RISK MANAGEMENT DISCLOSURE PRACTICES IN ACCORDANCE WITH KING II AND III: THE CASE OF SELECTED JSE LISTED COMPANIES

Year 2016, Volume: 8 Issue: 2, 159 - 174, 01.12.2016

Heleen Janse van Vuuren

Abstract

The ongoing collapse of large international companies could have been partially
prevented if good corporate governance principles and, more specifically,
effective risk management practices had been implemented and adhered to.
Research reveals that the majority of financial institutions in Europe do not
manage risk effectively and the global financial crisis proved that excessive risktaking
can result in corporate failure. Similar trends are prevalent in South Africa.
The aim of this research was to investigate the compliance of Johannesburg Stock
Exchange (JSE) listed companies with recommended risk management practices
and disclosure requirements after the introduction of King II and III. To achieve
this the annual reports of selected JSE listed companies were evaluated to
establish the quality of their reporting on risk management practices as
recommended in King II and III. The results of the study indicated that the
minority of the companies investigated, fully complied with all the recommended
requirements. This study contributed to literature by showing that although
disclosure on risk management practices improved significantly since King II
became operational in 2002, companies still did not adhere to all the requirements
as stipulated even after King III became effective in 2010. The finding, therefore,
supports the notion that full compliance is an evolutionary process, rather than a
revolutionary process and will therefore only be achieved over time.

Keywords

Corporate governance, risk management disclosure, King II, King III, JSE listed companies