Reporting Corporate Risk: An Empirical Inquiry into Listed Entities in the Saudi Capital Market

Abstract

A capital market with greater transparency provides more accurate metrics for measuring corporate performance, which can be utilized to inform market participants’ decisions. Informed risk is crucial to corporate reporting transparency. This empirical study explores the extent to which firms in the Saudi capital market disclose risk information, whether financial or non-financial. A risk disclosure index (RDI) is constructed based on a rigorous literature review of previous studies, considering suggested items related to corporate risk that must be disclosed. The sample comprises 50 corporations, with five companies representing the energy sector, three representing the utility sector, and forty-two representing the materials sector. The findings reveal moderate financial risk disclosure (sample mean 56%) and low non-financial risk disclosure (sample mean 33%) in the Saudi capital market. In the energy sector, the disclosed financial and non-financial risks comprise 57% and 37%, respectively; in the utility sector, these proportions are 56% and 31%, while in the materials sector, they are 54% and 33%, respectively. Regulators should prioritize high-quality, transparent, and comparable risk information disclosure to attract direct foreign investment. To improve their risk disclosure, managers of firms can also employ the RDI to examine the extent of risk their companies face. This study is limited to the annual and board reports of companies in the three sectors.

1. Introduction

Giant corporations play a crucial role in the corporate economy [1,2,3]. When management is separate from proprietors [4,5,6], corporate accounting, specifically “financial accounting”, serves to apprise “shareholders” by influencing internal corporate affairs [4,7,8]. The distinction between ownership and corporate control poses a challenge to corporate reporting [9]. Debates are ongoing regarding what a corporation entails and how it should report its outlook, matters, performance, and financial situation to stakeholders [4,7,8,10,11,12,13,14,15,16,17]. Despite concerted efforts spanning over a century by accounting researchers, academics, organizations, and other professional bodies to conceptualize corporate reporting [7,13], no single theory has been accepted as “the accounting theory” [4,8,10,13,14,18,19,20,21,22,23,24,25,26,27,28,29,30,31,32,33].

In 1936, the American Accounting Association (AAA) conceptualized corporate accounting to direct the Securities and Exchange Commission (SEC) on the contents of financial statements [34,35]. After forming several committees and setting various standards, the American Institute of Certified Public Accountants (AICPA) established the Financial Accounting Standards Board (FASB) in 1973. Since then, the FASB has been developing a conceptual framework to temporarily serve as a guide for the standard-setting process until a theory for corporate reporting is developed and widely accepted [23,36,37].

Professionally, corporate reporting has evolved to address users’ increasing needs for information regarding corporations. The practical unfeasibility of capturing economic realities within corporate financial statements has rationalized the growth in demand for modeling corporate reporting [38]. Corporate reporting has expanded to include, for example, the triple-bottom-line [39,40,41,42], intellectual capital [43,44,45,46], corporate social responsibility [47], and business and corporate sustainability [48,49]. Such comprehensive corporate reporting highlights users’ need for information regarding corporate reports, which financial statements lack.

In 1991, the AICPA formed The Special Committee on Financial Reporting, commonly known as the Jenkins Committee and officially known as Improving Business Reporting—A Customer Focus [5,50,51,52], to respond to the growing emphasis on business reporting as a model for corporate reporting [51,52]. The Jenkins Committee aimed to develop a business report that was not limited to “traditional financial metrics” by including “non-financial performance or key performance indicators” [34].

Non-financial reporting includes operating performance measures, which are considered vital supplemental information that helps forecast key value drivers evaluating profitability, growth, and risk [53,54]. It also includes future financial performance [55], which forecasts future profitability [56], stock returns [57], and earnings [55]. Therefore, reporting non-financial information is essential for investors’ decision-making [58,59,60,61,62,63]. Moreover, disclosed non-financial information predicts financial fraud and customer satisfaction while providing better insights into the value creation of a firm [64,65,66].

The Jenkins Committee report consisted of 10 elements, one of which was concerned opportunities and risks, including those resulting from key trends [51]. Considering that the international economy has become more competitive and complicated, risk management is crucial to the durability and success of an enterprise [67]. This is particularly true for the increasing number of firms that operate globally and encounter diverse “degrees of business, economic, and political risks” [68].

A capital market with greater transparency provides more accurate metrics for measuring corporate performance. In such a market, investors are provided with more information for decision-making [69]. Reported risk is key to financial reporting transparency [68]. Financial crises highlighted that corporations’ risk is not transparently described by either financial statements or other obligatory disclosures [70]. The quality of risk disclosure signifies managers’ confidence in their ability to manage risks and the processes they undergo to improve risk disclosure quality; it also assists them in effectively making informed risk-management decisions [67].

Empirical evidence from the Saudi capital market suggests that disclosure of non-financial information is low [8,71], as is the disclosure of risk [14]. Examining the annual report of the sampled corporations, Habtoor et al. [72] affirmed that non-financial institutions in Saudi Arabia disclose a moderate level of corporate risk, and the quality of the content therein is low [72].

Whether corporate risk is disclosed or not is an empirical concern. This study contributes to the accounting literature by empirically exploring the extent to which firms listed in the Saudi capital market disclose financial and non-financial information related to corporate risk. According to Ochoa-Pachas [73] (p. 2), “Descriptive investigations are the beginning of quantitative studies” that “allow describing, characterizing the phenomenon or facts to be studied”. A comprehensive index for risk disclosure is constructed to examine publicly traded corporations. The index is a composite of the following three sources: recommendations from the Jenkins model; principles and recommendations issued by the Australian Securities Exchange (ASX), Corporate Governance Council (CGC), and the DIRECTIVE 2014/95/EU; and previous suggestions on measuring and reporting corporate risk.

The remainder of this paper is organized as follows. Section 2 reviews the related literature on non-financial risk disclosure. Section 3 describes the research method, including the development of the NFRDI. Section 4 presents the results, and finally, Section 5 presents the conclusions, draws implications along with limitations, and avenues for future research.

2. Literature Review

Several factors impact corporate reporting. For example, imposing corporate taxes led to the need for reporting annual financial information, which allowed stakeholders to access more comprehensive financial information about corporations; this development occurred progressively “in the first three decades of the twentieth century” [5].

Additionally, “accounting scandals” and the global financial crisis underscored the importance of disclosing corporate risk [74,75] while creating a demand for such disclosure. Incidents involving Maxwell, Equitable Life, Enron, WorldCom, AIG, Lehman Brothers, and Madoff in the late 20th and early 21st centuries eroded the trust of investors and regulators [76]. Other regions of the world also experienced large-scale corporate scandals, such as the Wirecard scandal in the German market. The Saudi capital market witnessed several fraudulent activities attributed to failures in accounting and auditing [77]. Consequently, Bishah Agriculture Development Corporation and two high-profile telecommunication companies—Mohammad Al Mojil Group (MMG) and Etihad Etisalat (Mobily)—were banned from trading their shares [78,79].

In response, and possibly as a remedy, regulators emphasized the importance of communication to overcome distrust and rebuild stakeholders’ confidence [26,75,80]. Since then, reporting risk and disclosing related matters have attracted the attention of researchers. Risk has been viewed as the “uncertainty related to…gain or loss” [81].

Financial literature differentiates between risk and uncertainty. While the former is defined as a “set of outcomes arising from a decision that can be assigned”, probabilistically, uncertainties arise “when probabilities cannot be assigned to the set of outcomes” [82]. Risk disclosure refers to any reported information about any “opportunity”, likelihood, “hazard, danger, harm, threat, or exposure” that has affected the company in the past or will affect it “in the future” [82]. While this definition is suitable for analyzing risk [72], this study differentiates between ‘“good” and “bad” “risks” and “uncertainties”’ [82]. Generally, a business encounters uncertainty and inevitable risk regardless of whether it is financial or otherwise; it can be related to the business itself or to changes in economic conditions inversely impacting the price of business securities [80,83]. Stakeholders, particularly shareholders and debtholders, must be aware of the risk associated with corporations in which they have invested their wealth and savings.

Appropriately communicating risk builds awareness among stakeholders about possible critical changes [74]. Disclosing risk may mitigate agency costs. Ideally, reporting risk should reduce agency conflicts by providing external stakeholders with the information necessary to understand the firms’ risk exposures, better assess the prospects of the entity, enhance confidence, and build trust in the firm’s executive management [84].

The accounting literature suggests that risk disclosure augments investors’ ability to confidently make informed investment decisions, thereby affecting capital flows into organizations depending on their effectiveness in handling financial risk during crises, such as between 2007 and 2008 [76]. Understanding the risks that firms face is crucial for efficiently allocating capital to reduce its cost as a consequence of reporting risk associated with a listed corporation [85]. Reporting risk contributes to continuous investment and capital accumulation by stabilizing the investment environment [76].

In their current format, annual reports do not comprehensively discuss the risks firms encounter or the plans formulated to mitigate these risks [83]. Empirical studies reveal that risk disclosure is low and, consequently, risk reporting is inadequate [86]. This is particularly true regarding the disclosure of non-financial risks because both firms and regulators virtually always consider and pay more attention to financial risk disclosure, “which has been subject to various regulations” [87]. This may be because risk, by nature, can be classified into two types: financial risk, which is “retrospective” and whose financial outcomes and effects are measurable, and non-financial risk, which is “more forward-looking and hard to measure, often being presented in a narrative form” [88].

National GAAP and formal codes of best practice in global corporate governance have increased requirements for narrative risk disclosure in annual reports. Firms in the EU and Australia are mandated to disclose risk-related information [78,80,89]. The Corporate Governance Principles and Recommendations issued by the ASX under the CGC state that “[a] listed entity should disclose whether it has any material exposure to environmental or social risks and, if it does, how it manages or intends to manage those risks” [90]. Additionally, DIRECTIVE 2014/95/EU reports that “the European Parliament acknowledged the importance of businesses divulging information on sustainability such as social and environmental factors, with a view to identifying sustainability risks and increasing investor and consumer trust”. Although developed countries, such as the United States, Canada, Germany, the United Kingdom, Austria, and Finland, “mandate” financial risk disclosures, concentrating on the market risk of derivatives, for instance. FAS 119, FAS 133, IAS 32, and IAS 39, other forms of risk are voluntarily disclosed [91]. Meanwhile, some countries may lack such requirements. In Malaysia, there is no particular risk disclosure guidance except for financial risk; thus, non-financial risk reporting is inadequate [87]. Investment in the Gulf Cooperation Council (GCC) stock markets is considered highly risky because of extensive volatility [92].

