Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Aviva disclosed 15 risk factors in its most recent earnings report. Aviva reported the most risks in the “Macro & Political” category.

Risk Overview Q4, 2021

Risk Distribution

40% Macro & Political

27% Production

20% Finance & Corporate

13% Tech & Innovation

0% Legal & Regulatory

0% Ability to Sell

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

2020

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Aviva Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2021

Main Risk Category

Macro & Political

With 6 Risks

Macro & Political

With 6 Risks

Number of Disclosed Risks

-7

From last report

S&P 500 Average: 31

-7

From last report

S&P 500 Average: 31

Recent Changes

2Risks added

9Risks removed

2Risks changed

Since Mar 2022

2Risks added

9Risks removed

2Risks changed

Since Mar 2022

Number of Risk Changed

From last report

S&P 500 Average: 1

From last report

S&P 500 Average: 1

See the risk highlights of Aviva in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 15

Macro & Political

Total Risks: 6/15 (40%)Above Sector Average

Economy & Political Environment2 | 13.3%

Economy & Political Environment - Risk 1

Changes in public policy

any change in public policy (government or regulatory) could influence the demand for, and profitability of, our products. In some markets there are (or could be in the future) restrictions and controls on premium rates, rating factors and charges. The nature of the UK relationship with the EU and the EU's treatment of 3rd countries in respect of financial services has implications for our business models for our asset management and insurance businesses in the EU. Uncertain Operational risk We actively engage with governments and regulators globally in the development of public policy and regulation. We do this to understand how public policy may change and to help ensure better outcomes for our customers and the Group. The Group's multi-channel distribution and product strategy and geographic diversification, although reduced following the divestment programme, underpin the Group's adaptability to public policy risk, and often provides a hedge to the risk. For example, since the end of compulsory annuitisation in the UK, we have compensated for falling sales of individual annuities by increasing sales of other pension products - particularly bulk purchase annuities. We continue to actively monitor developments in EU policy towards third countries such as the UK, which could impact our business model and identify contingent management actions to address these. In the UK pressure on public finances may result in further erosion of tax relief for pension savings, and increase in Insurance Premium Tax. The FCA expect to confirm new consumer duty rules by end-July 2022, while new PRA and FCA regulations on operational resilience take effect end-March 2022. In Ireland the regulator has expressed concerns over renewal pricing and is expected to adopt reforms similar to those recently implemented in the UK. In Canada, where motor premium increases are approved by provincial regulators, pressure to minimise these will persist. The Future Regulatory Framework Review will determine the post Brexit regulatory and policy settlement, which will have a direct bearing on the outcome of the UK Solvency II review. The UK and EU separate reviews of Solvency II continue through 2022. Both reviews could impact the amount of prudential capital our businesses are required to hold in the UK and EU. EU policy towards financial services provided from third countries continues to incrementally harden. Some restrictions on delegation of asset management activities to the UK are expected in the Alternative Investment Fund Managers Directive (AIFMD) review. Emerging UK policy on data potentially threaten data adequacy with the EU.

Economy & Political Environment - Risk 2

Economic & credit cycle

uncertainty over prospects for future macroeconomic growth (including the impact of the conflict between Russia and Ukraine), inflation, credit and current low interest rates, and the response of Central Banks, could adversely impact the valuation of our investments or credit default experience. This could also impact the level of the returns we can offer to customers going forwards and our ability to profitably meet our promises of the past. Uncertain Credit risk, Market risk, Liquidity risk We limit the sensitivity of our balance sheet to investment risks. While interest rate exposures are complex, we aim to closely duration-match assets and liabilities and take additional measures to limit interest rate risk. We hold substantial capital against market risks, and we protect our capital with a variety of hedging strategies to reduce our sensitivity to shocks. We regularly monitor our exposures and employ both formal and ad-hoc processes to evaluate changing market conditions. Other actions taken in the past include reducing sales of products with guarantees and shifting our sales towards protection and unit-linked products. The follow-on effects of the financial stimulus measures to cope with the pandemic are now coming more into focus including the impact of interest rate rises, risk of a deflating asset bubble and the risk of inflation (potentially impacting credit quality of counterparties, as well as squeezing real wages adversely impacting discretionary saving, insurance new business and renewals and lapse risk). While inflation pressures are expected to recede in 2023, there is a risk inflation becomes entrenched and persistent. The Group's balance sheet has hedges in place to mitigate these risks.

