Abstract

Geopolitical risks pose a significant threat to many companies' performance, necessitating the acquisition and evaluation of reliable information to manage these risks effectively. Furthermore, increased legal requirements in recent years demand more comprehensive reports on firm-specific risks. Therefore, detailed knowledge of the regulatory framework, accounting implications, and measurement is essential for corporate managers, board members, and regulators to address and report geopolitical risks. This paper first provides an overview of legal provisions on corporate geopolitical risk reporting in the European Union, comparing them with provisions in the U.S. Regulation of geopolitical risk management and reporting often remains "soft law," granting significant discretion to corporate managers. Secondly, the paper discusses incentives for voluntarily providing information on geopolitical risks and analyzes the implications of these risks for the quality of financial reporting. Thirdly, based on a literature review, it describes current approaches to empirically measuring geopolitical risks at the country and company levels, offering various opportunities to expand the limited accounting literature on geopolitical risks.

Key words: Accounting quality, disclosure, political risk, reporting.