A few studies have investigated the presence and magnitude of corporate risk disclosure in GCC countries. Hassan [93] explored the disclosure of corporate risk in the United Arab Emirates. Abdallah et al. [94] also included GCC countries in studying corporate risk disclosure. However, there is a lack of in-depth research on the extent to which firms in the Saudi capital market disclose information about corporate risk [95]. Few studies have examined the level of corporate risk disclosure in Saudi Arabia, four of which have restricted their samples to financial institutions [96,97,98,99]. Habtoor et al. [72] linked corporate risk disclosure practices with firm-specific characteristics between 2008 and 2011; they also investigated the impact of corporate ownership structure on corporate risk disclosure during the same period. Ibrahim et al. [100] linked corporate governance with risk disclosure between 2012 and 2015. Alsheikh et al. [101] explored the effect of firm size and mandatory adoption of International Financial Reporting Standards (IFRS) on the degree of risk disclosure in Saudi Arabia between 2015 and 2017. All these studies examined only corporations’ annual reports; none of them assessed risk disclosure using a constructed corporate social responsibility index for Saudi firms grounded in Global Reporting Initiative (GRI) standards [95].

Previous studies that have used some form of a risk disclosure index have considered only non-financial risks [76,87,88] or both financial and non-financial items [75,82,102].

This study investigates the extent to which non-financial institutions in the Saudi capital market disclose risk information. Unlike some prior studies that have restricted their sources of collected data to the annual reports of sampled corporations, this study examines data from diverse sources, namely, firms’ annual and board reports.

3. Research Methods

3.1. Constructing the Risk Disclosure Index (RDI)

An RDI has been developed to measure the magnitude of risk disclosure in corporate reporting. This index draws on previous studies, including those by Jamil et al. [87], Ibrahim et al. [102], Habtoor et al. [72], Abdallah et al. [103], Ntim et al. [104], Miihkinen [105] Rajab and Schachler [76], Tan et al. [106], and Linsley and Shrives [82]. Furthermore, the fourth edition of the ASX CGC and Jenkins Committee’s report is utilized in constructing the RDI [51,90].

Table 1. Financial risk disclosure index suggested in prior studies.

Categories	Items	Used By	Originally Suggested By
Economic Risk	E1: Interest rate	Ibrahim et al. [100]	Linsley and Shrives [82], Habtoor et al. [72]
	E2: Exchange rate (Currency risk)	Ibrahim et al. [100]	Linsley and Shrives [82], Habtoor et al. [72]
	E3: Commodity price risk	Ibrahim et al. [100]	Linsley and Shrives [82], Habtoor et al. [72]
	E4: Inflation	Rajab and Handley-Schachler [76]
	E5: Credit	Ibrahim et al. [100]	Linsley and Shrives [82], Habtoor et al. [72]
	E6: Taxation	Rajab and Handley-Schachler [76].
Other Financial Risks	OF1: Liquidity	Ibrahim et al. [100]	Linsley and Shrives [82], Habtoor et al. [72]
	Exposure to other price risks	Habtoor et al. [72]
	Sensitivity analysis	Habtoor et al. [72]
Financial Instruments	FI1: Reclassification of instruments	Habtoor et al. [72]
	FI2: Cumulative changes in fair value	Habtoor et al. [72]
Derivatives Hedging	DH1: Changes in fair value of assets and liabilities	Habtoor et al. [72]
	DH2: Cash flow hedge	Habtoor et al. [72]

and

Table 2. Non-financial risk disclosure index suggested in prior studies.

Types of Non-Financial Risk	Items	Used By	Originally Suggested By
General Risk	GR1: Strategic goals and plans	Habtoor et al. [72]
	GR2: Prospects and expectations	Habtoor et al. [72]	Rajab and Handley-Schachler [76].
	GR3: Competition in product market	Habtoor et al. [72]
Accounting Policies	AP1: Use of estimates judgements	Habtoor et al. [72]
	AP2: Collateral assets against loans	Habtoor et al. [72]
	AP3: Financial assets impairment	Habtoor et al. [72]
	AP4: Other assets impairment	Habtoor et al. [72]
	AP5: De-recognition of financial assets	Habtoor et al. [72]
	AP6: Contingent liabilities	Habtoor et al. [72]
	AP7: Commitments capital expenditure	Habtoor et al. [72]	Probohudono (2013) [75]
	AP8: Contingent assets and gains	Habtoor et al. [72]
	AP9: Inventory evaluation	Habtoor et al. [72]
	AP10: Foreign currency translation	Habtoor et al. [72]
	AP11: Key sources of estimation uncertainty	Habtoor et al. [72]
	AP12: Risk management policies (general)	Habtoor et al. [72]
	AP13: Objective of holding derivatives instruments	Habtoor et al. [72]	Rajab and Handley-Schachler [76]
Derivatives Hedging	DH1: Hedging description	Habtoor et al. [72]
Segment Information	SI1: Business major segments	Habtoor et al. [72]	Jenkins Committee’s report
	SI2: Geographical major segments	Habtoor et al. [72]	Jenkins Committee’s report
	SI3: Geographical concentration	Habtoor et al. [72]	Jenkins Committee’s report
	SI4: Customers, suppliers, and asset concentration	Habtoor et al. [72]
Operational Risk	OP1: Key personnel dependence risk	Jamil et al. [87]	Miihkinen [105]
	OP2: Uncommon business fluctuations in demand	Jamil et al. [87]	Miihkinen [105]
	OP3: Interruptions in the delivery chain	Jamil et al. [87]	Miihkinen [105]
	OP4: Price fluctuations in the factors of production	Jamil et al. [87]	Miihkinen [105]
	OP5: Patents and other industrial rights	Jamil et al. [87]	Miihkinen [105], Ntim et al. [104]
	OP6: Customer satisfaction	Jamil et al. [87]	Linsley and Shrives [82], Miihkinen [105], Abdullah et al. [103], Habtoor et al. [72], Ibrahim et al. [10]
	OP7: Reputation.	Jamil et al. [87]	Miihkinen [105], Ntim et al. [104], Habtoor et al. [72]
	OP8: Brand name erosion		Linsley and Shrives [82]; Miihkinen [105], Ntim et al. [104], Habtoor et al. [72]; Ibrahim et al. [100]
	OP9: Stock obsolescence and shrinkage	Jamil et al. [87]	Linsley and Shrives [82], Miihkinen [105], Ntim et al. [104], Abdullah et al. [103], Ibrahim et al. [100]
	OP10: Product and service failure	Jamil et al. [87]	Linsley and Shrives [82], Rajab and Handley-Schachler [76], Miihkinen [105], Ntim et al. [104], Abdullah et al. [103], Habtoor et al. [72], Ibrahim et al. [100]
	OP11: Environmental issues/impact	Jamil et al. [87]	Linsley and Shrives [82], Miihkinen [105], Ntim et al. [104], Abdullah et al. [103], Ibrahim et al. [100].
	OP12: Health and safety	Jamil et al. [87]	Linsley and Shrives [82], Miihkinen [105], Ntim et al. [104], Abdullah et al. [103], Habtoor et al. [72], Ibrahim et al. [100]
	OP13: Unsuccessful project deliveries	Jamil et al. [87]	Rajab and Handley-Schachler [76] Miihkinen [105]
	OP14: Quality control	Jamil et al. [87]	Miihkinen [105]
	OP15: (a) Product development	Jamil et al. [87]	Linsley and Shrives [82], Ntim et al. [104], Abdullah et al. [103], Habtoor et al. [72]
	OP15: (b) Service development		Habtoor et al. [72], Ibrahim et al. [100]
	OP16: Business process and procedure	Jamil et al. [87]	Ntim et al. [104]
	OP17: Sourcing	Jamil et al. [87]	Linsley and Shrives [82], Ntim et al. [104], Abdullah et al. [103], Habtoor et al. [72], Ibrahim et al. [100]
	OP18: Compliance on operations regulation	Jamil et al. [87]	Rajab and Handley-Schachler [76]
	OP19: Social contribution/community support and social risk	Jamil et al. [87]	Rajab and Handley-Schachler [76], Ntim et al. [104]
	OP20: Efficiency and performance	Ibrahim et al. [101]	Linsley and Shrives [82], Habtoor et al. [72]
	OP21: Internal control	Habtoor et al. [72]	Rajab and Handley-Schachler [76]
	OP22: Recruiting of qualified and skilled professionals	Habtoor et al. [72]
	OP23: Continuity and sustainability	Habtoor et al. [72]
	OP24: Regulatory environment risk	Habtoor et al. [72]
	OP25: Legal regulatory sanctions	Habtoor et al. [72]
	OP26: Saudization risk	Habtoor et al. [72]
	OP27: Reservations for chartered accountant	Habtoor et al. [72]
	OP28: Events beyond balance sheet	Habtoor et al. [72]
	OP29: Operational disruption	Rajab and Handley-Schachler [76]
	OP30: Operational problem	Rajab and Handley-Schachler [76]
	OP31: Employment practices and workplace safety (H&S)	Rajab and Handley-Schachler [76].
	OP32: Other operational risks	Habtoor et al. [72]
Empowerment Risk	EM1: Governance, leadership, and management	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	EM2: Outsourcing	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	EM3: Performance incentives	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Habtoor et al. [72], Ibrahim et al. [100]
	EM4: Resistance to change/adaption/change readiness	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103]
	EM5: Communications	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	EM6: High employee turnover rate	Jamil et al. [87]	Ntim et al. [104]
	EM7: Productivity of staff	Jamil et al. [87]	Ntim et al. [104]
	EM8: Change readiness	Ibrahim et al. [99]	Linsley and Shrives [82]
Information Processing and Technology Risk	IT1: System safety and security (Integrity)	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	IT2: Accessibility by unauthorized personnel	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103]
	IT3: Availability of information	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Habtoor et al. [72], Ibrahim et al. [100]
	IT4: Infrastructure	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Habtoor et al. [72] Ibrahim et al. [100]
	IT5: Cybercrime	Jamil et al. [87]	Suggested by Pre-test Panelist
	IT6: Access	Ibrahim et al. [99]	Linsley and Shrives [82]
Integrity Risk	IN1: Management and employee fraud/illegal acts	Jamil et al. [87]	Linsley and Shrives [82], Ntim et al. [104], Abdullah et al. [103], Ibrahim et al. [100]
	IN2: Reputation	Jamil et al. [8]	Linsley and Shrives [82], Rajab and Handley-Schachler [76], Abdullah et al. [103], Ibrahim et al. [100]
	IN3: Conflict of interest	Jamil et al. [87]	Suggested by Pre-test Panelist
	IN4: Evasion or avoidance of tax regulation	Jamil et al. [87]	Suggested by Pre-test Panelist
	IN5: Market manipulation activities	Jamil et al. [87]	Suggested by Pre-test Panelist
	ST1: Market area	Jamil et al. [87]	Miihkinen [105]
	ST2: Position in the production chain	Jamil et al. [87]	Miihkinen [105]
	ST3: Too dependence on customer	Jamil et al. [87]	Miihkinen [105]
	ST4: Too dependence on suppliers	Jamil et al. [87]	Miihkinen [105], Rajab and Handley-Schachler [76]
	ST5: Changes in technological progress	Jamil et al. [87]	Miihkinen [105]
	ST6: Regulatory changes	Jamil et al. [87]	Miihkinen [105], Linsley and Shrives [82], Abdullah et al. [103], Ntim et al. [104], Ibrahim et al. [100]
	ST7: Economical changes	Jamil et al. [87]	Miihkinen [105]
	ST8: Mergers	Jamil et al. [87]	Miihkinen [105]
	ST9: Acquisitions		Rajab and Handley-Schachler [76]
	ST10: New alliances and joint ventures	Habtoor et al. [72]	Rajab and Handley-Schachler [76]
	ST11: Pricing	Jamil et al. [87]	Miihkinen [105], Abdullah et al. [103], Ibrahim et al. [100]
	ST12: Industry-specific changes	Jamil et al. [87]	Miihkinen [105], Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	ST13: Industry sources (competition)	Rajab and Handley-Schachler (2009) [76]
	ST14: Industry sources (potential entrants)	Rajab and Handley-Schachler (2009) [76]
	ST15: Industry sources (suppliers)	Rajab and Handley-Schachler (2009) [76]
	ST16: Industry sources (substitutes)	Rajab and Handley-Schachler (2009) [76]
	ST17: Industry sources (strategic partners)	Rajab and Handley-Schachler (2009) [76]
	ST18: Industry sources (changes in demand, client requirements, and customer preferences)	Rajab and Handley-Schachler (2009) [76]
	ST19: Launching of new products	Jamil et al. [87]	Miihkinen [105]
	ST20: Business portfolio changes	Jamil et al. [87]	Miihkinen [105], Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	ST21: Business life cycle	Jamil et al. [87]	Linsley and Shrives [82], Miihkinen [105], Abdullah et al. [103], Ibrahim et al. [100]
	ST22: Changes in management team (Management)	Jamil et al. [87]	Miihkinen [105]
	ST23: Competitors presence	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	ST24: Valuation of asset, liabilities, and stock	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103]
	ST25: Strategic planning process (Planning)	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103]
	ST26: Performance measurement	Jamil et al. [87]	Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [100]
	ST27: Taxation policy changes	Jamil et al. [87]	Ntim et al. [104]
	ST28: GDP growth/market demand/aggregate demand	Jamil et al. [87]	Ntim et al. [104]
	ST29: Inflation rate changes	Jamil et al. [87]	Ntim et al. [104]
	ST30: Budget deficit	Jamil et al. [87]	Ntim et al. [104]
	ST31: Environmental scan	Ibrahim et al. [102]	Linsley and Shrives [82]
	ST32: Sovereign and political	Ibrahim et al. [100]	Linsley and Shrives [82]
	ST33: Intellectual property right	Rajab and Handley-Schachler [76].
	ST34: Management of growth	Rajab and Handley-Schachler [76].
	ST35: Investment	Rajab and Handley-Schachler [76].
Research and Development Risk	RD1: Company’s plan regarding new products or services	Jamil et al. [87]	Tan et al. [106]
	RD2: Incompleteness of ongoing research and development projects	Jamil et al. [87]	Tan et al. [106]
	RD3: Breach of trust in research and development confidentiality	Jamil et al. [87]	Tan et al. [106]
Damage and Hazard Risk	DHR1: Significant illegal actions	Jamil et al. [87]	Miihkinen [105]
	DHR2: Natural disasters and/or terrorism	Jamil et al. [87]	Ntim et al. [105], Habtoor et al. [72]
Environmental Risk (risks related to transition to a lower-carbon economy)	ER1: Policy and legal risks	ASX CGC [90]	Rajab and Handley-Schachler [76], ASX CGC [90]
	ER2: Technology risk	ASX CGC [90]	ASX CGC [90]
	ER3: Market risk	ASX CGC [90]	ASX CGC [90]
	ER4: Reputation risk	ASX CGC [90]	ASX CGC [90]
Environmental Risk (Physical risks)	ERph1: Changes in water availability, sourcing, and quality	ASX CGC [90]	ASX CGC [90]
	ERph2: Food security	ASX CGC [90]	ASX CGC [90]
	ERph3: Liability	ASX CGC [90]	ASX CGC [90]
Climate change risk	Cch1: Climate and catastrophes	Rajab and Handley-Schachler [76]
	Cch2: Physical risks	ASX CGC [90]	ASX CGC [90]
	Cch3: Transition risks
	Cch4: Liability risks

