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Escalade Inc. (ESCA)
NASDAQ:ESCA
Risk Overview Q4, 2024
Risk Distribution
24% Finance & Corporate
24% Macro & Political
21% Production
11% Tech & Innovation
11% Legal & Regulatory
11% 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
Escalade 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, 2024
Main Risk Category
Finance & Corporate
With 9 Risks
Finance & Corporate
With 9 Risks
Number of Disclosed Risks
38
No changes from last report
S&P 500 Average: 31
38
No changes from last report
S&P 500 Average: 31
Recent Changes
3Risks added
3Risks removed
4Risks changed
Since Dec 2024
3Risks added
3Risks removed
4Risks changed
Since Dec 2024
Number of Risk Changed
4
+4
From last reportS&P 500 Average: 3
4
+4
From last reportS&P 500 Average: 3
See the risk highlights of Escalade 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 38
Finance & Corporate
Total Risks: 9/38 (24%)Below Sector Average
Share Price & Shareholder Rights1 | 2.6%
Share Price & Shareholder Rights - Risk 1
The market price of the Company's common stock is likely to be highly volatile as the stock market in general can be highly volatile.Accounting & Financial Operations5 | 13.2%
Accounting & Financial Operations - Risk 1
If we are unable to pay quarterly dividends at intended levels, our reputation and stock price may be harmed.Accounting & Financial Operations - Risk 2
The Company identified material weaknesses in its internal control over financial reporting as of December 31, 2023. Failure to remediate the material weakness remaining as of December 31, 2024, could result in material misstatements in the Company's financial statements and could materially and adversely affect the Company's ability to provide timely and accurate financial information about the Company, which could harm the Company's reputation and share price.Changed
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, the Company's management is required to report on, and the Company's independent registered public accounting firm is required to attest to, the effectiveness of the Company's internal control over financial reporting. The rules governing the standards that must be met for management to assess the Company's internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, the Company's management performs activities that include reviewing, documenting and testing the Company's internal control over financial reporting. In addition, if the Company fails to maintain the adequacy of its internal control over financial reporting, the Company's management will not be able to conclude on an ongoing basis that the Company maintains effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.
In connection with the preparation of the financial statements for the year ended December 31, 2023, management, with the assistance of its independent registered public accounting firm, identified deficiencies in the Company's internal control over financial reporting. Management then concluded, with the oversight of the Company's Audit Committee, that such deficiencies represent material weakness in the Company's internal control over financial reporting even though these material weaknesses did not result in any material errors or any restatement of the Company's previously reported financial results. For further discussion of these material weaknesses, see "Item 9A, Controls and Procedures." A "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis. Management cannot be certain that other deficiencies or material weaknesses will not arise or be identified or that the Company will be able to correct and maintain adequate controls over financial processes and reporting in the future.
Management and the Company's Audit Committee are committed to achieving and maintaining a strong internal control environment. The Company believes it has successfully remediated all but one of the previously identified material weaknesses. The Company is continuing its remediation efforts as to the remaining material weakness and believes that such actions will be successful, although there can be no assurances in this regard. In addition, in the future, the Company may be unable to identify and remediate additional control deficiencies, including material weaknesses. If not successfully remediated, the Company's failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in, or restatements of, the Company's financial statements, could cause the Company to fail to meet its reporting obligations and/or could cause investors to lose confidence in the Company's reported financial information, which could adversely affect the trading price of the Company's common stock and harm the Company's reputation. In addition, such failures could result in violations of applicable securities laws, an inability to meet NASDAQ listing requirements, a default in covenants under the Company's credit facilities, and/or exposure to lawsuits, investigations or other legal proceedings.
Accounting & Financial Operations - Risk 3
Quarterly operating results are subject to fluctuation.Operating results have fluctuated from quarter to quarter in the past, and the Company expects they will continue to do so in the future. Factors that could cause these quarterly fluctuations include the following: international, national and local general economic and market conditions; the size and growth of the overall sporting goods markets; intense competition among manufacturers, marketers, distributors and sellers of products; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products and sports; seasonal demand for products; adverse weather conditions that may create fluctuations in demand for certain of our products; the size, timing and mix of purchases of products; fluctuations and difficulty in forecasting operating results; ability to sustain, manage or forecast growth and inventories; new product development and introduction; ability to secure and protect trademarks, patents and other intellectual property; performance and reliability of products; customer service; the loss of significant customers or suppliers; dependence on distributors; business disruptions; disruptions or delays in our supply chain, including potential disruptions or delays arising from political unrest, war, labor strikes, natural disasters, and public health crises such as the coronavirus pandemic; increased costs of freight and transportation to meet delivery deadlines; changes in business strategy or development plans; general risks associated with doing business outside the United States, including, without limitation: exchange rates, import duties, tariffs, quotas and political and economic instability; changes in government regulations; any liability and other claims asserted against the Company; ability to attract and retain qualified personnel; and other factors referenced or incorporated by reference in this Form 10-K and any other filings with the Securities and Exchange Commission.
