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Sep 27, 2018

ASEAN firms need to do more on risk disclosure

New FTI Consulting ASEAN Disclosure Index shows region doing well on overall corporate disclosure

ASEAN companies – those across Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam – are not doing enough when it comes to risk disclosure, according to a review of 180 firms across the region.
The latest ASEAN Disclosure Index from FTI Consulting shows the region is doing well on overall corporate disclosure, with an average score of 7.8 out of 10, and on board quality, with an average score of three out of a possible four. But risk disclosure is an area where companies could be doing more: the average risk disclosure score is just 3.8 out of five across all 180 companies, says FTI.

While the majority (74 percent) provide a sustainability report in line with global standards, 37 percent fail to provide analyst transcripts or details of analyst engagements ‘even if investor presentations are available on the website,’ according to FTI.

Thai companies have the best average risk disclosure score at 4.5 out of five, while Vietnam has the lowest – an average of just 1.9. In terms of sectors, telecoms/tech is top with 4.9 out of five, while banking/financial services and manufacturing/industrial sectors have average risk disclosure scores of 3.5 and 3.4, respectively.

Top for disclosure

Of the 180 firms looked at by FTI, researchers classify 24 as ‘corporate disclosure champions’, with composite disclosure scores of 10/10, with 11 hailing from Malaysia.

As well as having the most corporate disclosure champions, Malaysia also scores highest on board quality, with an average 3.5 out of four. Vietnam has the furthest to go at 2.5. From the sectors, telecoms/tech companies have the highest average board quality score at 3.5 out of four, while those in food/consumer goods average 2.8.

As part of its study into board quality, FTI also looked at the number of women on boards, finding that a quarter of the companies examined have no female board representation. Again, it is Malaysia that comes out on top for board gender diversity, while ‘Indonesian companies are the weakest on this disclosure parameter.’

‘Despite seemingly high aggregate composite disclosure scores in the region, there are significant differences on individual parameters between companies and jurisdictions,’ explains Amrit Singh Deo, a managing director in the strategic communications section of FTI, in a statement accompanying the report. ‘Directors and management teams should discuss higher standards of risk disclosure at board meetings, as global investors view high risk disclosure standards as an opportunity to earn a ‘transparency premium’.’

Paul Downie, chairman of Asia-Pacific for the strategic communications section, agrees, noting that ‘these are increasingly important issues, bolstered further by the EU non-financial guidelines announced last year.’

While the report ‘shows progress is being made in the region to raise corporate transparency and non-financial disclosure’, Downie stresses that ‘there is still room for improvement.’

Garnet Roach

Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of subjects, from technology to...

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