present the list of RDI categories, the items as they appeared in prior studies, references from the literature, and new items from the fourth edition of the ASX CGC [90] and the Jenkins Committee’s report [51]. For clarity, the selected categories were divided into subcategories, enhancing the likelihood that sample corporations would be considered to have disclosed relevant risk information.

Items suggested in prior studies were not further divided. It is sufficient to disclose some of the examples to demonstrate that such reporting is considered risk-related disclosure. For example, under the category of “strategy risk”, there is an item labelled “industry sources (customers)”. Examples listed under this item include changes in demand, clients’ requirements, and customers’ preferences. Another item under the same category, labelled “GDP growth/market demand/aggregate demand”, consists of aggregated examples. Importantly, the item labelled “performance measurement” under “strategy risk” is defined as employees’ performance measurement to avoid confusion with firms’ performance measurement.

Table 3. Summary of categories in Table 1 and Table 2.

Type of Risk Disclosure	Categories of Risk	Number of Items
Financial Risk Disclosure	1. Economic Risk	6
	2. Financial Instruments	2
	3. Derivatives Hedging	2
	4. Other Financial Risk	3
	Total	13 Items
Non-Financial Risk Disclosure	5. General Risk	3
	6. Accounting Policies	13
	7. Derivatives Hedging	1
	8. Segment Information	6
	9. Operational Risk	32
	10. Empowerment Risk	9
	11. Information Processing and Technology Risk	6
	12. Integrity Risk	5
	13. Strategy Risk	35
	14. Research and Development Risk	3
	15. Damage and Hazard Risk	2
	16. Environmental Risk (risks related to transition to a lower-carbon economy)	4
	17. Environmental Risk (Physical risks)	3
	18. Climate Change Risk	4
	Total	126 Items
Total of All Items Suggested in Prior Studies		139 Items

summarizes the items listed in the developed RDI, comprising two main categories: financial and non-financial risk disclosure, which include 13 and 126 items, respectively.

Table 4. Modified items and sources of suggested modifications.

Categories	Items	Reference	Become
Segment Information	SI4: Customers, suppliers, and assets’ concentration	Habtoor et al. [72]	SI4: Customers’ concentration
			SI5: Suppliers’ concentration
			SI6: Assets’ concentration
Empowerment Risk	EM1: Governance, leadership and management	Jamil et al. [87], Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [99]	EM1: Governance
			EM2: Leadership
			EM3: Management
Empowerment Risk	EM4: (a) Resistance to change/adaption	Linsley and Shrives [82], Ibrahim et al. [99]	EM4: Resistance to change/adaption
	EM4: (b) Change readiness	Linsley and Shrives [82], Ibrahim et al. [99]	EM8: Change readiness
	EM8: High employee turnover rate	Jamil et al. [87], Ntim et al. [104]	EM8: Employee turnover
Operating Risk	OP31: Employment practices and workplace safety (H&S)	Rajab and Handley-Schachler [76]	OP32: Employment practices
			OP33: Workplace safety
Strategy Risk	ST27: performance measurement	Linsley and Shrives [82], Abdullah et al. [103], Ibrahim et al. [99]	ST27: performance measurement (Employee)

depicts the modification of the items listed in Table 1 and Table 2, as suggested in this study. Such modifications are not arbitrary, as the accounting literature has already recommended them. Table 4 presents specific studies for all proposed amendments. Such modifications ought to be viewed as imprudent for the developed RDI.

Table 5. Final list for financial RDI.

Categories	Items
Economic Risk	E1: Interest rate
	E2: Exchange rate (Currency risk)
	E3: Commodity price risk
	E4: Inflation
	E5: Credit
	E6: Taxation
Other Financial Risk	OF1: Liquidity
	OF2: Exposure to other price risks
	OF3: Sensitivity analysis
Financial Instruments	FI1: Reclassification of instruments
	FI2: Cumulative changes in fair value
Derivatives Hedging	DH1: Change in fair value of assets and liabilities
	DH2: Cash flow hedge

and

Table 6. Final list for non-financial RDI.

