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Executive Summary
This report deals with the analysis of the various risk associated with the selected entity: AGL Energy Limited. There are various theories and models in accounting for the disclosure and non-disclosure of the risk by the management in presenting the general purpose financial reports by the selected entity. It also presents the understanding of the risk which affects the nature of the risks faced by the entities. There are various risks which the business faces such as strategic risk, compliance and regulatory risk, financial risk and operational risk. It is very important for the entity to understand the risk as play an important role in setting the objectives and setting the strategies for achieving the goal.
An Introduction of the selected entity: AGL Energy Limited
AGL energy Limited is the listed public entity in Australia which is engaged in generating and retailing the gas for different uses such as residential and commercial use. It is generating the energy from the power stations which uses thermal power, natural gas, wind, hydroelectricity, solar gas and other sources of the electricity generation. It is the largest generator of the electricity and it is the largest carbon emitter in the country. The entity is retailing and wholesaling the energy and fuel products to the customers throughout the various part of Australia. It is operating in four segments such as retail energy, merchant energy, upstream gas and energy investments. The entity was formed on October 9, 2006 and it is having it headquarter in North Sydney, Australia.
Literature Review
Due to climate changes various risks have emerged for a corporation over the period of time. Various regulatory authorities like AASB and IASB have issued various statements which prescribe the guidelines and rules for the companies to publish the risks (AASB). Major of the risks which are faced by the organization are as below which the organization is required to disclose:
· Physical risks: Due to climate changes, the risk can be occurred in form of acute and chronic risks. Due to natural calamities the business operations may be abruptly impacted, and it can impact the profitability of organization. Further due to rising of temperature and other factors the operations of the company be negatively impacted. The organization should asses the risks on timely basis and should also made the disclosure in financial statements (Staehr, A.E. 2015).
· Strategic risks: Strategic risks are the major kind of risks which an entity should assess and disclose the matter in annual report. Under strategic risks mainly policy related risks are covered because if the strategy of organization is exposed to certain risks then it can demolish the strong organizations as well. The entities should access the strategic risks very carefully and should disclose the procedures adopted to assess the strategic risks in its annual report (Ho, Y. 2007).
· Compliance and regulatory: An entity should comply with all laws and regulations of the country or environment in which it operates. There risks are mainly arising due to government respond to climate changes and through rules and regulations so that resources can be optimally utilized by the government. Due to government policy, the entity may have significant impact on business operations, and it can be...