Accounting & Financial Operations - Risk 4
Changes in accounting standards could impact reported earnings and financial condition.The accounting standard setters, including the Financial Accounting Standards Board and the Securities and Exchange Commission, periodically change the financial accounting and reporting standards that govern the preparation of the Company's consolidated financial statements. These changes can be hard to predict and apply and can materially affect how the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a new or revised standard retrospectively, which may result in the restatement of prior period financial statements.
Accounting & Financial Operations - Risk 5
The preparation of the Company's financial statements requires the use of estimates that may vary from actual results.The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant estimates that may affect financial statements. Due to the inherent nature of making estimates, actual results may vary substantially from such estimates, which could materially adversely affect the Company's business, results of operations and financial condition. For more information on the Company's critical accounting estimates, please see the Critical Accounting Estimates section of this Form 10-K.
Debt & Financing1 | 2.6%
Debt & Financing - Risk 1
The Company's ability to operate and expand its business and to respond to changing business and economic conditions will be dependent upon the availability of adequate capital.Corporate Activity and Growth2 | 5.3%
Corporate Activity and Growth - Risk 1
Growth may strain resources, which could adversely affect the Company's business and financial performance.Corporate Activity and Growth - Risk 2
The Company may pursue strategic acquisitions, divestitures, or investments and the failure of a strategic transaction to produce anticipated results or the inability to fully integrate an acquired company could have an adverse impact on the Company's business.The Company has made acquisitions of complementary companies or businesses, which have been part of the strategic plan, and may continue to pursue acquisitions in the future from time to time. Acquisitions may result in difficulties in assimilating acquired companies, and may result in the diversion of capital and management's attention from other business issues and opportunities. The Company may not be able to successfully integrate operations that it acquires, including personnel, financial and information systems, cybersecurity measures, distribution, and operating procedures. If the Company fails to successfully integrate acquisitions, the Company's business could suffer. In addition, acquisitions may result in the incurrence of debt, contingent liabilities, amortization expense or write-offs of goodwill or other intangibles, any of which could affect the Company's financial position. The Company also has sometimes divested or discontinued certain operations, assets, and products that did not perform to the Company's expectations or no longer fit with the Company's strategic objectives.
Divestitures may result in gains, losses, contingent liabilities, write-offs, tax consequences, or other related costs and expenses that could affect the Company's financial position. Escalade will consider acquisitions, divestitures, and investments in the future, one or more of which, individually or in the aggregate, could be material to the Company's overall business, operations or financial position.
Macro & Political
Total Risks: 9/38 (24%)Above Sector Average
Economy & Political Environment2 | 5.3%
Economy & Political Environment - Risk 1
Fluctuation in economic conditions could prevent the Company from accurately forecasting demand for its products which could adversely affect its operating results or market share.Economy & Political Environment - Risk 2
Operating results may be impacted by changes in the economy that influence business and consumer spending.Our business is tied to general economic and industry conditions as demand for sporting goods depends largely on the strength of the U.S. economy, and to a lesser extent, by the economies of Asia, Mexico, Canada and Europe. We cannot predict economic downturns or how robust the economy may be nor whether such downturns or growth will be sustained. If economic recovery is slow to occur, or if the economy experiences a prolonged period of decelerating or negative growth, the Company's results of operations may be negatively impacted. In general, the Company's sales depend on discretionary spending by consumers. Business and financial performance may be adversely affected by current and future economic conditions, including unemployment levels, energy costs, interest rates, recession, inflation, the impact of natural disasters and terrorist activities, public health crisis, consumer confidence, the availability and cost of credit, bankruptcies or financial difficulties of our customers and suppliers, and other matters that influence business and consumer spending. These factors have had and could continue to have a substantial impact on our business.
