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root9B Holdings Inc (RTNB)
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Risk Overview Q1, 2017
Risk Distribution
35% Finance & Corporate
30% Ability to Sell
14% Tech & Innovation
8% Legal & Regulatory
8% Production
5% Macro & Political
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
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
root9B Holdings 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.
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 Q1, 2017
Main Risk Category
Finance & Corporate
With 13 Risks
Finance & Corporate
With 13 Risks
Number of Disclosed Risks
37
No changes from last report
S&P 500 Average: 31
37
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Mar 2017
0Risks added
0Risks removed
0Risks changed
Since Mar 2017
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of root9B Holdings 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 37
Finance & Corporate
Total Risks: 13/37 (35%)Below Sector Average
Share Price & Shareholder Rights5 | 13.5%
Share Price & Shareholder Rights - Risk 1
Our executive officers and directors, and major stockholders will be able to exert significant influence over us, which will limit our stockholders' ability to influence the outcome of key decisions.Share Price & Shareholder Rights - Risk 2
Investors may experience difficulty in trading our common stock, and our stock price may be volatile and fluctuate significantly, which could result in substantial losses for investors.Our common stock is thinly-traded and any recently reported sales price may not be a true market-based valuation of our common stock. There can be no assurance that an active market for our common stock will develop. In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to operating performance. Consequently, holders of shares of our common stock may not be able to liquidate their investment in our shares at prices that they may deem appropriate.
Share Price & Shareholder Rights - Risk 3
The issuance of shares upon exercise of outstanding warrants or conversion of our convertible debt could cause immediate and substantial dilution to existing stockholders.The issuance of shares upon exercise of warrants or conversion of our convertible debt could result in substantial dilution to the interests of other stockholders since the selling stockholders may ultimately convert and sell the full amount issuable on conversion.
Share Price & Shareholder Rights - Risk 4
We may not be able to attract the attention of major brokerage firms, which could have a material adverse impact on the market value of our common stock.Security analysts of major brokerage firms may not provide coverage of our common stock since there is no incentive for brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the likelihood that a sustained active market will develop for our common stock. It will also likely make it more difficult to attract new investors at times should we require additional capital.
Share Price & Shareholder Rights - Risk 5
If we cannot meet the NASDAQ Capital Market's continuing listing requirements and NASDAQ rules, NASDAQ may delist our securities, which could negatively affect our Company, the price of our securities and your ability to sell our securities.We recently obtained listing of our common stock on the NASDAQ Capital Market. In the future, however, we may not be able to meet the continued listing requirements of the NASDAQ Capital Market and NASDAQ rules, which require, among other things, metrics such as maintaining a minimum bid price per share, minimum stockholders' equity levels, minimum market capitalization and a majority of "independent" directors on our board of directors. If we are unable to satisfy the NASDAQ criteria for continued listing, our common stock could be subject to delisting. Trading, if any, of our common stock would thereafter be conducted in the over-the-counter market, in the so-called "pink sheets" or on the OTC Bulletin Board. As a consequence of any such delisting, our stockholders would likely find it more difficult to dispose of, or to obtain accurate quotations as to the prices of our common stock.
Accounting & Financial Operations3 | 8.1%
Accounting & Financial Operations - Risk 1
We do not intend to pay cash dividends on our common stock. As a result, stockholders will benefit from an investment in the common stock only if it appreciates in value.Accounting & Financial Operations - Risk 2
We have continued to experience significant losses from operations.We have experienced significant and continuing losses from operations which raises substantial doubt about our ability to continue as a going concern. During 2016, we incurred substantial costs in our efforts to grow the Cyber Solutions business segment. We hired additional personnel, engaged in strategic marketing and brand-building efforts, built-out the APC and other new offices opened, incurred legal fees related to trademarks and patents, and engaged in extensive research and development projects to enhance the Orkos and HUNT software platforms. These investments in the Cyber Solutions segment were made in anticipation of revenue growth during 2017, of which, there can be no assurance. To fund our ongoing operating and capital needs, we have been actively pursuing a strategic transaction involving IPSA, which may include a sale of all or substantially all of the assets of IPSA, and may pursue additional equity or debt financings. There can be no assurance, however, that we will be successful in completing a strategic transaction relating to IPSA or a future equity or debt financing on a timeframe that coincides with our cash needs, on acceptable terms, or completing it at all.