Natural and Human Disruptions2 | 13.3%

Natural and Human Disruptions - Risk 1

Climate change

potentially resulting in higher than expected weather-related claims (including business continuity claims), inaccurate pricing of general insurance risk, possible changes in morbidity and/or mortality rates, reputational impact from not being seen as a responsible steward/investor, as well as adversely impacting economic growth and investment markets. This also includes transition risks for our investments relating to the impact of the transition to a low carbon economy and litigation risk where we provide insurance cover. Increasing General insurance risk, Life insurance risk, Credit risk, Market risk Our climate-related financial disclosure sets out how Aviva incorporates climate-related risks and opportunities into governance, strategy, risk management, metrics (e.g. Climate Value-at-Risk) and targets. We are committed to aligning our business to the 1.5oC Paris Agreement target and plan to be a Net Zero company by 2040. The Group CRO was responsible for overseeing the embedding of a framework for ensuring climate-related risks and opportunities are identified, measured, monitored, managed and reported through our risk management framework and in line with our risk appetite. Aviva considers climate change to be a significant long-term risk to our business model. Global average temperatures over the last five years have been the hottest on record. Despite the UNFCCC Paris agreement, the current trend of increasing CO2 emissions is expected to continue, in the absence of radical action by governments, with global temperatures likely to exceed pre-industrial levels by at least 2oC and weather events (floods, droughts and windstorms) increasing in frequency and severity. Disclosure of potential impacts against various climate scenarios and time horizons will become increasingly common for all companies.

Natural and Human Disruptions - Risk 2

Pandemic

in an increasingly globalised world, new or mutations of existing bacteria or viruses may be difficult for stretched healthcare systems to contain, disrupting national economies and affecting our operations and the health and mortality of our customers. Stable Life Insurance risk (mortality, longevity, morbidity), General Insurance (business interruption, travel) and Operational risk. We have contingency plans which are designed to reduce as far as possible the impact on operational service arising from mass staff absenteeism, travel restrictions and supply chain disruption caused by a pandemic, which we were able to put into action during the current COVID-19 pandemic. We reinsure much of the mortality risk arising from our Life Protection business and hold capital to cover the risks of a 1-in-200 year pandemic event. We model a range of extreme pandemic scenarios including a repeat of the 1918 global influenza pandemic and COVID-19. In the Group and commercial insurance business we manage our potential exposure through our policy wordings. As an investment manager and investor, we engage with companies to ensure the responsible use of antibiotics to reduce the risk that antimicrobial resistance negates the efficacy of medical treatment. There remains uncertainty around the outlook for the COVID-19 Omicron variant. The long-term impact on mortality and morbidity is dependent on the extent natural immunity develops in the general population, the efficacy of new healthcare treatments and possible future strains that may emerge. Trends such as global climate change, urbanisation, antimicrobial resistance and intensive livestock production are likely to increase the risk of future pandemics, while reductions in migration and international travel as a result of COVID-19 are likely to be temporary making the containment of future pandemics more challenging. We expect the experience and learnings from the current COVID-19 will improve the effectiveness of the public healthcare response to any future pandemics.

Capital Markets2 | 13.3%

Capital Markets - Risk 1

Liquidity Risk

The relatively illiquid nature of insurance liabilities is a potential source of additional investment return by allowing us to invest in higher yielding, but less liquid assets such as commercial mortgages. For more information see Note 57d - Risk Management: Liquidity risk. • Maintaining committed borrowing facilities from banks and commercial paper issuance • Ensure cash flows are sufficient to meet liabilities through asset liability matching methodology • Use of our limit framework covering minimum liquidity cover ratio and minimum Group Centre liquidity • Contingency funding plan in place to address liquidity funding requirements in a significant stress scenario

Capital Markets - Risk 2

Market Risk

We actively seek some market risks as part of our investment and product strategy. We have a limited appetite for interest rate and property risks as we do not believe that these are adequately rewarded. For more information see Note 57c - Risk Management: Market risk. • Risk frameworks considering macroeconomic risk tolerances, which includes market risk • Active asset management and hedging in business units. Group-level equity and foreign exchange hedging. • Pension fund active risk management • Through product design , asset and liability duration matching limits impact of interest rate changes