Types of Non-Financial Risk	Items
General Risk	G1: Strategic goals and plans
	G2: Prospects and expectations
	G3: Competition in product market
Accounting Policies	AP1: Use of estimates judgements
	AP2: Collateral assets against loans
	AP3: Financial assets impairment
	AP4: Other assets impairment
	AP5: De-recognition of financial assets
	AP6: Contingent liabilities
	AP7: Commitments capital expenditure
	AP8: Contingent assets and gains
	AP9: Inventory evaluation
	AP10: Foreign currency translation
	AP11: Key sources of estimation uncertainty
	AP12: Risk management policies (general)
	AP13: Objective of holding derivative instruments
Derivatives Hedging	DH1: Hedging description
Segment Information	SI1: Business major segments
	SI2: Geographical major segments
	SI3: Geographical concentration
	SI4: Customers’ concentration
	SI5: Supplier concentration
	SI6: Asset concentration
Operational Risk	OP1: Key person dependence risk
	OP2: Uncommon business fluctuations in demand
	OP3: Interruptions in the delivery chain
	OP4: Price fluctuations in the factors of production
	OP5: Patents and other industrial rights
	OP6: Customer satisfaction
	OP7: Reputation
	OP8: Brand name erosion
	OP9: Stock obsolescence and shrinkage
	OP10: Product and service failure
	OP11: Environmental issues/impact
	OP12: Health and safety
	OP13: Unsuccessful project deliveries
	OP14: Quality control
	OP15: Product and service development
	OP16: Business process and procedure
	OP17: Sourcing
	OP18: Compliance on operations regulations
	OP19: Social contribution/community support and social risk
	OP20: Efficiency and performance
	OP21: Internal control
	OP22: Recruiting qualified and skilled professionals
	OP23: Continuity and sustainability
	OP24: Regulatory environment risk
	OP25: Legal regulatory sanctions
	OP26: Saudization risk
	OP27: Reservations for chartered accountants
	OP28: Events beyond balance sheet
	OP29: Risk management policies
	OP30: Liquidity and cash flow
	OP31: Operational disruption
	OP32: Operational problem
	OP33: Employment practices
	OP34: Environment risk (risks arising from the impact of companies’ operations on the natural environment)
	OP35: Other operation risks
Empowerment Risk	EM1: Governance
	EM2: Leadership
	EM3: Management
	EM4: Outsourcing
	EM5: Performance incentives
	EM6: Resistance to change/adaption/change readiness
	EM7: Communications
	EM8: High employee turnover rate
	EM9: Productivity of staff
	EM10: Change readiness
Information Processing and Technology Risk	IT1: System safety and security (Integrity)
	IT2: Accessibility by unauthorized personnel
	IT3: Information availability
	IT4: Infrastructure
	IT5: Cybercrime
	IT6: Access
Integrity Risk	IN1: Management and employee fraud/illegal acts
	IN2: Reputation
	IN3: Conflict of interest
	IN4: Evasion or avoidance of tax regulation
	IN5: Market manipulation activities
Strategy Risk	ST1: Market competition
	ST2: Market area
	ST3: Position in the production chain
	ST4: Heavy dependence on customers
	ST5: Heavy dependence on suppliers
	ST6: Changes in technological progress
	ST7: Regulatory changes
	ST8: Political changes
	ST9: Economical changes
	ST10: (a) Mergers and (b) acquisitions
	ST11: New alliances and joint ventures
	ST12: Pricing
	ST13: Industry-specific changes
	ST14: Industry sources (competition)
	ST15: Industry sources (potential entrants)
	ST16: Industry sources (suppliers)
	ST17: Industry sources (substitutes)
	ST18: Industry sources (strategic partners)
	ST19: Industry sources (changes in demand, client requirements, and customer preferences)
	ST20: Launching of new products
	ST21: Business portfolio changes
	ST22: Business life cycle
	ST23: Changes in management team (Management)
	ST24: Competitors’ presence
	ST25: Valuation of assets, liabilities, and stock
	ST26: Strategic planning process (Planning)
	ST27: Performance measurement (Employee)
	ST28: Taxation policy changes
	ST29: GDP growth/market demand/aggregate demand
	ST30: Inflation rate changes
	ST31: Budget deficit
	ST32: Environmental scan
	ST33: Sovereign and political
	ST34: Product market
	ST35: Intellectual property rights
	ST36: Management of growth
	ST37: Investment
Research and Development Risk	RD1: Company’s plans regarding new products or services
	RD2: Incompleteness of ongoing research and development projects
	RD3: Breach of trust in research and development confidentiality
Damage and Hazard Risk	DH1: Significant illegal actions
	DH2: Natural disasters and/or terrorism
Environmental risk (Risks related to transition to a lower-carbon economy)	ER1: Policy and legal risks
	ER2: Technology risk
	ER3: Market risk
	ER4: Reputation risk
Environmental risk (Physical risks)	ERph1: Changes in water availability, sourcing, and quality
	ERph2: Food security
	ERph3: Liability
Climate change risk	Cch1: Climate and catastrophes
	Cch2: Physical risks
	Cch3: Transition risks
	Cch4: Liability risks

present the final list of the financial and non-financial RDI to be used in examining firms’ reports.

3.2. Sampled Corporate Reports

The sample was comprised of 50 companies from three major sectors in 2019, two years after the adoption of IFRS in Saudi Arabia. The sectors include energy (five companies), utility (three companies), and material (forty-two companies). The market capitalization of the sampled corporation represents 85.51% of the aggregate Saudi market capitalization in 2019, as illustrated in

Table 7. Market capitalization of each sector in 2019.

Sector	Total Market Capitalization	%
Energy	7,089,144,660,000	78.55%
Utility	86,566,026,939	0.96%
Material	541,863,065,508.78	6.00%
Total market capitalization across the three sectors	7,717,573,752,448.08	85.51%
Total market capitalization in the Saudi Capital Market	9,025,438,669,340.85	100%

.

3.3. Coding Procedure

The RDI was used to examine firms’ annual and board of directors’ reports published on the Tadawul website [107]. To measure the extent of risk disclosure in the Saudi capital market, content analysis was employed to categorize each disclosure by risk type, either financial or non-financial. Specifically, a coding sheet containing all RDI elements was developed to examine whether corporations listed in the Saudi capital market disclosed such elements in their reports. The total number of disclosed risks was then calculated to yield a score for each group of items for each corporation. Therefore, each sampled corporation had several scores corresponding to the groups of items in the RDI. Finally, a global score was calculated for each corporation, reflecting its overall level of risk disclosure associated with its operations and strategies.

In examining financial instruments risk as a financial item, firms must explicitly report each item in numerical figures for it to be considered as a disclosure. For example, Aldrees Corporation communicated the accounting policies for cumulative changes in fair value; however, the reclassification of instruments item under the financial instruments category is not considered a disclosure.

Table 8. Examples of accounting policy items not deemed as disclosure.

Items	Companies
AP2: Collateral assets against loans	ARAMCO (Dhahran, Saudi Arabia)
	Petro Rabigh (Rabigh, Saudi Arabia)
	SARCO (Jeddah, Saudi Arabia)
	ALDREES (Riyadh, Saudi Arabia)
	BAHRI (Riyadh, Saudi Arabia)
	GASCO (Riyadh, Saudi Arabia)
	BAHRI (Riyadh, Saudi Arabia)
	Saudi Electricity Co.
	SABIC (Riyadh, Saudi Arabia)
	MA’ADEN (Riyadh, Saudi Arabia)
	YANSAB (Yanbu, Saudi Arabia)
	SIPCHEM (Alkhobar, Saudi Arabia)
	YSCC (Riyadh, Saudi Arabia)
	ALUJAIN (Riyadh, Saudi Arabia)
	TCC (Tabuk, Saudi Arabia)
	Jouf Cement (Riyadh, Saudi Arabia)
AP6: Contingent liabilities	SARCO (Jeddah, Saudi Arabia)
	ALDREES (Riyadh, Saudi Arabia)
	GASCO (Riyadh, Saudi Arabia)
	SABIC (Riyadh, Saudi Arabia)
	SAUDI KAYAN (Jubail, Saudi Arabia)
	SAUDI CEMENT (Dammam, Saudi Arabia)
	YSCC (Riyadh, Saudi Arabia)
	EPCCO
	GASCO (Riyadh, Saudi Arabia)
	YANSAB (Yanbu, Saudi Arabia)

presents examples of firms that reported information about accounting policy items that did not qualify as risk disclosures in Saudi corporate reports.

4. Research Findings

This section details the research findings, starting with background data and descriptive statistics of the sampled companies. Next, financial risk disclosure scores of companies are presented by sectors and categories, followed by non-financial risk disclosure scores.

Table 9. Background data and descriptive statistics.