While we have identified revenue opportunities for our cybersecurity operations that, if realized, will increase revenues and cash flows and help move to profitability from operations, there can be no assurances these opportunities will be realized.
In the event that we are unable to generate revenues or raise additional funds through a strategic transaction relating to IPSA or an equity or debt financing, we may be required to delay, reduce or severely curtail our operations or the implementation of our business strategies or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition and long-term prospects.
The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.
Our independent registered public accounting firm issued their report dated April 17, 2017 in connection with the audit of our financial statements as of and for the year ending December 31, 2016, which included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern.
Accounting & Financial Operations - Risk 3
Our Chief Executive Officer and Chief Financial Officer concluded that due to a material weakness in our internal control over financial reporting, our internal controls were not effective at December 31, 2016. Our failure to implement and maintain effective internal control over financial reporting could result in material misstatements in our financial statements which could require us to restate financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on our stock price.As required by Securities and Exchange Commission Rule 13a-15(e) and 15d-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that due to a material weakness in our internal control over financial reporting as described in Item 9a. "Controls and Procedures", our disclosure controls were not effective at December 31, 2016. We cannot assure you that additional significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in additional significant deficiencies or material weaknesses, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated under Section 404. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.
Debt & Financing3 | 8.1%
Debt & Financing - Risk 1
If we default on any material provision of our convertible notes, there could be a significant adverse effect on the Company, including our ability to remain in business.Debt & Financing - Risk 2
We may not be able to secure necessary funding in the future which would adversely affect our ability to grow, increase revenues, and achieve profitability.Unless we achieve positive cash flow, substantial working capital will be required for continued operations. If we raise additional funds by issuing debt and equity securities, the percentage of our capital stock owned by our current shareholders would be reduced, and those equity securities may have rights that are senior to those of the holders of our currently outstanding securities. Additional financing may not be available when needed on commercially acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may be forced to curtail planned growth, and we may be unable to develop or enhance planned products and services, take advantage of future opportunities, or respond to competitive pressures. Additionally, due to capital raised in Q1 2016 we are subject to "down round protection" (otherwise referred to as "anti-dilution" and "full ratchet" provisions). Such provisions may require waivers from these investors which may not be granted, making additional capital raises difficult.
Debt & Financing - Risk 3
Conflicts of interest could preclude IPSA from accepting engagements, thereby causing decreased utilization and revenues.IPSA provides services that usually involve sensitive client information. IPSA's engagement agreement with a client or other business reasons may preclude it from accepting engagements from time to time with its clients' competitors or adversaries. As IPSA grows its operations and the complement of consulting services, the number of conflict situations may continue to increase. Moreover, in industries in which IPSA provides services, there has been a continuing trend toward business consolidations and strategic alliances. These consolidations and alliances reduce the number of companies that may seek IPSA's services and increase the chances that IPSA will be unable to accept new engagements as a result of conflicts of interest. If IPSA is unable to accept new engagements for any reason, its consultants may become underutilized, which would adversely affect IPSA's revenues and results of operations in future periods.
Corporate Activity and Growth2 | 5.4%
Corporate Activity and Growth - Risk 1
An inability to retain IPSA's senior management team and other managing directors would be detrimental to the success of IPSA's business.Corporate Activity and Growth - Risk 2
There are substantial risks associated with acquisitions.An integral part of our historical growth strategy has been evaluating and, from time to time, consummating acquisitions. These transactions involve a number of risks and present financial, managerial and operational challenges, including: diversion of management's attention from running the existing business; increased expenses, including legal, administrative and compensation expenses resulting from newly hired employees; increased costs to integrate personnel, customer base and business practices of the acquired company; adverse effects on reported operating results due to possible impairment of intangible assets including goodwill associated with acquisitions; and dilution to stockholders to the extent of issuance of securities in the transaction.
