All UK companies, except small ones will be required to produce a strategic report from October 2013. This presentation sets out key requirements and potential director's liabilities for getting it wrong.

1. New UK Reporting Regulations- what is
a strategic report? Does it link to
Integrated reporting? August 2013

2. What’s happening?
• New Regulations for companies on how to
report: in force from 1st October
• Strategic report required
• Companies Act 2006 (Strategic Report and
Director’s Report) Regulations 2013
• Financial Reporting Council issued draft
guidance

3. Why is it happening?
• Government commitment to reinstate the
Operating and Financial Review to ensure
director’s social and environmental duties
have been covered in company reporting
• Aims to promote cohesiveness
• Putting the focus on the information being
strategic

4. What companies do the regulations
apply to?
• Differing requirements according to whether
the company is:
– Listed
– Large
– Medium sized companies

5. What’s required?
• Section 414c requires:
– description of principle risks and uncertainties (All
sizes)
– analysis of Key Performance indicators (Large and
quoted companies for non-financial KPIs)
– description of the entities objectives, strategy and
business model (Quoted companies)
– explanation of main trends and factors affecting
the company (Quoted companies)

6. What about disclosures?
• For quoted companies, disclosures required
around:
– environment
– employees
– Social, community and human rights issues
– Diversity
• If not disclosed, the company must state
which of these disclosures are missing

7. What should the report do?
• Provide information and insight into the
companies main objectives, strategies and
principle risks
• Complement, supplement and provide context
of related financial statements
• Provide an analysis of past performance
• Signpost the location of supporting material

8. Materiality is key
• Organisations will have to understand what the
key issues are to their business
• ‘Materiality’ is key. Defintion taken from
International Financial Reporting Standard:
“Omissions or misstatements of items are material
if they could, individually or collectively, influence
the economic decisions that users make on the
basis of the financial statements. Materiality
depends on the size and nature of the omission or
misstatement judged in the surrounding
circumstances”

9. How does it relate to integrated
reporting?
• Both International Integrated Reporting Council
and FRC want to improve the quality of
reporting, with shareholders as the main focus.
• Strategic report, in contrast to Integrated report
is governed by legislation
• Strategic report is required as part of the annual
report
• Draft Integrated Reporting Framework provides
more in-depth information about how non-
financial issues might feed into a companies
strategy

10. Are there consequences for directors
getting it wrong?
• Section 463 of the Companies Act allows for
directors to be held liable to compensate their
company if it suffers any loss as a result of any
untrue or misleading statement (or any omission)
arising from the director’s report, the director’s
remuneration report or the strategic report
• Directors knew that the statements were untrue
or misleading, or if they knew that the omission
was a dishonest concealment of a material fact

11. Getting it right
• Good reporting will lead to:
– less exposure to penalties
– greater transparency for investors or shareholders
– better understanding and management of risks
– improved governance

12. Solutions
• Find out what is ‘material’ to the company’s operations
and strategy.
• Understand key risks through proper risk management.
Has your company reviewed its risk register taking into
account non-financial information?
• Have these been considered against both reputational
and financial risk?
• What company engagement takes place?
• Review supply chain management: do you know the
risks down your supply chain? E.g. working standards.

13. www.clt-envirolaw.com