Sectors		Companies	Date of Establishment	Date of Issuing	Assets	Net Income	Capital
Energy Sector	1	Saudi Arabian Oil Co. (SAUDI ARAMCO) (Dhahran, Saudi Arabia)	13 November 1988	11 December 2019	1,494,126,000	330,693,000	7,050,000,000,000
	2	Rabigh Refining and Petrochemical Co. (PETRO RABIGH)	19 September 2005	3 November 2007	74,029,648	−602,960	18,974,160,000
	3	National Shipping Company of Saudi Arabia (BAHRI) (Riyadh, Saudi Arabia)	22 January 1978	N\A *	20,560,827	645,070	15,750,000,000
	4	Aldrees Petroleum and Transport Services Co. (ALDREES) (Riyadh, Saudi Arabia)	12 September 1962	26 February 2006	3,585,220	291,743,658	3,750,000,000
	5	Saudi Arabia Refineries Co. (SARCO) (Jeddah, Saudi Arabia)	1 February 1961	N\A *	465,021,769	17,170,699	670,500,000
	Mean				411,464,693	127,929,893	1,417,828,932,000
	SD				634,046,089	168,030,910	3,148,488,851,467
	MAX				1,494,126,000	330,693,000	7,050,000,000,000
	MIN				3,585,220	−602,960.00	670,500,000
Utility Sector	1	Saudi Electricity Co. (Riyadh, Saudi Arabia)	14 December 1999	5 April 2000	479,829,990	1,387,557	84,248,526,939
	2	National Gas and Industrialization Co. (GASCO) (Riyadh, Saudi Arabia)	9 December 1963	N\A *	2,114,580,974	142,369,283	2,317,500,000
	3	Alkhorayef Water and Power Technologies Co. (AWPT) (Riyadh, Saudi Arabia)	2 September 1991	1 June 2020	405,930,624	91,727,369	0
	Mean				1,000,113,862.67	78,494,736.33	28,855,342,313
	SD				965,863,854.67	71,416,305.50	47,985,897,707.77
	MAX				2,114,580,974	142,369,283	84,248,526,93
	MIN				405,930,624	1,387,557	0
Material Sector	1	Saudi Basic Industries Corp. (SABIC) (Riyadh, Saudi Arabia)	6 September 1976	4 January 1977	310,365,751,000	8,462,836,000	281,700,000,000
	2	Saudi Arabian Mining Co. (MA’ADEN) (Riyadh, Saudi Arabia)	23 March 1997	28 July 2008	97,657,597,048	−1,528,137,524	54,638,246,882.40
	3	Yanbu National Petrochemical Co.	11 February 2006	20 February 2006	18,070,407		31,443,750,000
	4	SABIC Agri-Nutrients Co. (Riyadh, Saudi Arabia)	11 September 1965	7 March 1990	9,662,542,000	1,473,919,000	32,291,666,615
	5	Saudi Kayan Petrochemical Co. (SAUDI KAYAN) (Jubail, Saudi Arabia)	12 June 2007	23 June 2007	35,327,795,000	−636,777,000	16,650,000,000
	6	Sahara International Petrochemical Co. (SIPCHEM)) (Khobar, Saudi Arabia	22 December 1999	9 September 2006	23,991,272,000	244,708,000	13,170,666,642.72
	7	National Petrochemical Co. (PETROCHEM) (Riyadh, Saudi Arabia)	8 September 2007	8 August 2009	19,015,723,000	1,018,161,000	11,395,200,000
	8	Saudi Industrial Investment Group (SIIG) (Riyadh, Saudi Arabia)	1 January 1996	15 February 2004	22,207,304,000	1,286,990,000	10,800,000,000
	9	Saudi Cement Co. (SAUDI CEMENT) (Dammam, Saudi Arabia)	-	23 November 1955	3,909,280,000	451,397,000	10,725,300,000
	10	Advanced Petrochemical Co. (ADVANCED) (Dammam, Saudi Arabia)	1 October 2005	20 January 2007	3,802,588,000	759,308,000	10,693,785,960
	11	National Industrialization Co. (TASNEE) (Riyadh, Saudi Arabia)	19 May 1985	N\A *	22,939,499,000	−1,843,256,000	9,150,745,790.88
	12	Southern Province Cement Co. (SPCC) (Abha, Saudi Arabia)	21 January 1978	N\A *	4,200,173,479	462,711,487	9,016,000,000
	13	Yanbu Cement Co. (YCC) (Yanbu, Saudi Arabia)	18 March 1977	N\A *	3,690,527,264	257,675,907	6,008,625,000
	14	Qassim Cement Co. (QACCO) (Buraydah, Saudi Arabia)	11 August 1976	N\A *	2,056,671,016	360,735,095	5,949,000,000
	15	Yamama Cement Co. (YSCC) (Riyadh, Saudi Arabia)	8 August 1961	N\A *	5,565,506,080	256,335,297	5,244,750,000
	16	Arabian Cement Co. (ACC) (Jeddah, Saudi Arabia)	14 June 1960	N\A *	3,646,924,000	212,548,000	3,680,000,000
	17	City Cement Co. (CITY CEMENT) (Riyadh, Saudi Arabia)	19 June 2005	13 October 2012	2,331,361,282	180,945,473	3,386,680,000
	18	Eastern Province Cement Co. (EPCCO) (Khobar, Saudi Arabia)	9 January 1982	N\A *	2,764,934,000	180,696,000	3,096,000,000
	19	Northern Region Cement Co. (NORTHERN CEMENT) (Turaif, Saudi Arabia)	16 March 2006	20 March 2006	3,218,787,991	92,753,025	2,131,200,000
	20	Alujain Corp. (ALUJAIN) (Riyadh, Saudi Arabia)	21 December 1991	N\A *	1,496,722,000	191,156,000	2,076,000,000
	21	Najran Cement Co. (NAJRAN CEMENT) (Najran, Saudi Arabia)	7 October 2005	12 May 2012	2,484,328,000	53,515,000	2,033,200,000
	22	Tabuk Cement Co. (TCC) (Tabuk, Saudi Arabia)	20 July 1994	N\A *	1,813,923,110	24,189,800	1,422,000,000
	23	Al Jouf Cement Co. (JOUF CEMENT) (Riyadh, Saudi Arabia)	5 August 2006	11 August 2010	2,319,337,706	5,256,112	1,368,510,000
	24	Umm Al-Qura Cement Co. (UACC) (Riyadh, Saudi Arabia)	4 July 2013	12 June 2014	1,266,621,166	79,823,172	1,215,500,000.00
	25	Hail Cement Co. (HCC) (Hail, Saudi Arabia)	30 November 2010	16 October 2011	1,313,855,586	59,657,071	1,194,380,000
	26	Zamil Industrial Investment Co. (ZAMIL INDUST) (Khobar, Saudi Arabia)	8 July 1998	9 February 2002	5,643,398,000	129,710,000	1,089,600,000
	27	Saudi Steel Pipe Co. (SSP) (Dammam, Saudi Arabia)	10 June 1980	4 August 2009	1,118,893,791	−26,828,587	1,054,680,000
	28	Methanol Chemicals Co. (CHEMANOL) (Jubail, Saudi Arabia)	1 August 1989	16 September 2008	1,943,037,580	−84,075,501	1,007,010,000.00
	29	Al Yamamah Steel Industries Co. (ALYAMAMAH STEEL) (Riyadh, Saudi Arabia)	9 January 1989	22 May 2016	1,552,124,684	−38,463,736	960,120,000
	30	United Wire Factories Co. (ASLAK) (Riyadh, Saudi Arabia)	10 October 1990	21 August 2011	603,217,953	22,118,397	761,670,000
	31	Takween Advanced Industries Co. (TAKWEEN) (Khobar, Saudi Arabia)	21 October 1993	7 February 2012	1,966,409,000	−96,717,000	760,000,000
	32	Middle East Paper Co. (MEPCO) (Jeddah, Saudi Arabia)	6 August 2000	3 May 2015	1,576,810,754	6,127,972	715,000,000
	33	Zahrat Al Waha for Trading Co. (OASIS) (Riyadh, Saudi Arabia)	6 October 2003	17 September 2017	489,794,251	56,635,828	705,000,000
	34	Basic Chemical Industries Co. (BCI) (Dammam, Saudi Arabia)	1 February 1973	16 June 2008	756,351,951	59,385,672	659,450,000.00
	35	Al Kathiri Holding Co. (ALKATHIRI) (Riyadh, Saudi Arabia)	31 August 2008	9 July 2017	110,283,613	16,015,975	596,756,160
	36	The National Company for Glass Industries (ZOUJAJ) (Riyadh, Saudi Arabia)	17 January 1990	N\A *	739,153,713	−29852802	581,014,000.00
	37	Nama Chemicals Co. (NAMA CHEMICALS) (Jubail, Saudi Arabia)	12 May 1992	22 October 1998	1,302,602,000	1,176,000	555,542,400
	38	Arabian Pipes Co. (APC) (Riyadh, Saudi Arabia)	24 August 1991	21 December 1992	1,133,887,000	66,937,000	510,400,000
	39	National Gypsum Co. (NGC) (Riyadh, Saudi Arabia)	30 April 1959	N\A *	464,265,968	10,906,493	430,033,337.86
	40	National Metal Manufacturing and Casting Co. (MAADANIYAH) (Jubail, Saudi Arabia)	3 December 1990	N\A *	452,356,132	−65,108,989	429,552,719.92
	41	Filing and Packing Materials Manufacturing Co. (FIPCO) (Riyadh, Saudi Arabia)	16 June 1991	N\A *	292,670,777	26,026,206	332,350,000
	42	Saudi Paper Manufacturing Co. (SPM) (Dammam, Saudi Arabia)	13 November 1989	14 June 2006	935,747,275	−27,468,911	233,680,000
Mean					14,479,716,632.79	288,922,850.10	12,901,501,559.73
SD					49,524,857,654.14	1,402,585,357.15	43,793,988,925.26
MAX					310,365,751,000	8,462,836,000	281,700,000,000.
MIN					18,070,407	−1,843,256,000	233,680,000

*: Information is not made available on Tadawul.

provides detailed information about the sample, including corporations’ names, trading names, establishment dates, dates of public trading in Tadawul, and figures regarding total assets, net income, and capitalization for the sampling year. It is revealed that the highest mean of total assets and net income for companies in the material sector are SR 14,479,716,632.79 (standard deviation of SR 49,524,857,654.14) and SR 288,922,850.10 (standard deviation of SR 1,402,585,357.15), respectively. However, the mean capital in this sector is the lowest compared to other sectors, at SR 12,901,501,559.73 (standard deviation of SR 43,793,988,925.26).

Regarding capitalization, the energy sector exhibits the highest mean of SR 1,417,828,932,000 (standard deviation of SR 3,148,488,851,467). However, the net income of the energy sector ranks second, with a mean of SR 127,929,893 (standard deviation of SR 168,030,910). Assets in the energy sector are the lowest, with a mean of SR 411,464,693 (standard deviation of SR 634,046,089).

The utility sector consistently ranks second in terms of assets and capitalization, with means of SR 1,000,113,862.67 (standard deviation of SR 965,863,854.67) and SR 28,855,342,313 (standard deviation of SR 47,985,897,707.77), respectively. However, the utility sector has the lowest net income compared to other sectors, with a mean of SR 78,494,736.33 (standard deviation of 71,416,305.50).

The data source was the Tadawul website [107]. Descriptive statistics were calculated by the authors.

4.1. Financial Risk Disclosure

Table 10. Financial risk disclosure ratios: companies and sectors.

Companies	Results as	Economic Risk	Other Financial Risk	Financial Instruments	Derivatives Hedging	Disclosure per Companies in %
		6 Items	3 Items	2 Items	2 Items	13 Items
ARAMCO (Dhahran, Saudi Arabia)	Score	6\6	3\3	1\2	2\2	12\13
	Ratio	1	1	0.5	1	0.92
PETRO RABIGH (Rabigh, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
SARCO (Jeddah, Saudi Arabia)	Score	2\6	2\3	1\2	0\2	5\13
	Ratio	0.33	0.67	0.5	0	0.38
ALDREES (Riyadh, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
BAHRI (Riyadh, Saudi Arabia)	Score	3\6	3\3	1\2	1\2	8\13
	Ratio	0.5	1	0.5	0.5	0.62
Sector Mean	57%
GASCO (Riyadh, Saudi Arabia)	Score	2\6	2\3	1\2	0\2	5\13
	Ratio	0.33	0.67	0.5	0	0.38
Saudi Electricity Co. (Riyadh, Saudi Arabia)	Score	5\6	3\3	0\2	2\2	10\13
	Ratio	0.83	1	0	1	0.77
AWPT (Riyadh, Saudi Arabia)	Score	4\6	3\3	0\2	0\2	7\13
	Ratio	0.67	1	0	0	0.54
Sector Mean	56%
SABIC (Riyadh, Saudi Arabia)	Score	5\6	3\3	2\2	2\2	12\13
	Ratio	0.83	1	1	1	0.92
MA’ADEN (Riyadh, Saudi Arabia)	Score	4\6	2\3	1\2	2\2	9\13
	Ratio	0.67	0.67	0.5	1	0.69
YANSAB (Yanbu, Saudi Arabia)	Score	5\6	3\3	0\2	0\2	8\13
	Ratio	0.83	1	0	0	0.62
SABIC Agri-Nutrients Co. (Riyadh, Saudi Arabia)	Score	4\6	2\3	2\2	0\2	8\13
	Ratio	0.67	0.67	1	0	0.62
Saudi Kayan (Jubail, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
SIPCHEM (Khobar, Saudi Arabia	Score	5\6	3\3	2\2	2\2	12\13
	Ratio	0.83	1	1	1	0.92
PETROCHEM (Riyadh, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
SIIG (Riyadh, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
SAUDI CEMENT (Dammam, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
ADVANCED (Dammam, Saudi Arabia)	Score	4\6	3\3	2\2	2\2	11\13
	Ratio	0.67	1	1	1	0.85
TASNEE (Riyadh, Saudi Arabia)	Score	4\6	3\3	1\2	2\2	10\13
	Ratio	0.67	1	0.5	1	0.77
SPCC (Abha, Saudi Arabia)	Score	3\6	2\3	0\2	0\2	5\13
	Ratio	0.5	0.67	0	0	0.38
YCC (Yanbu, Saudi Arabia)	Score	3\6	2\3	0\2	1\2	6\13
	Ratio	0.5	0.67	0	0.5	0.46
QACCO (Buraydah, Saudi Arabia)	Score	2\6	2\3	0\2	0\2	4\13
	Ratio	0.33	0.67	0	0	0.31
YSCC (Riyadh, Saudi Arabia)	Score	3\6	2\3	1\2	0\2	6\13
	Ratio	0.5	0.67	0.5	0	0.46
ACC (Jeddah, Saudi Arabia)	Score	3\6	2\3	2\2	2\2	9\13
	Ratio	0.5	0.67	1	1	0.69
CITY CEMENT (Riyadh, Saudi Arabia)	Score	3\6	3\3	0\2	0\2	6\13
	Ratio	0.5	1	0	0	0.46
EPCCO (Khobar, Saudi Arabia	Score	2\6	3\3	1\2	1\2	7\13
	Ratio	0.33	1	0.5	0.5	0.54
NORTHERN CEMENT (Turaif, Saudi Arabia)	Score	3\6	3\3	0\2	0\2	6\13
	Ratio	0.5	1	0	0	0.46
ALUJAIN (Riyadh, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
NAJRAN CEMENT (Najran, Saudi Arabia)	Score	4\6	3\3	0\2	0\2	7\13
	Ratio	0.67	1	0	0	0.54
TCC (Tabuk, Saudi Arabia)	Score	4\6	2\3	1\2	0\2	7\13
	Ratio	0.67	0.67	0.5	0	0.54
Jouf Cement (Riyadh, Saudi Arabia)	Score	4\6	1\3	1\2	0\2	6\13
	Ratio	0.67	0.33	0.5	0	0.46
UACC (Riyadh, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
HCC (Hail, Saudi Arabia)	Score	4\6	1\3	0\2	0\2	5\13
	Ratio	0.67	0.33	0	0	0.38
ZAMIL INDUST (Khobar, Saudi Arabia)	Score	3\6	3\3	2\2	0\2	8\13
	Ratio	0.5	1	1	0	0.62
SSP (Dammam, Saudi Arabia)	Score	4\6	3\3	0\2	0\2	7\13
	Ratio	0.67	1	0	0	0.54
CHEMANOL (Jubail, Saudi Arabia)	Score	3\6	2\3	0\2	0\2	5\13
	Ratio	0.5	0.67	0	0	0.38
ALYAMAMAH STEEL (Riyadh, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
ASLAK (Riyadh, Saudi Arabia)	Score	6\6	3\3	0\2	0\2	9\13
	Ratio	1	1	0	0	0.69
TAKWEEN (Khobar, Saudi Arabia)	Score	5\6	2\3	2\2	0\2	9\13
	Ratio	0.83	0.67	1	0	0.69
MEPCO (Jeddah, Saudi Arabia)	Score	4\6	3\3	1\2	1\2	9\13
	Ratio	0.67	1	0.5	0.5	0.69
OASIS (Riyadh, Saudi Arabia)	Score	3\6	3\3	0\2	0\2	6\13
	Ratio	0.5	1	0	0	0.46
BCI (Dammam, Saudi Arabia)	Score	6\6	3\3	0\2	2\2	11\13
	Ratio	1	1	0	1	0.85
ALKATHIRI (Riyadh, Saudi Arabia)	Score	3\6	1\3	0\2	0\2	4\13
	Ratio	0.5	0.33	0	0	0.31
ZOUJAJ (Riyadh, Saudi Arabia)	Score	5\6	1\3	0\2	0\2	6\13
	Ratio	0.83	0.33	0	0	0.46
NAMA CHEMICALS (Jubail, Saudi Arabia)	Score	4\6	3\3	0\2	0\2	7\13
	Ratio	0.67	1	0	0	0.54
APC (Riyadh, Saudi Arabia)	Score	4\6	1\3	0\2	0\2	5\13
	Ratio	0.67	0.33	0	0	0.38
NGC (Riyadh, Saudi Arabia)	Score	3\6	1\3	0\2	0\2	4\13
	Ratio	0.5	0.33	0	0	0.31
Maadaniyah (Jubail, Saudi Arabia)	Score	4\6	2\3	0\2	0\2	6\13
	Ratio	0.67	0.67	0	0	0.46
FIPCO (Riyadh, Saudi Arabia)	Score	4\6	1\3	0\2	0\2	5\13
	Ratio	0.67	0.33	0	0	0.38
SPM (Dammam, Saudi Arabia)	Score	4\6	2\3	1\2	0\2	7\13
	Ratio	0.67	0.67	0.5	0	0.54
Sector Mean	54%
Sample Mean	56%

