accept (or risk they are willing to take) regarding the future success of that company," he said.

"Having sampled a few of the first statements included in recently published annual report and accounts, the IRM has developed a ten step template to assist companies in improving their reporting”.

Listed companies have many stakeholders and it is the duty of the board of directors to protect stakeholder interests. In particular, shareholders are entitled to receive information about the current financial status and anticipated future prospects of the company.

Director of corporate governance at the Financial Reporting Council, David Styles, welcomed the IRM's analysis.

“The IRM have produced a useful analysis of the first full year of longer term viability reporting. It is of course important that companies consider their particular circumstances, and the IRM’s template is a valuable tool for companies to use when assessing risk and reporting on viability,” he commented.

The report is available at https://www.theirm.org/media/2516203/IRM-Long-Term-Viability-Report-25-10-16_Final.pdf

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