International Operations2 | 5.3%
International Operations - Risk 1
International operations expose the Company to the unique risks inherent in foreign operations.International Operations - Risk 2
The Company faces risks associated with our operations in China.Added
The Company has key suppliers in China and numerous products sold by the Company are manufactured in China. The Company also has a wholly-owned Chinese subsidiary that facilitates the Company's sourcing operations in China. As a result, the Company's business is subject to risks associated with doing business in China including, but not limited to, political and social conditions, conflicts between Chin and the U.S., existing and future laws, regulations and policies, state ownership of and/or control or influence over certain companies and industries, protection of intellectual property rights and uncertainties associated with enforcing contractual obligations and laws. In addition, there are U.S. laws, rules and regulations that impose restrictions or requirements that could affect the Company, such as the Uyghur Forced Labor Prevention Act ("UFLPA") enacted by Congress in 2021 that imposes a presumptive ban on the import of goods to the U.S. that are made, wholly or in part, in the Xinjiang Uyghur Autonomous Region ("XUAR") of China. Although the Company believes it is in compliance with the UFLPA and all other U.S. and Chinese laws impacting its operations in China, these risks generally associated with doing business in China could adversely affect our business, financial condition and results of operations.
Natural and Human Disruptions4 | 10.5%
Natural and Human Disruptions - Risk 1
Unseasonable or extreme weather conditions, alone or together with natural disasters, as well as other catastrophic events, could adversely affect the Company's business and results of operations.Natural and Human Disruptions - Risk 2
These risks are not exhaustive.Other sections of this Form 10-K may include additional factors which could adversely impact the Company's business and financial performance. Moreover, the Company operates in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can the Company assess the impact of all factors on business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Natural and Human Disruptions - Risk 3
The occurrence of future pandemics or similar events and their ultimate magnitude is unpredictable, volatile and uncertain.The COVID-19 pandemic created significant public health concerns and economic disruption, which materially impacted the Company, our customers, suppliers and sales channels. We cannot predict whether future pandemics or other public health crises will emerge. Nor can we predict the impact of such occurrences nor whether and to what degree any disruptions might be caused thereby. In such events, many indeterminable factors may arise, including the duration and severity of the occurrence, the amount of time it may take for more normalized economic activity to resume, future government actions that may be taken, the effects on the Company's customers and suppliers, including their ability to pay for our products, the effects on operations of the Company's logistics providers, and the impact on the ability of the Company's employees to work and travel. Governmental actions may cause the Company to modify its business operations or otherwise adversely impact the Company. There can be no assurance that the Company will be able to respond quickly enough or appropriately to circumstances that may change rapidly and/or that are outside of our control. The short-term and long-term impacts of such occurrences on the Company's business is unknown and ultimately could result in material adverse effects on the Company's business, financial performance and results of operations.
Natural and Human Disruptions - Risk 4
Terrorist attacks, acts of war, natural disasters, and public health crises may seriously harm the Company's business.Among the chief uncertainties facing the nation and the world and, as a result, our business, is the instability and conflicts in the Middle East and in Ukraine and uncertainties regarding North Korea, Russia, China and other Asian and European countries. Obviously, no one can predict with certainty what the overall economic impact will be as a result of these circumstances. Terrorist attacks may cause damage or disruption to the Company, employees, facilities and customers, which could significantly impact net sales, costs and expenses and financial condition. The potential for future terrorist attacks, the national and international responses to terrorist attacks, and other acts of war and hostility may cause greater uncertainty and cause business to suffer in ways the Company currently cannot predict.
In addition, any natural disaster or other serious disruption to one of the Company's manufacturing or distribution sites due to fire, tornado, earthquake or other natural disasters in countries where the Company conducts business, or political unrest, war, labor strikes, work stoppages or public health crises, such as outbreaks of the coronavirus in countries where our suppliers are located could result in the disruption of the Company's shipments and supply chain of products and raw materials. Any significant disruption of the Company's supply chain, manufacturing operations, and/or product shipments resulting from similar events on a large scale or over a prolonged period could cause significant delays until the Company would be able to resume normal operations or shift to other third party suppliers, if needed. There can be no assurance that alternative capacity could be obtained on favorable terms, if at all, and could negatively affect the Company's sales and profitability.