reveals that financial risk disclosure scores vary among companies, ranging from a minimum of 31% to a maximum of 92%. ARAMCO, SABIC, and SIPCHEM have disclosed the highest levels (92%) of financial risk exposure. Companies that disclosed more than 75% of the items are ADVANCED and BCI, with a risk disclosure proportion of 85%, while Saudi Electricity Co. and TASNEE come second at 77%. However, QACCO, ALKATHIRI, and NGC disclosed the lowest levels of financial risk exposure at 31%, disclosing risk for only four items.

The sample mean (56%) reveals a moderate level of financial risk disclosure in the Saudi capital market. Disclosed financial risks in the energy, utility, and material sectors amounted to 57%, 56%, and 54%, respectively.

Table 11. Financial risk disclosure by categories.

Financial Risk Disclosure
Categories	Economic Risk	Other Financial Risk	Financial Instruments	Derivatives Hedging
Mean	64%	74%	23%	20%

demonstrates that “other financial risk”, at 74%, is the most common category for financial RDI among the sampled companies. It is followed by “economic risk” disclosure at 64%. Apparently, all companies disclosed risks related to liquidity, credit, and currency. This is likely a consequence of the mandatory adoption of IFRS in Saudi Arabia since 2017 [107]. Alsheikh et al. [101] documented a positive relationship between IFRS adoption and liquidity, credit, and market risk disclosure.

Furthermore, corporations that disclosed risk for all items under the “other financial risks” category represent 40% of the sample, as illustrated in

Table 12. Percentages of companies disclosing all or no items under “Other Financial Risks” and “Derivatives Hedging” categories.

Companies That Disclosed All Items under the “Other Financial Risks” Category		Companies That Did Not Disclose Any Item under the “Derivatives Hedging” Category
ARAMCO (Dhahran, Saudi Arabia)	EPCCO (Khobar, Saudi Arabia	PETRO RABIGH (Rabigh, Saudi Arabia)	SAUDI CEMENT (Dammam, Saudi Arabia)	UACC (Riyadh, Saudi Arabia)	ZOUJAJ (Riyadh, Saudi Arabia)
BAHRI (Riyadh, Saudi Arabia)	NORTHERN CEMENT (Turaif, Saudi Arabia)	ALDREES (Riyadh, Saudi Arabia)	SPCC (Abha, Saudi Arabia)	HCC (Hail, Saudi Arabia)	NAMA CHEMICALS (Jubail, Saudi Arabia)
Saudi Electricity Co. (Riyadh, Saudi Arabia)	NAJRAN CEMENT (Najran, Saudi Arabia)	SARCO (Jeddah, Saudi Arabia)	QACCO (Buraydah, Saudi Arabia)	ZAMIL INDUST (Khobar, Saudi Arabia)	APC (Riyadh, Saudi Arabia)
AWPT (Riyadh, Saudi Arabia)	ZAMIL INDUST (Khobar, Saudi Arabia)	GASCO (Riyadh, Saudi Arabia)	YSCC (Riyadh, Saudi Arabia)	SSP (Dammam, Saudi Arabia)	NGC (Riyadh, Saudi Arabia)
SABIC (Riyadh, Saudi Arabia)	SSP (Dammam, Saudi Arabia)	AWPT (Riyadh, Saudi Arabia)	CITY CEMENT (Riyadh, Saudi Arabia)	CHEMANOL (Jubail, Saudi Arabia)	Maadaniyah (Jubail, Saudi Arabia)
YANSAB (Yanbu, Saudi Arabia)	ASLAK (Riyadh, Saudi Arabia)	YANSAB (Yanbu, Saudi Arabia)	NORTHERN CEMENT (Turaif, Saudi Arabia)	ALYAMAMAH STEEL (Riyadh, Saudi Arabia)	FIPCO (Riyadh, Saudi Arabia)
SIPCHEM (Khobar, Saudi Arabia	MEPCO (Jeddah, Saudi Arabia)	SABIC Agri-Nutrients Co. (Riyadh, Saudi Arabia)	ALUJAIN (Riyadh, Saudi Arabia)	ASLAK (Riyadh, Saudi Arabia)	SPM (Dammam, Saudi Arabia)
ADVANCED (Dammam, Saudi Arabia)	OASIS (Riyadh, Saudi Arabia)	Saudi Kayan (Jubail, Saudi Arabia)	NAJRAN CEMENT (Najran, Saudi Arabia)	TAKWEEN (Khobar, Saudi Arabia)
TASNEE (Riyadh, Saudi Arabia)	BCI (Dammam, Saudi Arabia)	PETROCHEM (Riyadh, Saudi Arabia)	TCC (Tabuk, Saudi Arabia)	OASIS (Riyadh, Saudi Arabia)
CITY CEMENT	NAMA CHEMICALS (Jubail, Saudi Arabia)	SIIG (Riyadh, Saudi Arabia)	Jouf Cement (Riyadh, Saudi Arabia)	ALKATHIRI (Riyadh, Saudi Arabia)
Represent 38% of the sample		Represent 71% of the sample

. However, the derivatives hedging category had the lowest level of disclosure, with only 20% of the sample representation; 74% of the sample did not disclose risks about any item under this category (see Table 12). The high percentage of companies not using derivatives may be attributed to Shariah compliance, which prohibits “riba” (usury) to Muslims. Corporations striving for compliance with Shariah rules abstain from using currency derivatives to avoid “riba” and thereby safeguard customers from the adverse effects [108].

4.2. Non-Financial Risk Disclosure

Table 13. Non-financial risk disclosure ratios (by companies and sectors).

