Education
About Us
Working with TipRanks
Follow Us
ABB Ltd (ABBNY)
OTHER OTC:ABBNY
Risk Overview Q4, 2021
Risk Distribution
30% Macro & Political
22% Legal & Regulatory
19% Production
15% Finance & Corporate
7% Tech & Innovation
7% 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
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
ABB Ltd 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 Q4, 2021
Main Risk Category
Macro & Political
With 8 Risks
Macro & Political
With 8 Risks
Number of Disclosed Risks
27
+2
From last reportS&P 500 Average: 31
27
+2
From last reportS&P 500 Average: 31
Recent Changes
2Risks added
0Risks removed
2Risks changed
Since Dec 2021
2Risks added
0Risks removed
2Risks changed
Since Dec 2021
Number of Risk Changed
2
+1
From last reportS&P 500 Average: 3
2
+1
From last reportS&P 500 Average: 3
See the risk highlights of ABB Ltd 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 27
Macro & Political
Total Risks: 8/27 (30%)Above Sector Average
Economy & Political Environment2 | 7.4%
Economy & Political Environment - Risk 1
The uncertainties relating to the United Kingdom’s new relationship with the European Union and itspotential impact on the relationship between Switzerland and the European Union, may have a negative effect on cross-border trade and our business.Economy & Political Environment - Risk 2
Our business is exposed to risks associated with the volatile global economic environment andpolitical conditions.Adverse changes in economic or political conditions, particularly in locations where our customers oroperations are located, as well as concerns about global trade, global health crises, developments in energyprices, and terrorist activities, could have a material adverse effect on our business, financial condition,results of operations and liquidity and may adversely impact the demand for our products and services.These and other factors may prevent our customers and suppliers from obtaining the financing required topursue their business activities as planned, which may force them to modify, delay or cancel plans topurchase or supply our products or services. In addition, if our customers do not generate sufficient revenue,or fail to timely obtain access to the capital markets, they may not be able to pay, or may delay payment of,the amounts they owe us. Customers with liquidity issues have delayed payments of amounts they owe usand this had lead and may lead to additional bad debt expense for us, which may adversely affect our resultsof operations and cash flows. We are also subject to the risk that the counterparties to our credit agreementsand hedging transactions may go bankrupt if they suffer catastrophic demand on their liquidity that preventsthem from fulfilling their contractual obligations to us.Our business environment is influenced also by numerous other economic or political uncertainties whichmay affect the global economy and the international capital markets. In periods of slow economic growth ordecline, our customers are more likely to buy less of our products and services, and as a result we are morelikely to experience decreased revenues. Our businesses are affected by the level of investments anddemand in the markets that we serve, principally utilities, industry and transport & infrastructure. At varioustimes during the last several years, we also have experienced, and may experience in the future, grossmargin declines in certain businesses, reflecting the effect of factors such as competitive pricing pressures,inventory write-downs, charges associated with the cancellation of planned expansion and increases incomponent and manufacturing costs resulting from higher labor and material costs borne by ourmanufacturers and suppliers that, as a result of competitive pricing pressures or other factors, we are unableto pass on to our customers. Economic downturns also may lead to restructuring actions and associatedexpenses. Uncertainty about future economic conditions makes it difficult for us to forecast operating resultsand to make decisions about future investments.In addition, we are subject to the risks that our business operations in or with certain countries may beadversely affected by trade tariffs, trade or economic sanctions or other restrictions imposed on thesecountries, including the trade tensions between the United States and China in recent years. These couldlead to increased costs for us or for our customers or limit our ability to do business in or with certaincountries. In addition, actual or potential investors that object to certain of these business operations mayadversely affect the price of our shares by disposing or deciding not to purchase our shares. These countriesmay from time to time include countries that are identified by the United States as state sponsors of terrorism.If any countries where or with whom we do business are subject to such sanctions or restrictions, ourbusiness, consolidated operating results, financial condition and the trading price of our shares may beadversely affected. In 2021, our total revenues from business with countries identified by the U.S.government as state sponsors of terrorism represented significantly less than 1 percent of our total revenues.Based on the amount of revenues and other relevant quantitative and qualitative factors, we have determined 6that our business in 2021 with countries identified by the U.S. government as state sponsors of terrorism wasnot material.