Ability to Sell
Total Risks: 11/37 (30%)Above Sector Average
Competition3 | 8.1%
Competition - Risk 1
IPSA is experiencing enhanced price competitionCompetition - Risk 2
Intense competition in our target markets could impair our ability to grow and to achieve profitability.The market for cyber solutions work has been developing rapidly over the past several years and continues to change as new entrants enter the market. As competition increases, there could be impact on the markets and pricing which will present a risk to the revenue growth for root9B.
Competition - Risk 3
Intense competition in our target markets could impair our ability to grow and to achieve profitability. If we do not grow, our competitive ability will be severely restricted, which would further impact profitability.Our competitors vary in size and in the scope and breadth of the products and services they offer. Our competitors include Deloitte, Accenture, PwC, Ernst & Young, FireEye, IBM, Palo Alto Networks, Cisco and Symantec as well as other national firms and a number of smaller regional firms. Many of our competitors have longer operating histories, substantially greater financial, technical, marketing, or other resources, or greater name recognition than us. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Increased competition is likely to result in price reductions, reduced gross margins, and loss of market share, any one of which could seriously harm our business. We have recently experienced price competition in our Business Advisory Services Group and continue to evaluate pricing strategies and service delivery processes to respond to this new market condition.
Demand2 | 5.4%
Demand - Risk 1
A significant portion of our business revenues depend on a relatively small number of large customers. If any of these customers decide they will no longer use our services, revenues will decrease and financial performance will be severely impacted.Demand - Risk 2
A significant portion of IPSA's revenue is derived from a limited number of clients, and its engagement agreements, including those related to its largest clients, can be terminated by clients with little or no notice and without penalty, which may cause its operating results to be unpredictable.IPSA has derived, and expects to continue to derive, a significant portion of its revenues from a limited number of clients. IPSA's clients typically retain it on an engagement-by-engagement basis, rather than under fixed-term contracts; the volume of work performed for any particular client is likely to vary from year to year, and a major client in one fiscal period may not require or may decide not to use our services in any subsequent fiscal period. Moreover, a large portion of new engagements comes from existing clients. Accordingly, the failure to obtain new large engagements or multiple engagements from existing or new clients could have a material adverse effect on the amount of revenues IPSA generates. In addition, almost all engagement agreements can be terminated by its clients with little or no notice and without penalty.
Sales & Marketing6 | 16.2%
Sales & Marketing - Risk 1
IPSA's financial results could suffer if it is unable to achieve or maintain adequate utilization and suitable billing rates for its consultants.Sales & Marketing - Risk 2
root9B's services are relatively new to the market and we are confronting the issue of market acceptance.Since the commencement of operations by our root9B, LLC cybersecurity subsidiary, it has been preparing its services for market and has been compiling and communicating with a list of prospects. These services are relatively new to the market and root9B is actively pursuing and educating potential customers. There cannot be any assurance of the market acceptance of its services, and the failure to gain acceptance would be materially adverse to root9B and to our growth.
Sales & Marketing - Risk 3
Our lengthy sales cycle could make it more difficult to achieve our growth objectives.The period between initial contact with a potential customer and that customer's purchase of services is often long and difficult to predict. A customer's decision to purchase services involves a significant allocation of resources, is influenced by a customer's budgetary cycles, and in many instances, involves a preferred-vendor process. To successfully sell our services, generally we must educate the potential customers regarding the uses and benefits of our services, which can require significant time and resources. Many potential customers are large enterprises that generally take longer to designate preferred vendors; the typical sales cycle in connection with becoming an approved vendor has been approximately six to twelve months. If the sales cycle unexpectedly lengthens in general, or for one or more large orders, it would adversely affect the timing of revenues and revenue growth.
Sales & Marketing - Risk 4
root9B's sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our results of operations to fluctuate significantly.Our results of operations may fluctuate, in part, because of the resource intensive nature of our sales efforts, the length and variability of our sales cycle and the short-term difficulty in adjusting our operating expenses. Our results of operations depend in part on sales to large organizations. The length of our sales cycle, from proof of concept to delivery of and payment for our services, is typically four to twelve months but can be more than a year. To the extent our competitors develop services that our prospective customers view as equivalent to ours, our average sales cycle may increase. Because the length of time required to close a sale varies substantially from customer to customer, it is difficult to predict exactly when, or even if, we will make a sale with a potential customer. As a result, large individual sales may, in some cases, occur in quarters subsequent to those we anticipated, or may not occur at all.