Sectors	Companies	Results as	GR	AP	DH	SI	OP	EM	IT	IN	ST	RD	DHR	ER	ERph	Cch	Disclosure per Company in %
			3 Items	13 Items	1 Item	6 Items	35 Items	10 Items	6 Items	5 Items	37 Items	3 Items	2 Items	4 Items	3 Items	4 Items
Energy	ARAMCO (Dhahran, Saudi Arabia)	Score	3\3	12\13	1\1	6\6	22\32	7\9	2\6	1\5	23\35	1\3	1\2	3\4	1\3	4\4	69%
		Ratio	1	0.92	1	1	0.69	0.78	0.33	0.2	0.66	0.33	0.5	0.75	0.33	1
	PETRO RABIGH (Rabigh, Saudi Arabia)	Score	2\3	9\13	0\1	5\6	8\32	3\9	0\6	1\5	8\35	0\3	0\2	0\4	0\3	0\4	29%
		Ratio	0.67	0.69	0	0.83	0.25	0.33	0	0.2	0.23	0	0	0	0	0
	SARCO (Jeddah, Saudi Arabia)	Score	1\3	7\13	0\1	3\6	3\32	2\9	0\6	0\5	3\35	0\3	0\2	0\4	0.33	0\4	15%
		Ratio	0.33	0.54	0	0.5	0.09	0.22	0	0	0.09	0	0	0	0\3	0
	ALDREES (Riyadh, Saudi Arabia)	Score	3\3	8\13	0\1	6\6	17\32	3\9	2\6	1\5	3\35	0\3	0\2	0\4	0	0\4	34%
		Ratio	1	0.62	0	1	0.53	0.33	0.33	0.2	0.09	0	0	0	0.33	0
	BAHRI (Riyadh, Saudi Arabia)	Score	2\3	11\13	1\0	3\6	15\32	4\9	1\6	1\5	7\35	0\3	1\2	0\4	0\3	0\4	37%
		Ratio	0.67	0.85	1	0.5	0.47	0.44	0.17	0.2	0.2	0	0.5	0	0	0
Sector Mean		37%
Utility	GASCO (Riyadh, Saudi Arabia)	Score	0\3	9\13	0\1	3\6	14\32	3\9	4\6	0\5	12\35	0\3	1\2	0\4	0.33	0\4	37%
		Ratio	0	0.69	0	0.5	0.44	0.33	0.67	0	0.34	0	0.5	0	0\3	0
	Saudi Electricity Co. (Riyadh, Saudi Arabia)	Score	2\3	11\13	1\0	5\6	12\32	5\9	4\6	1\5	17\35	1\3	0\2	0\4	0	0\4	47%
		Ratio	0.67	0.85	1	0.83	0.38	0.56	0.67	0.2	0.49	0.33	0	0	0.33	0
	AWPT (Riyadh, Saudi Arabia)	Score	0\3	10\13	0\1	1\6	0\32	0\9	0\6	0\5	0\35	0\3	0\2	0\4	0\3	0\4	9%
		Ratio	0	0.77	0	0.17	0	0	0	0	0	0	0	0	0	0
Sector Mean		31%
Material	SABIC (Riyadh, Saudi Arabia)	Score	3\3	10\13	1\0	4\6	28\32	5\9	4\6	1\5	19\35	0\3	1\2	1\4	1\3	1\4	63%
		Ratio	1	0.77	1	0.67	0.88	0.56	0.67	0.2	0.45	0	0.5	0.25	0.33	0.25
	MA’ADEN (Riyadh, Saudi Arabia)	Score	1\3	10\13	1\0	5\6	14\32	5\9	3\6	1\5	17\35	0\3	0\2	0\4	1\3	0\4	46%
		Ratio	0.33	0.77	1	0.83	0.44	0.56	0.5	0.2	0.49	0	0	0	0.33	0
	YANSAB (Yanbu, Saudi Arabia)	Score	3\3	9\13	1\0	1\6	22\32	5\9	4\6	0\5	11\35	0\3	2\2	0\4	2\6	1\4	48%
		Ratio	1	0.69	1	0.17	0.69	0.56	0.67	0	0.31	0	1	0	0.67	0.25
	SABIC Agri-Nutrients Co. (Riyadh, Saudi Arabia)	Score	1\3	10\13	0\1	5\6	11\32	6\9	2\6	0\5	10\35	0\3	0\2	0\4	1\3	0\4	37%
		Ratio	0.33	0.77	0	0.83	0.34	0.67	0.33	0	0.29	0	0	0	0.33	0
	Saudi Kayan (Jubail, Saudi Arabia)	Score	3\3	9\13	0\1	5\6	18\32	4\9	4\6	0\5	6\35	0\3	2\2	0\4	1\3	0\4	41%
		Ratio	1	0.69	0	0.83	0.56	0.44	0.67	0	0.17	0	1	0	0.33	0
	SIPCHEM (Khobar, Saudi Arabia	Score	3\3	10\13	1\0	3\6	12\32	3\9	0\6	0\5	7\35	0\3	1\2	0\4	0\3	0\4	32%
		Ratio	1	0.77	1	0.5	0.38	0.33	0	0	0.2	0	0.5	0	0	0
	PETROCHEM (Riyadh, Saudi Arabia)	Score	2\3	11\13	0\1	3\6	10\32	2\9	0\6	1\5	8\35	0\3	0\2	0\4	0\3	0\4	29%
		Ratio	0.67	0.85	0	0.5	0.31	0.22	0	0.2	0.23	0	0	0	0	0
	SIIG (Riyadh, Saudi Arabia)	Score	2\3	11\13	0\1	2\6	10\32	3\9	0\6	1\5	9\35	0\3	1\2	0\4	0\3	1\4	32%
		Ratio	0.67	0.85	0	0.33	0.31	0.33	0	0.2	0.26	0	0.5	0	0	0.25
	SAUDI CEMENT (Dammam, Saudi Arabia)	Score	2\3	10\13	0\1	3\6	10\32	3\9	0\6	0\5	3\35	0\3	0\2	0\4	0\3	0\4	25%
		Ratio	0.67	0.77	0	0.5	0.31	0.33	0	0	0.09	0	0	0	0	0
	ADVANCED (Dammam, Saudi Arabia)	Score	2\3	11\13	0\1	3\6	5\32	4\9	2\6	1\5	12\35	0\3	1\2	0\4	0\3	0\4	33%
		Ratio	0.67	0.85	0	0.5	0.16	0.44	0.33	0.2	0.34	0	0.5	0	0	0
	TASNEE (Riyadh, Saudi Arabia)	Score	2\3	11\13	1\0	3\6	14\32	4\9	2\6	0\5	9\35	1\3	1\2	0\4	0\3	0\4	38%
		Ratio	0.67	0.85	1	0.5	0.44	0.44	0.33	0	0.26	0.33	0.5	0	0	0
	SPCC (Abha, Saudi Arabia)	Score	2\3	9\13	0\1	4\6	5\32	3\9	0\6	0\5	3\35	0\3	0\2	0\4	0\3	0\4	21%
		Ratio	0.67	0.69	0	0.67	0.16	0.33	0	0	0.09	0	0	0	0	0
	YCC (Yanbu, Saudi Arabia)	Score	1\3	11\13	1\0	4\6	9\32	3\9	0\6	0\5	6\35	1\3	0\2	0\4	0\3	1\4	29%
		Ratio	0.33	0.85	1	0.67	0.28	0.33	0	0	0.17	0.33	0	0	0	0.25
	QACCO (Buraydah, Saudi Arabia)	Score	0\3	9\13	1\0	5\6	10\32	3\9	0\6	0\5	8\35	0\3	0\2	0\4	0\3	0\4	29%
		Ratio	0	0.69	1	0.83	0.31	0.33	0	0	0.23	0	0	0	0	0
	YSCC (Riyadh, Saudi Arabia)	Score	2\3	6\13	0\1	0\6	6\32	3\9	3\6	0\5	9\35	0\3	0\2	0\4	0\3	0\4	24%
		Ratio	0.67	0.46	0	0	0.19	0.33	0.5	0	0.26	0	0	0	0	0
	ACC (Jeddah, Saudi Arabia)	Score	3\3	10\13	1\0	5\6	12\32	4\9	3\6	0\5	9\35	0\3	0\2	0\4	0\3	1\4	38%
		Ratio	1	0.77	1	0.83	0.38	0.44	0.5	0	0.26	0	0	0	0	0.25
	CITY CEMENT (Riyadh, Saudi Arabia)	Score	3\3	8\13	0\1	3\6	12\32	3\9	0\6	0\5	1\35	0\3	1\2	0\4	0\3	0\4	25%
		Ratio	1	0.62	0	0.5	0.38	0.33	0	0	0.03	0	0.5	0	0	0
	EPCCO (Khobar, Saudi Arabia	Score	3\3	9\13	0\1	3\6	8\32	3\9	0\6	0\5	11\35	0\3	0\2	0\4	0\3	0\4	29%
		Ratio	1	0.69	0	0.5	0.25	0.33	0	0	0.31	0	0	0	0	0
	NORTHERN CEMENT (Turaif, Saudi Arabia)	Score	3\3	8\13	0\1	3\6	7\32	4\9	0\6	0\5	10\35	0\3	0\2	0\4	0\3	0\4	28%
		Ratio	1	0.62	0	0.5	0.22	0.44	0	0	0.29	0	0	0	0	0
	ALUJAIN (Riyadh, Saudi Arabia)	Score	1\3	9\13	0\1	4\6	8\32	3\9	0\6	0\5	4\35	0\3	1\2	0\4	0\3	0\4	24%
		Ratio	0.33	0.69	0	0.67	0.25	0.33	0	0	0.11	0	0.5	0	0	0
	NAJRAN CEMENT (Najran, Saudi Arabia)	Score	3\3	9\13	0\1	3\6	7\32	3\9	0\6	0\5	7\35	0\3	0\2	0\4	0\3	0\4	25%
		Ratio	1	0.69	0	0.5	0.22	0.33	0	0	0.2	0	0	0	0	0
	TCC (Tabuk, Saudi Arabia)	Score	2\3	7\13	0\1	3\6	11\32	3\9	0\6	0\5	7\35	0\3	1\2	0\4	0\3	0\4	27%
		Ratio	0.67	0.54	0	0.5	0.34	0.33	0	0	0.2	0	0.5	0	0	0
	Jouf Cement (Riyadh, Saudi Arabia)	Score	3\3	10\13	0\1	3\6	10\32	3\9	3\6	0\5	4\35	0\3	0\2	0\4	0\3	0\4	29%
		Ratio	1	0.77	0	0.5	0.31	0.33	0.5	0	0.11	0	0	0	0	0
	UACC (Riyadh, Saudi Arabia)	Score	2\3	6\13	0\1	3\6	16\32	3\9	0\6	0\5	10\35	0\3	0\2	0\4	0\3	0\4	32%
		Ratio	0.67	0.46	0	0.5	0.5	0.33	0	0	0.29	0	0	0	0	0
	HCC (Hail, Saudi Arabia)	Score	3\3	6\13	0\1	5\6	12\32	4\9	2\6	1\5	5\35	0\3	0\2	0\4	1\3	1\4	32%
		Ratio	1	0.46	0	0.83	0.38	0.44	0.33	0.2	0.14	0	0	0	0.33	0.25
	ZAMIL INDUST (Khobar, Saudi Arabia)	Score	1\3	11\13	0\1	5\6	10\32	3\9	1\6	1\5	3\35	0\3	1\2	0\4	0\3	0\4	29%
		Ratio	0.33	0.85	0	0.83	0.31	0.33	0.17	0.2	0.09	0	0.5	0	0	0
	SSP (Dammam, Saudi Arabia)	Score	1\3	10\13	0\1	5\6	16\32	4\9	3\6	0\5	5\35	0\3	1\2	0\4	1\3	2\4	38%
		Ratio	0.33	0.77	0	0.83	0.5	0.44	0.5	0	0.14	0	0.5	0	0.33	0.5
	CHEMANOL (Jubail, Saudi Arabia)	Score	3\3	9\13	0\1	5\6	10\32	4\9	0\6	0\5	9\35	0\3	0\2	0\4	0\3	0\4	32%
		Ratio	1	0.69	0	0.83	0.31	0.44	0	0	0.26	0	0	0	0	0
	ALYAMAMAH STEEL (Riyadh, Saudi Arabia)	Score	2\3	9\13	0\1	5\6	9\32	3\9	0\6	0\5	2\35	0\3	0\2	0\4	0\3	0\4	24%
		Ratio	0.67	0.69	0	0.83	0.28	0.33	0	0	0.06	0	0	0	0	0
	ASLAK (Riyadh, Saudi Arabia)	Score	1\3	11\13	0\1	5\6	9\32	4\9	0\6	0\5	7\35	0\3	0\2	0\4	0\3	0\4	29%
		Ratio	0.33	0.85	0	0.83	0.28	0.44	0	0	0.2	0	0	0	0	0
	TAKWEEN (Khobar, Saudi Arabia)	Score	3\3	10\13	0\1	5\6	20\32	4\9	0\6	3\5	11\35	0\3	0\2	0\4	1\3	2\4	47%
		Ratio	1	0.77	0	0.83	0.63	0.44	0	0.6	0.31	0	0	0	0.33	0.5
	MEPCO (Jeddah, Saudi Arabia)	Score	2\3	12\13	0\1	5\6	18\32	3\9	0\6	0\5	8\35	0\3	1\2	0\4	1\3	0\4	40%
		Ratio	0.67	0.92	0	0.83	0.56	0.33	0	0	0.23	0	0.5	0	0.33	0
OASIS (Riyadh, Saudi Arabia)	Score	1\3	9\13	0\1	6\6	12\32	4\9	1\6	0\5	14\35	0\3	0\2	0\4	0\3	0\4	37%
	Ratio	0.33	0.69	0	1	0.38	0.44	0.17	0	0.4	0	0	0	0	0
BCI (Dammam, Saudi Arabia)	Score	2\3	9\13	0\1	5\6	14\32	2\9	0\6	1\5	7\35	0\3	1\2	0\4	1\3	0\4	33%
	Ratio	0.67	0.69	0	0.83	0.44	0.22	0	0.2	0.2	0	0.5	0	0.33	0
ALKATHIRI (Riyadh, Saudi Arabia)	Score	1\3	7\13	0\1	3\6	8\32	3\9	0\6	0\5	7\35	0\3	0\2	0\4	0\3	0\4	23%
	Ratio	0.33	0.54	0	0.5	0.25	0.33	0	0	0.2	0	0	0	0	0
ZOUJAJ (Riyadh, Saudi Arabia)	Score	2\3	7\13	0\1	5\6	8\32	2\9	0\6	0\5	5\35	0\3	1\2	0\4	0\3	0\4	24%
	Ratio	0.67	0.54	0	0.83	0.25	0.22	0	0	0.14	0	0.5	0	0	0
NAMA CHEMICALS (Jubail, Saudi Arabia)	Score	1\3	9\13	0\1	4\6	18\32	4\9	1\6	0\5	7\35	0\3	0\2	0\4	1\3	0\4	36%
	Ratio	0.33	0.69	0	0.67	0.56	0.44	0.17	0	0.2	0	0	0	0.33	0
APC (Riyadh, Saudi Arabia)	Score	1\3	8\13	0\1	4\6	10\32	3\9	0\6	0\5	10\35	0\3	0\2	0\4	0\3	0\4	29%
	Ratio	0.33	0.62	0	0.67	0.31	0.33	0	0	0.29	0	0	0	0	0
NGC (Riyadh, Saudi Arabia)	Score	1\3	7\13	0\1	4\6	12\32	3\9	0\6	0\5	8\35	0\3	0\2	0\4	1\3	1\4	29%
	Ratio	0.33	0.54	0	0.67	0.38	0.33	0	0	0.23	0	0	0	0.33	0.25
MAADANIYAH (Jubail, Saudi Arabia)	Score	2\3	9\13	0\1	4\6	9\32	3\9	0\6	0\5	9\35	0\3	0\2	0\4	0\3	0\4	29%
	Ratio	0.67	0.69	0	0.67	0.28	0.33	0	0	0.26	0	0	0	0	0
FIPCO (Riyadh, Saudi Arabia)	Score	3\3	8\13	0\1	3\6	19\32	6\9	2\6	0\5	19\35	1\3	0\2	0\4	2\3	0\4	50%
	Ratio	1	0.62	0	0.5	0.59	0.67	0.33	0	0.54	0.33	0	0	0.67	0
SPM (Dammam, Saudi Arabia)	Score	2\3	10\13	0\1	3\6	17\32	5\9	2\6	1\5	9\35	0\3	1\2	0\4	0\3	0\4	40%
	Ratio	0.67	0.77	0	0.5	0.53	0.56	0.33	0.2	0.26	0	0.5	0	0	0
Sector Mean		33%
Sample Mean		33%

