Shareholders are aware that any investment they hold in a company is subject to risk and also companies have become more attentive to risk latterly. In part this may be caused by having to operate in more aggressive business environments where change is continuous.
It may also, in part, be a result of directors becoming conscious of shareholders' increased concerns about risk. Directors are looking to reduce and manage company risk exposures as this creates a more stable company and this then allays the anxieties of shareholders. This happens only if directors provide discussions of the major risks that have impacted upon the company in the past or may impact upon the company in the future.
The implementation of the Directive 51/2003/CE requires an enrichment of the risk disclosure information in the annual report. Generally, the risk disclosure regulations across countries are all moving towards the same goal.
This work starts from an overview of the economic theories below voluntary and narrative disclosure and then focuses on narrative risk disclosure. I analyze the risk reporting relevance, review and compare the regulation across a range of different countries; I finally focus on risk disclosure in the narrative section of annual reports of non financial companies listed on Italian Stock Market. To obtain a measure of risk information I apply a content analysis and I develop a software, Bako (Business Analysis through Key Occurrences), to verify and support the results obtained by the manual content analysis. Finally, I assign a risk disclosure score to each company and test whether there are any corporate differences between companies that have high or low risk disclosure level.

Lorenzo Neri is adjunct professor in the department of Business and Finance at the University of Florence. He received a Phd in Financial Accounting from the University of Florence. His research interests include financial reporting and voluntary disclosure.