Production

Total Risks: 4/15 (27%)Above Sector Average

Manufacturing1 | 6.7%

Manufacturing - Risk 1

Operational Risk

Operational risk, including conduct risk, should generally be reduced to as low a level as is commercially sensible. For more information see Note 57h - Risk Management: Operational risk. • Our Operational Risk & Control Management Framework which includes the tools, processes and standardised reporting necessary to identify, measure, manage, monitor and report on the operational risks • Scenario-based approach to determine appropriate level of capital to be held in respect of operational risks • Improving the resilience and reliability of our systems and IT security to protect ours and our customers' data • Monitoring the potential conduct exposures and the key drivers of these, taking action to mitigate harm • Implementing mitigating controls to ensure all risks associated with our disposals are appropriately addressed

Employment / Personnel1 | 6.7%

Employment / Personnel - Risk 1

Added

Talent

an ageing workforce and new technologies requiring new skills will make recruitment, retention and investing in talent increasingly important. Increasing Operational risk To attract and retain talent we have various internal talent development programmes and a broad variety of graduate and apprentice schemes. In 2021 we launched the new Aviva University, promoting life-long learning for colleagues enabling them to focus on developing key skills such as digital/data and change management. We launched a new talent strategy and career compass, designed to enable colleagues to have brilliant career conversations. Our retention measures include innovative policies such as flexible working and equal parental leave as well as providing great leadership and career progression for our people. We expect technology and automation to increasingly change the skills required for our workforce, and the pace of change will accelerate the required reskilling of existing workforces and recruitment of new talent. Aviva is returning to 2019 (pre-pandemic) volumes of voluntary attrition, however in recent months rates have moved slightly above 2019 which could be attributed to pent up 'demand' from 2020 where leaver volumes significantly reduced. We anticipate the impact from any pent up "demand" to have a short term effect and aligned People teams will support leadership teams with interventions where required. Recruitment and retention will become more challenging as the relative size of the working age population declines, education systems fail to produce future generations with the right skills in sufficient numbers and immigration controls restrict the talent pool. Expectations of the next generation of employees (i.e. Generation Z) will require us to change how we operate if we are to retain talen

Costs2 | 13.3%

Costs - Risk 1

Changed

Life insurance risk

We take measured amounts of life insurance risk provided we have the appropriate core skills in underwriting and pricing. For more information see Note 57e - Risk Management: Life insurance risk. • Risk selection (includes risk tolerance for longevity risk) and underwriting on acceptance of new business • Longevity swaps covering pensioner-in-payment scheme liabilities • Product development and management framework ensures products and propositions meet customer needs • Use of reinsurance on longevity risk for our annuity business and the staff pension scheme

Costs - Risk 2

Changed

General insurance and health risk

We take general insurance risk in measured amounts for explicit reward, in line with our core skills in underwriting and pricing. We have a preference for those risks that we understand well, that are intrinsically well managed and where there is a spread of risks in the same category. General insurance risk diversifies well with our Life Insurance and other risks. For more information see Note 57f - Risk Management: General insurance and health risk. • Use of reinsurance to reduce the financial impact of a catastrophe and manage earnings volatility. • Application of robust and consistent reserving framework to derive best estimate with results subject to internal and external review, including independent reviews and audit reviews • Extensive use of data, financial models and analysis to improve pricing and risk selection • Underwriting appetite framework linked to delegations of authority that govern underwriting decisions/limits • Product development and management framework that ensures products meet customer needs

Finance & Corporate

Total Risks: 3/15 (20%)Below Sector Average

Accounting & Financial Operations1 | 6.7%

Accounting & Financial Operations - Risk 1

Added

Longevity advancements (e.g. due to medical advances)

these contribute to an increase in life expectancy of our annuity customers and thus future payments over their lifetime may be higher than we currently expect. Stable Life insurance risk (longevity) We monitor our own experience carefully and analyse external population data to identify emerging trends. Detailed analysis of the factors that influence mortality informs our pricing and reserving policies. We add qualitative medical expert inputs to our statistical analysis and analyse factors influencing mortality and trends in mortality by cause of death. We also use longevity swaps to hedge some of the longevity risk from the Aviva Staff Pension Scheme and longevity reinsurance for bulk purchase annuities and for some of our individual annuity business. There is considerable uncertainty as to whether the improvements in life expectancy that have been experienced over the last 40 years will continue into the future. In particular, there is likely to be a reduced level of improvement from the two key drivers of recent improvements, smoking cessation (as you can only give up smoking once) and the use of statins in the treatment of cardiovascular disease (where the most significant benefit from use in higher risk groups has now been seen). Despite continued medical advances emerging, dietary changes, increasing obesity and strains on public health services have slowed the historical trend since around 2011. In the UK, this has led to some significant industry-wide longevity reserve releases in recent years, as the assumptions around future longevity improvements have been weakened. The potential impact of the COVID-19 pandemic on medium and longer term longevity projections, via ongoing direct effects (e.g. endemic COVID-19) or via indirect effects (e.g. strains on the NHS), also adds to the uncertainty but we do not currently anticipate a material impact on the overall outlook.