illustrates divergent non-financial risk disclosure scores among companies. They range from a minimum of 9% to a maximum of 69%. ARAMCO disclosed the highest levels of non-financial risk exposure at 69%, followed by SABIC at 63%. FIBCO disclosed around half of the risk items, at 50%. However, all remaining firms, representing 94% of the sample, disclosed less than 50% of their non-financial risks.

Moreover, SARCO and AWPT disclosed the least, at 9% and 15%, respectively. Both firms did not disclose any items from the 6th and 12th categories. The recent listing of AWPT on the Saudi capital market may contribute to its low level of disclosure. Furthermore, AWPT had the lowest capital in the sample, which was zero.

The sample mean of 33% in Table 13 indicates a low non-financial risk disclosure in the Saudi capital market. The energy, utility, and material sectors reported 37%, 31%, and 33% of non-financial risk items, respectively. Only two companies—ARAMCO from the energy sector and SABIC from the materials sector—reported disclosure for more than 50% of the considered items, at 71% and 65% levels, respectively; this seems to have ultimately affected their sectors’ overall disclosure ratios.

As shown in Table 13, ARAMCO, SABIC, Saudi Electricity Co., and YANSAB had the highest risk disclosure rates at 71%, 65%, 50%, and 50%, respectively. This indicates a positive correlation between firm size and corporate risk disclosure in the Saudi capital market. All remaining firms, representing 92% of the sample, disclosed less than 50% of their non-financial risk.

4.2.1. Non-Financial Risk Disclosure by Categories

Regarding the categories, the results indicate that the most common category for non-financial RDI among sample companies is “accounting policies”, at 71%. Within this category, companies’ disclosure ratios range between 92% and 54%, with only three companies having ratios under 50%. Moreover, under this category, all sample corporations reported disclosure regarding the risk management policy (general) item. The items “use of estimates judgements”, “inventory evaluation”, and “foreign currency translation” were disclosed by 49 out of the 50 corporations. The high level of disclosure in this category is attributed to the mandatory IFRS adoption requirements in Saudi Arabia [105].

General risk and segment information categories are the second- and third-most disclosed categories, at 65% and 64%, respectively. The most disclosed items are related to business major, geographical major, and geographical concentration segments, with 92% of the sample disclosing related risks (

Table 14. Non-financial risk disclosure by categories.

Categories Mean	Non-Financial Risk Disclosure
	GR	AP	DH	SI	OP	EM	IT
	65%	71%	22%	64%	37%	42%	18%
	IN	ST	RD	DHR	ER	ERph	Cch
	7%	24%	3%	21%	2%	12%	8%

).

Counterintuitively, no company disclosed information about the eight items under the different categories listed in

Table 15. Items undisclosed by any of the sample companies.

Reservations for chartered accountants under the “operational risks” category.

Accessibility by unauthorized personnel under the “information-processing and technology risk” category.

Conflicts of interest.

Evasion or avoidance of tax regulation under the “integrity risk” category.

Incompleteness of ongoing research and development projects and breach of trust in research and development confidentiality under “research and development risks” category.

Market risk under the “environmental risks” (risks related to transition to a lower-carbon economy) category.

Food security under the “environmental risks (physical risks)” category.

.

Interestingly, even though the category “environmental risks (related to transition to a lower-carbon economy)” had a disclosure ratio of 2%, primarily driven by ARAMCO and SABIC’s disclosures on related items, other companies did not disclose any items under this category. In the utility sector, Saudi Electricity Co. and AWPT did not disclose risks about any item under the “environmental risk” and “climate change” categories. This is partially attributed to the nature of their operations. Despite the considerable effect of these companies’ operations on other sample companies, they chose not to disclose.

4.2.2. Non-Financial Risk Disclosure by Sectors and Companies

While financial risk is moderately disclosed in the Saudi capital market, non-financial risk disclosure remains notably low, possibly because firms and regulators pay more attention to the former.

The sample mean (35%) indicates low-risk disclosure in the Saudi capital market (

Table 16. Sectors’ ratio of financial, non-financial, and aggregate risk disclosure.

	Energy Sector	Utility Sector	Material	Mean
Financial Disclosure	57%	56%	54%	56%
Non-Financial Disclosure	37%	31%	33%	33%
Total	39%	33%	35%	35%
SAMPLE MEAN	35%

). The energy, utility, and material sectors reported disclosure rates of only 39%, 33%, and 35%, respectively, for the considered risk items. Only two companies—ARAMCO from the energy sector and SABIC from the materials sector—achieved disclosure rates higher than 50% for non-financial risk within their respective sectors. However, even the highest ratio of non-financial disclosure does not reach 35% overall. This suggests that these two companies ultimately affect the final ratio in the sample. Despite AWPT disclosing only 11% of its non-financial risks, the disclosures from the other two companies did not reach even 45%.

5. Conclusions, Implications, and Limitations

This study empirically explores the extent to which firms in the Saudi capital market disclose financial and non-financial risk-related information. An index comprising 13 financial and 126 non-financial risk-related items, totaling 139 items, was used to understand the presence of such disclosures in the annual corporate reports of corporations listed in the Saudi capital market. The findings reveal a moderate level of financial risk disclosure, with a sample mean of 56%. Specifically, the energy, utility, and material sectors disclosed financial risks at rates of 57%, 56%, and 54%, respectively. The most common category for financial RDI was “Other financial risks”, reported by 74% of the sample companies, followed by disclosures in the “Economic Risks” category at 64%. Notably, all companies disclosed risks related to liquidity, credit, and currency.

In contrast, non-financial risk was found to be low, with a sample mean of 33%. The energy, utility, and material sectors reported non-financial risk items at rates of 39%, 33%, and 35%, respectively. Only two companies—ARAMCO from the energy sector and SABIC from the materials sector—achieved disclosure rates higher than 50% for non-financial risks within their respective sectors. However, even the highest ratio of disclosure did not reach 35% overall.

To attract direct foreign investment, it is recommended that regulators prioritize having high-quality, transparent, and comparable risk information disclosures. Regulatory bodies, both within and outside Saudi Arabia, can utilize the index developed in this study to identify critical items related to financial and non-financial risks that listed corporations should disclose. Additionally, managers can use this index to assess and improve their firms’ risk disclosure practices.

This study is limited by its focus on three sectors—energy, utility, and material—comprising 50 companies. Furthermore, it only examines annual and board reports, excluding interim reports and information available on companies’ official websites. Future research could expand the sample to include the entire Saudi capital market and investigate different time periods to track improvements in disclosure practices over time.