UK boards will have to include a ‘viability statement’ in their strategic report to investors in order to comply with the updated version of the UK Corporate Governance Code.
The Financial Reporting Council (FRC), which issued the revised code on 17 September, believes the statement will provide an “improved and broader assessment of long-term solvency and liquidity”. It says the statement will “look forward significantly longer than 12 months”.
Among other changes to the code, companies are expected to robustly assess their principal risks and explain how these are being managed or mitigated. They should also monitor their risk management and internal control systems and, at least annually, carry out a review of their effectiveness and feed back on that review in the annual report.
The code also addresses the issue of executive pay. It requires listed companies to ensure that remuneration is designed to promote the long-term success of the company and wants them to be able to demonstrate how this is being achieved more clearly to shareholders.
FRC CEO Stephen Haddrill said: “The changes to the code are designed to strengthen the focus of companies and investors on the longer term and the sustainability of value creation.”
Sally Percy is editor of The Treasurer