International Operations2 | 7.4%
International Operations - Risk 1
We may encounter difficulty in managing our business due to the global nature of our operations.International Operations - Risk 2
Our operations in emerging markets expose us to risks associated with conditions in those marketsA significant amount of our operations is conducted in the emerging markets in South America, Asia, and theMiddle East and Africa. In 2021, approximately 40 percent of our consolidated revenues were generated fromthese emerging markets. Operations in emerging markets can present risks that are not encountered incountries with well-established economic and political systems, including:• economic instability, which could make it difficult for us to anticipate future business conditions inthese markets, cause delays in the placement of orders for projects that we have been awardedand subject us to volatile geographic markets,• political or social instability, which could make our customers less willing to make cross-borderinvestments in such regions and could complicate our dealings with governments regardingpermits or other regulatory matters, local businesses and workforces,• boycotts and embargoes that may be imposed by the international community on countries inwhich we do business or where we seek to do business could adversely affect the ability of ouroperations in those countries to obtain the materials necessary to fulfill contracts and our abilityto pursue business or establish operations in those countries,• foreign state takeovers of our and our customers’ facilities,• significant fluctuations in interest rates and currency exchange rates,• the imposition of unexpected taxes or other payments on our revenues in these markets,• our inability to obtain financing and/or insurance coverage from export credit agencies, and• exchange controls and other restrictions by foreign governments.Additionally, political and social instability resulting from increased violence in certain countries in which wedo business has raised concerns about the safety of our personnel. These concerns may hinder our ability tosend personnel abroad and to hire and retain local personnel. Such concerns may require us to increasesecurity for personnel traveling to and working in affected countries or to restrict or wind-down operations insuch countries, which may negatively impact us and result in higher costs and inefficiencies.Consequently, our exposure to the conditions in or affecting emerging markets may adversely affect ourbusiness, financial condition, results of operations and liquidity
Natural and Human Disruptions1 | 3.7%
Natural and Human Disruptions - Risk 1
Our business is exposed to risks associated with the COVID-19 pandemic.Capital Markets3 | 11.1%
Capital Markets - Risk 1
Currency Transaction Risk.Added
Capital Markets - Risk 2
Currency Translation Risk.Added
The results of operations and financial position of most of our non-U.S.companies are initially recorded in the currency of the country in which each such company resides, whichwe call “local currency”. That financial information is then translated into U.S. dollars at the applicableexchange rates for inclusion in our Consolidated Financial Statements. The exchange rates between localcurrencies and the U.S. dollar can fluctuate substantially, which could have a significant translation effect onour reported consolidated results of operations and financial position.Increases and decreases in the value of the U.S. dollar versus local currencies will affect the reported valueof our local currency assets, liabilities, revenues and expenses in our Consolidated Financial Statements,even if the value of these items has not changed in local currency terms. These translations couldsignificantly and adversely affect our results of operations and financial position from period to period.
Capital Markets - Risk 3
Our multi-national operations expose us to the risk of fluctuations in currency exchange rates.Currency exchange rate fluctuations have had, and could continue to have, a material impact on ouroperating results, the comparability of our results between periods, the value of assets or liabilities asrecorded on our Consolidated Balance Sheet and the price of our securities. Volatility in exchange ratesmakes it harder to predict exchange rates and perform accurate financial planning. Changes in exchangerates can unpredictably and adversely affect our consolidated operating results and could result in exchange losses.
Legal & Regulatory
Total Risks: 6/27 (22%)Above Sector Average
Litigation & Legal Liabilities2 | 7.4%
Litigation & Legal Liabilities - Risk 1
We may be the subject of product liability claims.Litigation & Legal Liabilities - Risk 2
Our business subjects us to considerable potential exposure to litigation and legal claims and could be materially adversely affected if we incur legal liability.We are subject to, and may become a party to, a variety of litigation or other claims. Our business is subjectto the risk of claims involving current and former employees, customers, partners, subcontractors, suppliers,competitors, shareholders, government regulatory agencies or others through private actions, class actions,whistleblower claims, administrative proceedings, regulatory actions or other proceedings. Our acquisitionactivities have in the past and may in the future be subject to litigation or other claims. While we maintaininsurance for certain potential liabilities, such insurance does not cover all types and amounts of potentialliabilities and is subject to various exclusions as well as caps on amounts recoverable
Taxation & Government Incentives1 | 3.7%
Taxation & Government Incentives - Risk 1
Examinations by tax authorities and changes in tax regulations could result in lower earnings andcash flows.Environmental / Social3 | 11.1%
Environmental / Social - Risk 1
We are subject to environmental laws and regulations in the countries in which we operate. We incurcosts to comply with such regulations, and our ongoing operations may expose us to environmental liabilities.Environmental / Social - Risk 2
We could be affected by future laws or regulations enacted to address climate change concerns as well as the physical effects of climate change.Existing or pending laws and regulations intended to address climate change concerns could affect us in thefuture. We have incurred, and may need to incur additional costs to comply with these laws and regulationsand any non-compliance could adversely affect our reputation and result in significant fines. We could also beaffected indirectly by increased prices for goods or services provided to us by companies that are directlyaffected by these laws and regulations and pass their increased costs through to their customers. At thistime, we cannot estimate what impact such costs may have on our business, results of operations or financialcondition. We could also be affected by the physical consequences of climate change itself, although wecannot estimate what impact those consequences might have on our business or operations. Any suchchanges could also impact our ability to achieve our 2030 Sustainability targets as well as the related costs and resources necessary to do so