Debt & Financing1 | 6.7%

Debt & Financing - Risk 1

Credit Risk

We take a balanced approach to credit and believe we have the expertise to manage it and the structural investment advantages conferred to insurers with long-dated, relatively illiquid liabilities that enables us to earn superior investment returns. For more information see Note 57b - Risk Management: Credit risk. • Risk frameworks considering macroeconomic risk tolerances, which includes credit risk • Credit limit framework imposes limits on credit concentration by issuer, sector and type of instrument • Investment restrictions on certain sovereign and corporate exposures • Credit risk hedging programme and asset de-risking

Corporate Activity and Growth1 | 6.7%

Corporate Activity and Growth - Risk 1

Asset management risk

Risks specific to asset management should generally be reduced to as low a level as is commercially sensible, on the basis that taking on these risks will rarely provide us with an upside. For more information see Note 57g - Risk Management: Asset management risk. • Product development and review process with propositions based on customer needs • Investment performance and risk management oversight and review process • Client relationship teams managing client retention risk

Tech & Innovation

Total Risks: 2/15 (13%)Above Sector Average

Cyber Security1 | 6.7%

Cyber Security - Risk 1

Cyber crime

criminals (including state sponsored activity) may attempt to access our IT systems to steal or utilise company and customer data, or plant malware viruses to access customer or company funds, and/or damage our reputation and brand. Increasing Operational risk Aviva has invested significantly in cyber security with automated controls to protect our data and critical IT services. In response to the changing threat environment Aviva has increased the level of anti-malware protection during 2021 enhancing our ability to identify, detect and prevent such attacks. Aviva has extensive operational measures to assess and respond to data breaches and has continued to monitor the threat environment and enhance its IT infrastructure and cyber controls to prevent attacks. Aviva's cyber defences are regularly tested using our own 'ethical hacking' team as well as through using external penetration testing to evaluate our infrastructure. Aviva uses the Information Security Forum (ISF) Standard of Good Practice and cross references to ISO 27001 and the NIST Cybersecurity Framework. Aviva conducts regular internal audits using the financial services three lines of defence model and are audited externally at least annually. High profile cyber security incidents have continued to impact corporates globally due to the increased use of destructive malware/ransomware. The cyber threat is expected to persist in 2022 with increasing levels of sophistication and industrialisation anticipated. Aviva continuously monitors the external threat environment to ensure that our cyber investment and the effectiveness of our controls remains appropriate to mitigate the continued and changing nature of the cyber threat.

Technology1 | 6.7%

Technology - Risk 1

New technologies & data

failure to understand and react to the impact of new technology and its effect on customer behaviour and how we distribute products could potentially result in our business model becoming obsolete. Failure to keep pace with the use of data to price more accurately and to detect insurance fraud could lead to loss of competitive advantage and underwriting losses. Stable Operational risk Aviva continues to develop our data science capabilities to both inform and enable improvements in the customer journey, our understanding of how customers interact with us and our underwriting disciplines. Our Data Charter sets out our public commitment to use data responsibly and securely. Data mastery and the effective use of 'Big Data' through artificial intelligence and advanced analytics has and will continue to be a critical driver of competitive advantage for insurers. However, this will be subject to increasing regulatory scrutiny to ensure this is being done so in an ethical, transparent and secure way. The competitive threat to traditional insurers will continue to persist with the potential for big technology companies and low cost innovative digital start-ups to grow their footprint in the insurance market, where previously underwriting capability, risk selection and required capital have proven to be a sufficient barrier to entry.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

Become an Expert with TipRanks Premium

What am I Missing?

Make informed decisions based on Top Analysts' activity

Know what industry insiders are buying

Get actionable alerts from top Wall Street Analysts

Find out before anyone else which stock is going to shoot up

Get powerful stock screeners & detailed portfolio analysis

Subscribe Now See Plans & Pricing