Hidden in the Fog: Does Integrated Reporting Help Users Assess Company Risk?

There is an asymmetry of information between stakeholders and management. Management has insight into day-to-day management reports, while interested parties must rely on information published in press releases or annual integrated reports. Insufficient information may lead to adverse selection for investors where the performance is overstated, whether by earnings management or accounting fraud, or where companies fail to identify risks that may significantly interrupt the business. South Africa is regarded as a leader in integrated reporting, as the JSE model is part of the compulsory reporting framework for listed companies. Despite the accolades received, significant corporate failures and business interruptions occurred, casting doubt on the integrity of the assertions made in these reports. Previous academic studies mostly focused on whether published reports met reporting criteria rather than on the content of the risk section. The aim of this study was to focus on the identified risks in the integrated reports to determine whether any themes emerged. The population consisted of published integrated reports for companies listed in the consumer goods and services sectors on the JSE in 2023. The integrated reports were analyzed through qualitative content analysis in ATLAS.ti. The unit of analysis was defined as meaningful segments of narrative text, rather than individual words or segments. Trending risks identified in the integrated reports included deterioration of electricity infrastructure, a difficult operating environment, diminishing consumer disposable income, cyber risk, and crime. Although integrated reporting provides important risk information, assessing company risk remains constrained by legitimacy pressures and institutional realities.