Environmental / Social - Risk 3
Failure to comply with evolving data privacy and data protection laws and regulations or to otherwiseprotect personal data, may adversely impact our business and financial results.We are subject to many rapidly evolving privacy and data protection laws and regulations around the worldincluding the General Data Protection Regulation (GDPR) in Europe as well as the California Data PrivacyAct and the California Privacy Rights Act (effective in January 2023) in the United States. This requires us tooperate in a complex environment where there are significant constraints on how we can process personaldata across our business. The GDPR, which became effective in May 2018, has established stringent dataprotection requirements for companies doing business in or handling personal data of individuals in theEuropean Union. The GDPR imposes obligations on data controllers and processors including therequirement to maintain a record of their data processing and to implement policies and procedures as part oftheir mandated privacy governance framework. Breaches of the GDPR could result in substantial fines, whichin some cases could be up to four percent of our worldwide revenue. In addition, a breach of the GDPR orother data privacy or data protection laws or regulations could result in regulatory investigations, reputationaldamage, orders to cease/change our use of data, enforcement notices, as well as potential civil claimsincluding class action type litigation. We have invested, and continue to invest, human and technologyresources in our data privacy and data protection compliance efforts. There can be no assurance that anysuch actions will be sufficient to prevent cybersecurity breaches, disruptions, unauthorized release ofsensitive information or corruption of data. Despite such actions, there is a risk that we may be subject tofines and penalties, litigation and reputational harm if we fail to properly process or protect the data or privacyof third parties or comply with the GDPR or other applicable data privacy and data protection regimes.
Production
Total Risks: 5/27 (19%)Below Sector Average
Manufacturing1 | 3.7%
Manufacturing - Risk 1
Undertaking long-term, technically complex projects or projects that are dependent upon factors notwholly within our control could adversely affect our profitability and future prospects.Employment / Personnel2 | 7.4%
Employment / Personnel - Risk 1
Illegal behavior by any of our employees or agents could have a material adverse impact on ourconsolidated operating results, cash flows, and financial position as well as on our reputation andour ability to do business.Employment / Personnel - Risk 2
If we are unable to attract and retain qualified management and personnel then our business may be adversely affected.Our success depends in part on our continued ability to hire, assimilate and retain highly qualified personnel,particularly our senior management team and key employees. Competition for highly qualified managementand technical personnel remains intense in the industries and regions in which we operate. If we are unableto attract and retain members of our senior management team and key employees, including in connectionwith our ongoing organizational transformation, this could have an adverse effect on our business
Costs2 | 7.4%
Costs - Risk 1
There is no guarantee that our ongoing efforts to reduce costs will be successful.Costs - Risk 2
Increases in costs or limitation of supplies of raw materials may adversely affect our financialperformanceWe purchase large amounts of commodity-based raw materials, including steel, copper, aluminum and oil.Prevailing prices for such commodities are subject to fluctuations due to changes in supply and demand anda variety of additional factors beyond our control, such as global political and economic conditions.Historically, prices for some of these raw materials have been volatile and unpredictable, and such volatility isexpected to continue. Therefore, commodity price changes may result in unexpected increases in rawmaterial costs, and we may be unable to increase our prices to offset these increased costs without sufferingreduced volumes, revenues or operating income. We do not fully hedge against changes in commodity pricesand our hedging procedures may not work as planned.We depend on third parties to supply raw materials and other components and may not be able to obtainsufficient quantities of these materials and components, which could limit our ability to manufacture productson a timely basis and could harm our profitability. The risk that we may not be able to obtain raw materials orother components is increased by the COVID-19 pandemic. For some raw materials and components, werely on a single supplier or a small number of suppliers. If one of these suppliers were unable to provide uswith a raw material or component we need, our ability to manufacture some of our products could beadversely affected until we are able to establish a new supply arrangement. We may be unable to find a sufficient alternative supply channel in a reasonable time period or on commercially reasonable terms, if atall. In 2021, global supply chain constraints caused us to experience some delays in supplier deliveries andproduct shortages for various categories such as semiconductors and certain other raw materials as well asconstraints in the transportation of inbound supplies. We took steps to mitigate supply chain shortages,including building up buffer stocks, approving new suppliers and redesigning certain products. Although wewere able to mitigate some disruptions and support our business growth, we have experienced some delaysin delivering to certain of our customers and cannot assure you that our mitigation efforts will be sufficient toovercome these supply chain constraints if these continue or worsen in 2022.If our suppliers are unable to deliver sufficient quantities of materials on a timely basis, the manufacture andsale of our products may be disrupted, we may be required to assume liability under our agreements withcustomers and our sales and profitability could be materially adversely affected.
