---
title: "Governance Under the Spotlight: Managing Related Party Risk"
description: Related party transactions are under increasing regulatory scrutiny. Learn key disclosure risks, governance considerations and why transparency matters.
---

[Arnold Hill Blog: Insights and Advice for Businesses and Individuals ](https://www.arnoldhill.co.uk/blog)

# [Governance Under the Spotlight: Managing Related Party Risk](https://www.arnoldhill.co.uk/blog/managing-related-party-risk)

 Written by [Arnold Hill](https://www.arnoldhill.co.uk/blog/author/arnold-hill) | May 13, 2026 1:23:25 PM

Related party transactions are a routine part of many businesses. They are often entirely legitimate and commercially sensible. However, they remain one of the most consistently scrutinised areas of financial reporting.

Where disclosures are incomplete or unclear, the risks are not just technical—they can extend to regulatory challenge, reputational damage and loss of stakeholder confidence.

### **What is a Related Party and Why It Matters**

A related party is any individual or entity with the ability to influence a company’s decisions. This typically includes:

The underlying principle is simple: where relationships could influence transactions, transparency is expected**.** Unlike transactions between independent third parties, related party arrangements may not be conducted on normal commercial terms. Even where they are, users of the financial statements need visibility.

### **Why This Area Is Under Increasing Scrutiny**

Related party disclosures sit at the intersection of accounting, governance and company law. As a result, they attract particular attention from regulators.

Recent developments have only heightened this focus:

In practice, this means that disclosures are more visible and are more likely to be challenged, than ever before.

### **Where Risks Commonly Arise**

In our experience, issues rarely arise because transactions are inappropriate. More often, they arise because relationships or disclosures are incomplete.

Common areas of difficulty include:

These challenges can lead to omissions that only become apparent during audit or regulatory review.

### **The Consequences of Getting It Wrong**

Where related party disclosures are not handled correctly, the impact can extend beyond the accounts themselves. Potential consequences include:

Importantly, issues in this area can raise wider questions about governance and oversight, even where underlying transactions are entirely appropriate.

### **A Growing Area of Focus**

*"The direction of travel in UK corporate reporting is clear: greater transparency, stronger governance and increased accountability,"* says Negin Balajam, Auditor at Arnold Hill & Co LLP.

*"Related party disclosures are a key part of that picture. They provide insight into how a business is run, how decisions are made, and whether transactions are conducted fairly. As expectations continue to evolve, this is likely to remain an area of ongoing focus for regulators, auditors and stakeholders alike."*

### **How We Can Help**

Understanding related party relationships - and ensuring they are appropriately reflected in financial reporting - can be more complex than it first appears.

If you would like to discuss how this may apply to your business, or review your current approach, please [get in touch](https://www.arnoldhill.co.uk/contact-us) with our team.

Author, Negin Balajam  - Auditor

[Negin.Balajam@arnoldhill.co.uk](mailto:Negin.Balajam@arnoldhill.co.uk)

 

[View full post](https://www.arnoldhill.co.uk/blog/managing-related-party-risk)

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