New Intelligize Report Offers Insights into SEC Views on Company Risk Factors

Fortunately for investors, you don’t need inside access to C-suites to know what kinds of risks keep corporate executives on edge. Publicly traded companies frequently disclose in their Securities and Exchange Commission filings their views on the major risks to their businesses. Over time, themes about the risks weighing on companies tend to emerge from the thousands of disclosures they issue each year.

Using the Intelligize platform to search risk-factor disclosures in 10-K filings for the 12 months ending February 28, we’ve issued a report on the top concerns identified by issuers in the last year. We also included insights into the SEC’s thinking on key risk factors after analyzing hundreds of comment letters the agency sent to companies in response to their disclosures. We include some highlights below, and you can CLICK HERE to read the full report.

Dependence on Employees, Management and Key Personnel

Concerns about the state of the labor force are very real, based on what companies are disclosing. Dependence on employees, management and key personnel rose to the top spot among risk factors last year. Note that the SEC’s enhanced disclosures related to human capital indicate regulators want to know more too.

Operational Disruptions

Put another way, this is the collateral effect of the other key risk factors. Issues with the potential for disruption that come up routinely in 10-K filings include Covid-19, cybersecurity, geopolitics and supply chain bottlenecks.

Ukraine-Russia Conflict

Russian president Vladimir Putin’s aggression against neighboring Ukraine sparked a military conflict that continues to rage. As the United States and European Union issue more sanctions against Russia and more aid to the Ukrainian government, the situation between the two countries became the fastest-rising risk factor in our newest rankings.

Takeaways from Comment Letters

From a sample of more than 440 comments in SEC comment letters sent to companies regarding their risk factor disclosures, we found almost twice as many cases in which the agency focused on disclosures related to climate change as any other risk factor. In particular, the commission asked for more information about risks from litigation tied to climate change. Another point of inquiry: indirect consequences of climate change on companies’ businesses and operations.

The comment letters also delved into risks posed by cross-border concerns. For example, what risks arise in business affairs when dealing with China’s authoritarian government?

Next Up

With the failures of Silicon Valley Bank and Signature Bank still fresh on the minds of the public, companies have recently taken to filing 8-K disclosures that detail the impact of the collapses on their own businesses. Look for similar comments in forthcoming risk factor sections of 10-K filings as we learn more about the reverberations from the events across the financial system.

CLICK HERE to access the full report.