Extracting the latest governance and risk management trends from Japan
PwC Japan has recently published an analysis of this year’s trends in corporate governance, risk management and other hot topics, based on text mining of XBRL-based annual reports by Japanese public companies listed on the Tokyo Stock Exchange.
In the governance arena, for example, it finds that the spotlight is on ‘sustainability,’ ‘diversity’ and ‘successors,’ while the number of companies mentioning ‘independent outside directors’ is also on the rise. These changes seem to reflect revisions to Japan’s Corporate Governance Code. When it comes to risk management, companies seem to be increasingly focussed on climate change-related risks, as shown by the prominence of keywords such as ‘TCFD,’ ‘decarbonisation’ and ‘carbon pricing.’ Other growing concerns that companies are responding to are ‘supply chain’ and ‘geopolitics.’ Interestingly, two additional trending keywords, reflecting issues attracting company attention, are ‘human rights’ and ‘DX’, or ‘digital transformation.’
This research was performed on reports made in XBRL format and obtained via EDINET, the Financial Services Agency’s electronic corporate disclosure system. This machine-readable data was automatically extracted from hundreds of reports, and analysed using natural language processing techniques to gain insights into the key words and phrases appearing across Japanese businesses. While care must be taken in interpretation, such analyses can offer rapid views of overall patterns and emerging trends.
XBRL tagging of narrative reporting by companies makes it much easier for investors and other users to extract relevant information, and so enables faster and more powerful analysis of text. For a similar, more speculative example – also from Japan – our short series on Key Audit Matters (KAMs) explores some possible insights and the value of granularity in tagging.