Capital Markets1 | 2.6%
Capital Markets - Risk 1
The Company could be adversely affected by changes in currency exchange rates and/or the value of the United States dollar.Production
Total Risks: 8/38 (21%)Above Sector Average
Manufacturing1 | 2.6%
Manufacturing - Risk 1
The Company's business involves the potential for product recalls, warranty liability, product liability, and other claims against us, which could adversely affect our reputation, earnings and financial condition.Employment / Personnel2 | 5.3%
Employment / Personnel - Risk 1
The Company is currently transitioning to a new Chief Executive Officer and will soon commence the process of onboarding a new Chief Executive Officer, which may result in some disruption to the Company.Added
Employment / Personnel - Risk 2
The Company could suffer if it fails to attract and retain skilled management and key personnel.The Company's success depends in large part on its ability to attract and retain highly qualified management executives and key personnel. Significant competition for qualified candidates exists in the Company's business lines and geographic locations. If the Company is not able to hire and retain its executives and key personnel, or if the compensation costs required to attract and retain such individuals becomes more expensive, the Company may suffer adverse consequences to its business, operations, and financial condition.
Supply Chain4 | 10.5%
Supply Chain - Risk 1
The Company's business is subject to risks associated with sourcing and manufacturing outside of the United States, and risks arising from tariffs and/or international trade wars.Supply Chain - Risk 2
Disruptions to our supply chain could have an adverse impact on our operations.Many of the Company's products are manufactured outside the United States. Those products must be transported by third parties over large geographic distances. Delays in the shipment or delivery of our products could occur due to work stoppages, port strikes, lack of availability of transportation, global instability, attacks on shipping vessels and similar high seas disruptions and other factors beyond the Company's control. If the Company experiences any significant disruption in its supply chain or sharply rising costs for any reason, the Company may be unable to satisfy customer demand for our products resulting in lost sales. Such delays and increased costs could impair our ability to timely and efficiently deliver our products, and could adversely impact our operating results.
Supply Chain - Risk 3
Deterioration in relationships with suppliers or in the financial condition of suppliers could adversely affect liquidity, results of operations and financial position.Access to materials, parts and supplies is dependent upon close relationships with suppliers and the ability to purchase products from the principal suppliers on competitive terms. The Company does not enter into long-term supply contracts with these suppliers, and has no current plans to do so in the future. These suppliers are not required to sell to the Company and are free to change the prices and other terms. Any deterioration or change in the relationships with or in the financial condition of the Company's significant suppliers could have an adverse impact on its ability to procure materials and parts necessary to produce products for sale and distribution. If the Company or any of the significant suppliers terminated or significantly curtailed its relationship with a significant supplier or the Company, respectively, or if a significant supplier ceased operations, the Company would be forced to expand relationships with other suppliers, seek out new relationships with new suppliers or risk a loss in market share due to diminished product offerings and availability. Any change in one or more of these suppliers' willingness or ability to continue to supply the Company with their products could have an adverse impact on the Company's liquidity, results of operations and financial position.
Supply Chain - Risk 4
The Company's business may be adversely affected by the actions of and risks associated with third-party suppliers.The raw materials that the Company purchases for manufacturing operations and many of the products that it sells are sourced from a wide variety of third-party suppliers. The Company cannot control the supply, design, function or cost of many of the products that are offered for sale and are dependent on the availability and pricing of key materials and products. Disruptions in the availability of raw materials used in production of these products may adversely affect sales and result in customer dissatisfaction. The ability to find qualified suppliers and to access products in a timely and efficient manner is a significant challenge, especially with respect to goods sourced outside the United States. Political instability, financial instability of suppliers, merchandise quality issues, trade restrictions, tariffs, currency exchange rates, transport capacity and costs, inflation and other factors relating to foreign trade are beyond the Company's control.
Costs1 | 2.6%
Costs - Risk 1
Excess inventory levels have previously and may in the future adversely impact the Company's operating results.Added
Tech & Innovation
Total Risks: 4/38 (11%)Below Sector Average
Trade Secrets2 | 5.3%
Trade Secrets - Risk 1
The expiration or termination of our material trademarks, brand names and licensing agreements could have a material adverse effect on the Company's business.Trade Secrets - Risk 2
Intellectual property rights are valuable, and any inability to protect them could reduce the value of products.The Company obtains patents, trademarks and copyrights for intellectual property, including its brand names, which represent important assets to the Company. If the Company fails to adequately protect intellectual property through patents, trademarks and copyrights, its intellectual property rights may be misappropriated by others, invalidated or challenged, and our competitors could duplicate the Company's products or may otherwise limit any competitive design or manufacturing advantages. The Company believes that success is likely to depend upon continued innovation, technical expertise, marketing skills, branding, customer support and services rather than on legal protection of intellectual property rights. However, the Company intends to aggressively assert its intellectual property rights when necessary.
