DLA Piper’s “Early Filers Risk Factors Report” reveals trends in risk factor disclosure based on an analysis of 150 filers with fiscal years ending between August and December 2022.
Among the key takeaways:
- More than half of filers covered these topics (from most to least prevalent): COVID-19, general economic downturn or inflation, cybersecurity, climate, Russia and war in Ukraine, and supply chain disruptions.
- Over 95% of filers disclosed COVID-related risks. Of those, a majority discussed (from most to least prevalent) supply chain issues and disruptions, unpredictable impacts with inability to predict future performance, government and regulatory response of restrictions to contain spread, impact on consumer demand, reductions in labor workforce, and material adverse effect.
- Of the 78% of filers that disclosed climate-related risk, more than 50% discussed (from most to least prevalent) extreme weather events (drought, wildfire, thunderstorms, snow, earthquakes, floods, hurricanes), reporting risk to comply with regulations (including increased costs), material adverse effect on profitability or results of operations, disruptions to manufacturing operations (such as project cancellation), increased energy usage & product costs, and inadequate insurance coverage.
The 150 companies consisted of 31% small-caps, 31% mid-caps, and 38% large-caps.
We recently reported on the firm’s Form 10-K risk factor guidance here.