Finance & Corporate
Total Risks: 4/27 (15%)Below Sector Average
Debt & Financing2 | 7.4%
Debt & Financing - Risk 1
If we are unable to obtain performance and other guarantees from financial institutions, we may beprevented from bidding on, or obtaining, some contracts, or our costs with respect to such contracts could be higher.Debt & Financing - Risk 2
Our hedging activities may not protect us against the consequences of significant fluctuations inexchange rates, interest rates or commodity prices on our earnings and cash flows.Our policy is to hedge material currency exposures by entering into offsetting transactions with third-partyfinancial institutions. Given the effective horizons of our risk management activities and the anticipatorynature of the exposures intended to be hedged, there can be no assurance that our currency hedgingactivities will fully offset the adverse financial impact resulting from unfavorable movements in foreignexchange rates. In addition, the timing of the accounting for recognition of gains and losses related to ahedging instrument may not coincide with the timing of gains and losses related to the underlying economicexposures.As a resource-intensive operation, we are exposed to a variety of market and asset risks, including theeffects of changes in commodity prices and interest rates. We monitor and manage these exposures as anintegral part of our overall risk management program, which recognizes the unpredictability of markets andseeks to reduce the potentially adverse effects on our business. As part of our effort to manage theseexposures, we may enter into commodity price and interest rate hedging arrangements. Nevertheless,changes in commodity prices and interest rates cannot always be predicted or hedged.If we are unable to successfully manage the risk of changes in exchange rates, interest rates or commodityprices or if our hedging counterparties are unable to perform their obligations under our hedging agreementswith them, then changes in these rates and prices could have an adverse effect on our financial condition andresults of operations
Corporate Activity and Growth2 | 7.4%
Corporate Activity and Growth - Risk 1
Anticipated benefits of historical, existing and potential future mergers, acquisitions, joint ventures or strategic alliances may not be realized.Corporate Activity and Growth - Risk 2
Our business strategy includes making strategic divestitures. There can be no assurance that any divestitures will provide business benefit.Changed
Our strategy includes divesting certain businesses. The divestiture of an existing business could reduce ourfuture profits and operating cash flows and make our financial results more volatile. We may also retaincertain obligations or grant indemnities in connection with a divestment. We may not find suitable purchasersfor our non-core businesses and may continue to pay operating costs associated with these businesses.Failed attempts to divest non-core businesses may distract management’s attention from other businessactivities, erode employee morale and customers’ confidence, and harm our business. A divestiture couldalso cause a decline in the price of our shares and increased reliance on other elements of our core businessoperations. Whether we realize the anticipated benefits of a divestment, including our divestment in 2020 of80.1 percent of the Power Grids business and the divestment in 2021 of our Mechanical Power Transmissionbusiness, depends on whether we successfully manage the related risks. If we do not successfully managethe risks associated with a divestiture, our business, financial condition, and results of operations could be adversely affected.
Tech & Innovation
Total Risks: 2/27 (7%)Below Sector Average
Trade Secrets1 | 3.7%
Trade Secrets - Risk 1
An inability to protect our intellectual property rights or actual or alleged infringement of a thirdparty’s intellectual property rights could adversely affect our business.Changed
Cyber Security1 | 3.7%
Cyber Security - Risk 1
Increased information technology (IT) security threats and more sophisticated cyber-attacks couldpose a risk to our systems, networks, products, solutions and services.Ability to Sell
Total Risks: 2/27 (7%)Below Sector Average
Competition2 | 7.4%
Competition - Risk 1
Industry consolidation could result in more powerful competitors and fewer customers.Competition - Risk 2
We operate in very competitive and rapidly changing markets and could be adversely affected if wefail to keep pace with technological changes.We operate in very competitive and rapidly changi ng markets where we regularly need to innovate anddevelop products, systems, services and solutions that address the business challenges and needs of ourcustomers. The nature of these challenges varies across the geographic markets and product areas that weserve. The markets for our products and services are characterized by evolving industry standards, whichmay require us to modify our products and systems. The continual development of advanced technologies fornew products and product enhancements is an important way in which we remain competitive and maintainacceptable pricing levels. If we fail to keep pace with technological changes in the industrial sectors that weserve, we may experience lower revenues, price erosion and lower margins.Our primary competitors are sophisticated companies with significant resources that may develop productsand services that are superior to our products and services or may adapt more quickly than we do to newtechnologies, industry changes or evolving customer requirements. We are also facing increased competitionfrom low cost competitors in emerging markets, which may give rise to increased pressure to reduce ourprices. Our failure to anticipate or respond quickly to technological developments or customer requirementscould adversely affect our business, results of operations, financial condition and liquidity.
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.