Cyber Security2 | 5.3%
Cyber Security - Risk 1
Cybersecurity breaches or other data security incidents could result in unauthorized access, theft, modification, or destruction of Company assets, including bank accounts, intellectual property, and confidential information, which may adversely affect the Company's business and results of operations.Changed
Cyber Security - Risk 2
Breaches of data or technology security could damage the Company's reputation, cause the Company to incur additional expense, expose the Company to litigation, and adversely affect the Company's business, financial condition and profitability.Changed
A breach of our data or technology security could result in an unauthorized transfer or release of Company proprietary, employee, customer and other Company related information, or the loss of valuable business data or technology, that could cause a disruption in our business. Hackers are increasingly sophisticated and operate large scale and complex cybersecurity attacks. In the event of such an attack, we may expend significant capital and other resources to protect against, respond to, and/or alleviate problems caused by a breach. Such an event could also result in unwanted negative media attention, damage to the Company's reputation, damage to our customers, and result in lost sales and lawsuits. The Company also must comply with increasingly complex regulatory cybersecurity and privacy standards, which may result in significant expense due to increased investment in technology and the development of new operational processes which could negatively impact the Company's profitability. The Company maintains cyber liability insurance; however, such insurance may not be sufficient to cover the financial, legal, business or reputational losses that could result from a breach of the Company's systems.
Legal & Regulatory
Total Risks: 4/38 (11%)Below Sector Average
Regulation1 | 2.6%
Regulation - Risk 1
New laws, policies, regulations, rulemaking and oversight, as well as changes to those currently in effect, could adversely impact our earnings, cash flows and operations.Litigation & Legal Liabilities1 | 2.6%
Litigation & Legal Liabilities - Risk 1
The Company may be subject to various types of litigation, and our insurance may not be sufficient to cover damages related to those claims.Environmental / Social2 | 5.3%
Environmental / Social - Risk 1
The Company is subject to risks associated with laws and regulations related to health, safety, climate change and environmental, social and governance matters.Changed
Environmental / Social - Risk 2
Unauthorized disclosure of sensitive or confidential customer information could harm the Company's business and its standing with its customers.Through sales and marketing activities, the Company collects and stores certain information that customers provide to purchase products or services or otherwise communicate and interact with the Company. Despite instituted safeguards for the protection of such information, the Company cannot be certain that all of its systems are entirely free from vulnerability to attack. If successful, hackers or other malicious parties could misappropriate confidential customer or business information. In addition, an employee, a contractor or other third party with whom the Company does business may attempt to circumvent the Company's security measures in order to obtain such information or inadvertently cause a breach involving such information. Loss of customer or business information could disrupt operations, damage the Company's reputation, and expose the Company to claims from customers, financial institutions, payment card associations and other persons, any of which could have an adverse effect on the Company's business, results of operations and financial condition.
Ability to Sell
Total Risks: 4/38 (11%)Below Sector Average
Competition1 | 2.6%
Competition - Risk 1
Markets are highly competitive which could limit the Company's growth and reduce profitability.Demand3 | 7.9%
Demand - Risk 1
The Company's customers may experience financial difficulties that could result in losses to the Company.Demand - Risk 2
The Company derives a substantial portion of its revenue from a few significant customers and loss of any of these customers could materially affect our results of operations and financial condition.The Company has two major customers, each of which accounted for more than ten percent of consolidated gross sales in the Company's 2024 fiscal year. The Company also has several other large customers, none of which represent more than ten percent of consolidated gross sales, and historically has derived substantial revenues from these customers. Our customers continue to experience industry consolidation, which increases our risk that we may be unable to find sufficient alternative customers. The Company needs to continue to expand its customer base, including sales of new product offerings to existing customers, in order to minimize the effects of the loss of any single customer in the future. If sales to one or more of the large customers would be lost or materially reduced, there can be no assurance that the Company will be able to replace such revenues, which could have a material adverse effect on the Company's business, results of operations and financial condition.
Demand - Risk 3
If the Company is unable to predict or effectively react to changes in consumer demand, it may lose customers and sales may decline.Success depends in part on the ability to anticipate and respond in a timely manner to changing consumer demand and preferences regarding sporting goods. Products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. The Company often makes commitments to manufacture products months in advance of the proposed delivery to customers. If Escalade misjudges the market for products, sales may decline significantly. The Company may have to take significant inventory markdowns on unpopular products that are overproduced and/or miss opportunities for other products that may rise in popularity, both of which could have a negative impact on profitability. A major shift in consumer demand away from sporting goods products could also have a material adverse effect on the Company's business, results of operations and financial condition.
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.