The disclosure of risks: A comparison of German HDAX and Indian CNX 100 practices 2007 and 2009

This research project is an international project which is realized in cooperation with our Indian partner university, the Kannur University in Kerala. The project is financially supported and promoted by the German Academic Exchange Service (DAAD).

The overall aim is to work out how the public was informed before and during
the current financial crisis with the following secondary goals:

• To evaluate the effect of mandatory risk reporting compared to more
  voluntary risk disclosure practices on the information content of annual
  reports.
• To work out the current state of risk reporting in India prior to the
  introduction of the IFRS framework in 2011 as the basis of a follow-up
  study.

This is done to come up with recommendations for governing bodies if risk disclosure should be improved and how it could be done. In addition to these more practical objectives, it will also contribute to broader discussions as on the management of risk like the use of risk measures such as Value at Risk and information on corporate risk policies in general. It could therefore provide some insights on how managers perceive risks, their level of awareness before the financial crisis and how this relates to current practices like write-offs. In this context, it will be of additional value to being able to work out differences between Indian and German companies’, reflecting the different corporate and national cultures.

Professor Thomas Berger has extensive knowledge on risk management and risk reporting (see earlier studies on the topic), and will be the coordinator on the German side. Professor Asokan is Professor of business administration at the department of Management Studies at Kannur University. His research focuses on finance issues, especially capital markets and risk analysis, he will be the coordinator on the Indian side.

On both sides, master students will also be involved as part of their MBA study to gain knowledge on qualitative research, e.g. with the help of case studies and special lectures. In addition, this would include Master theses on the incentives of risk disclosures (agency and signalling issues), existing regulations for disclosing risk information as well as work on international accounting standards.

In order to increase evaluation quality in terms of consistency and stability, the teams from both countries will meet in Germany and India. Through these meetings the common understanding necessary for the assessment of the annual reports will be fostered.

Kannur University

International Risk Management Week 2010

DAAD