Over the past ten years, it has become increasingly clear that non-financial factors determine the value creation of companies. Success or failure are determined by intangible factors. The power to innovate, the strenght of the brand, the reputation among customers. The number of external factors has steadily grown as we reach limits in a number of areas. Such as nitrogen emissions, climate change, access to water and social inequality.

An impact is a risk

It has now become clear that the external factors that play a role in the long term can pose a financial risk in an increasingly shorter term. While conducting this survey we were confronted with a pandemic, anti-racism protests and, in the Netherlands, the prospect of water shortages because of increasingly long and dry summers. Long-term external risks can be a significant threat if a company fails to change swiftly or in a timely fashion.

In this study, we performed an analysis of the annual reports (financial year 2019) of the 25 AEX companies in the Netherlands. We have identified and assessed all risks (450), not just those related to sustainability. To assess whether companies are "myopic" in their risk reporting, we looked at the visibility that the risks provide in short and long term, the priorities and the extent to which the risks are specifically described. This provides insight into the quality of the process and the reporting.

Mark Didden

Senior manager Corporate Reporting
KPMG Nederland
didden.mark@kpmg.nl
+31 6 51040961