“Updating risk factors in 2024: Considerations and trends from early filers” from DLA Piper reveals trends in disclosure of select hot topic risk factors based on an analysis of Russell 3000 fiscal 2023 Form 10-Ks filed from August 1, 2023 to January 31, 2024 (“Early Filers”).
Among the key takeaways:
Artificial Intelligence—Although 84% of Early Filers included AI-related risk factors, the firm deemed most of those to be “non-substantive” in nature (i.e., absent AI-specific risk disclosure).
Climate / ESG—73% of Early Filers included a climate or ESG-related risk factor in their most recent Form 10-K.
The most common climate/ESG risks specifically addressed were regulatory compliance, the potential for a material adverse effect on profitability or results of operations, and climate-prompted extreme weather events.
COVID-19—88% of Early Filers included a COVID-19-related risk factor.
Cybersecurity—Per this firm memo (discussed here), 91% of Early Filers referenced cybersecurity in their risk factors. Of those, the vast majority mentioned general risks associated with supply chain or third-party attacks (85%); 17% indicated that the company experiences frequent, ongoing and/or an increasing number of cyber attacks; 17% mention specific risks associated with the supply chain or third-party attacks; and 16% address risks related to a specific cybersecurity incident.
The memo includes additional data on the most commonly discussed cybersecurity, ESG and climate-related, AI-related, and COVID-related-related topics in the risk factors, as well as other risk factor considerations.