Because a substantial portion of our expenses are relatively fixed in the short term, consisting mainly of payroll expenses, our results of operations will suffer if our revenue falls below expectations in a particular quarter, which could cause the price of our common stock to decline.
Sales & Marketing - Risk 5
If root9B is unable to sell our products, subscriptions and services, as well as renewals of our subscriptions and services, to our customers, our future revenue and operating results will be harmed.Our future success depends, in part, on our ability to expand the deployment of our products with new and existing customers, including solutions delivered through the APC. This may require increasingly sophisticated and costly sales efforts and may not result in additional sales. In addition, the rate at which our customers purchase additional products, subscriptions and services depends on a number of factors, including the perceived need for additional IT security as well as general economic conditions. If our efforts to sell additional products, subscriptions and services to our customers are not successful, our business would suffer.
Further, existing customers that purchase our products have no contractual obligation to renew their subscriptions and support and maintenance services agreements beyond the initial contract period, and given our limited operating history, we may not be able to accurately predict our renewal rates. Our customers' renewal rates may decline or fluctuate as a result of a number of factors, including the level of their satisfaction with our services, our customer support, customer budgets and the pricing of our products compared with the products and services offered by our competitors. We cannot assure that our customers will renew their subscriptions, and if our customers do not renew their subscriptions or renew on less favorable terms, our revenue may grow more slowly than expected, if at all.
To a certain level, we also depend on our installed customer base for future support and maintenance revenue. We offer our support and maintenance agreements for terms that generally range between one and five years. If customers choose not to renew their support and maintenance agreements or seek to renegotiate the terms of their support and maintenance agreements prior to renewing such agreements, our revenue may decline.
Sales & Marketing - Risk 6
If root9B is unable to increase sales of our solutions to large organizations while mitigating the risks associated with serving such customers, our business, financial position and results of operations may suffer.Our growth strategy is dependent, in part, upon increasing sales of our solutions to large enterprises and governments. Sales to large customers involve risks that may not be present (or that are present to a lesser extent) with sales to smaller entities. These risks include:
- Increased purchasing power and leverage held by large customers in negotiating contractual arrangements with us;- More stringent or costly requirements imposed upon us in our support service contracts with such customers;- More complicated implementation processes;- Longer sales cycles and the associated risk that substantial time and resources may be spent on a potential customer that ultimately does not purchase our platform or solutions;- More pressure for discounts and write-offs
In addition, because security breaches with respect to larger, high-profile enterprises are likely to be heavily publicized, there is increased reputational risk associated with serving such customers. If we are unable to increase sales of our platform to large enterprise and government customers while mitigating the risks associated with serving such customers, our business, financial position and results of operations may suffer.
Tech & Innovation
Total Risks: 5/37 (14%)Below Sector Average
Trade Secrets2 | 5.4%
Trade Secrets - Risk 1
If root9B is unable to protect our intellectual property, the value of our cybersecurity business may be diminished, and our cybersecurity business may be adversely affected.Trade Secrets - Risk 2
We and root9B, in the future, may be a party defendant to patent lawsuits and other intellectual property rights claims that are expensive and time consuming, and, if resolved adversely, would have a significant impact on our cybersecurity business, financial condition, and results of operations.Companies in the cybersecurity business often own large numbers of patents, copyrights, trademarks, and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. In addition, various "non-practicing entities" that own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value from technology companies. Furthermore, from time to time we may introduce new products, including in areas where we currently do not operate, which could increase our exposure to patent and other intellectual property claims from competitors and non-practicing entities. Defending patent and other intellectual property litigation is costly and can impose a significant burden on management and employees, and there can be no assurances that favorable final outcomes will be obtained in all cases. In addition, plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations. We may decide to settle such lawsuits and disputes on terms that are unfavorable to us. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The terms of such a settlement or judgment may require us to cease some or all of our operations or pay substantial amounts to the other party. In addition, we may have to seek a license to continue practices found to be in violation of a third party's rights, which may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The development of alternative non-infringing technology or practices could require significant effort and expense or may not be feasible. Our business, financial condition, and results of operations would be adversely affected as a result of an unfavorable resolution of the disputes and litigation referred to above.
Cyber Security3 | 8.1%
Cyber Security - Risk 1
Our role in the cybersecurity industry may place us at greater risk than other companies for a cyber-attack and other cybersecurity risks. Attempted attacks, and a failure to protect our systems in the event of an attack, may adversely impact our reputation and operations.Cyber Security - Risk 2
root9B's failure to attract and retain highly skilled cyber experts would have an adverse effect on us.Our ability to attract and retain qualified professional and/or skilled cyber personnel, either through direct hiring or acquisition of other firms employing such professionals, is an important factor in determining our future success. The market for these professionals is very competitive as well as limited for senior level operators with the Department of Defense experience we seek. There can be no assurance that we will be successful in our efforts to attract and retain the needed personnel. The failure to attract and retain skilled personnel could impair our ability to sell, provide services to our clients, and conduct our business effectively by limiting the number of engagements we can handle concurrently and could limit our ability to work on large scale projects.
Cyber Security - Risk 3
IPSA's reputation could be damaged and it could incur additional liabilities if it fails to protect client and employee data.IPSA relies on information technology systems to process, transmit, and store electronic information and to communicate among its locations around the world and with its clients, partners, and employees. The breadth and complexity of this infrastructure increases the potential risk of security breaches which could lead to potential unauthorized disclosure of confidential information.
In providing services to clients, IPSA may manage, utilize, and store sensitive or confidential client or employee data, including personal data. As a result, IPSA is subject to numerous laws and regulations designed to protect this information, such as the U.S. federal and state laws governing the protection of health or other personally identifiable information and international laws such as the European Union Directive on Data Protection.
These laws and regulations are increasing in complexity and number. If any person, including any of IPSA's employees, negligently disregards or intentionally breaches its established controls with respect to client or employee data, or otherwise mismanages or misappropriates that data, IPSA could be subject to significant monetary damages, regulatory enforcement actions, fines, and/or criminal prosecution. In addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through systems failure, employee negligence, fraud, or misappropriation, could damage IPSA's reputation and cause it to lose clients and their related revenue in the future.
Legal & Regulatory
Total Risks: 3/37 (8%)Below Sector Average
Regulation1 | 2.7%
Regulation - Risk 1
Increased regulatory scrutiny of the immigration investor program industry.Litigation & Legal Liabilities2 | 5.4%
Litigation & Legal Liabilities - Risk 1
We are responsible for the indemnification of our officers and directors.Litigation & Legal Liabilities - Risk 2
IPSA's engagements could result in professional liability, which could be very costly and hurt our reputation.IPSA's engagements typically involve complex analyses and the exercise of professional judgment. As a result, IPSA is subject to the risk of professional liability. Litigation alleging that IPSA performed negligently or breached any other obligations could expose it to significant legal liabilities and, regardless of outcome, is often very costly, could distract management, could damage its reputation, and could harm its financial condition and operating results.
Production
Total Risks: 3/37 (8%)Below Sector Average
Employment / Personnel2 | 5.4%
Employment / Personnel - Risk 1
IPSA's inability to hire and retain talented people in an industry where there is great competition for talent could have a serious negative effect on our prospects and results of operations.Employment / Personnel - Risk 2
We are dependent on key personnel, including our cyber experts, for the success of our business.We depend on the services of certain key employees, including our cyber experts, for the success of our business, many of whom do not have employment or non-solicitation agreements. If certain of our key employees, including our cyber experts, were to leave the Company and recruit co-workers to join them it may have a material adverse effect on our results of operations. We may not be able to locate or employ on acceptable terms qualified replacements for our key employees if their services were no longer available.
Costs1 | 2.7%
Costs - Risk 1
A decline in the price of, or demand for, any of our Business Advisory Solutions services, would harm our revenues and operating margins.Macro & Political
Total Risks: 2/37 (5%)Below Sector Average
Economy & Political Environment1 | 2.7%
Economy & Political Environment - Risk 1
Changes in capital markets, legal and general economic or other factors beyond IPSA's control could reduce demand for IPSA's services, in which case IPSA's revenues and profitability could decline.International Operations1 | 2.7%
International Operations - Risk 1
International operations could result in additional risks.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.