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

National Grid Transco disclosed 9 risk factors in its most recent earnings report. National Grid Transco reported the most risks in the “Macro & Political” category.

Risk Overview Q1, 2022

Risk Distribution

44% Macro & Political

22% Finance & Corporate

11% Tech & Innovation

11% Legal & Regulatory

11% Production

0% Ability to Sell

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

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

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

National Grid Transco Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

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

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

Risk Highlights Q1, 2022

Main Risk Category

Macro & Political

With 4 Risks

Macro & Political

With 4 Risks

Number of Disclosed Risks

-2

From last report

S&P 500 Average: 31

-2

From last report

S&P 500 Average: 31

Recent Changes

9Risks added

11Risks removed

0Risks changed

Since Mar 2022

9Risks added

11Risks removed

0Risks changed

Since Mar 2022

Number of Risk Changed

No changes from last report

S&P 500 Average: 3

No changes from last report

S&P 500 Average: 3

See the risk highlights of National Grid Transco 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 9

Macro & Political

Total Risks: 4/9 (44%)Above Sector Average

Economy & Political Environment1 | 11.1%

Economy & Political Environment - Risk 1

Added

Political and societal expectations and perceptions

There is a risk that we do not position ourselves appropriately to political and societal expectations. Processes and resources are in place to review, monitor and influence perceptions of our business and our reputation by: • enhancing and consolidating our digital roadmap and social channels; • developing an internal forum to increase management of stakeholder and media reputational issues; • meeting our commitment to be a responsible business (see pages 60 - 69); and • promoting partnerships and proactive policy-change discussions across the jurisdictions where we operate. Considerations on emerging risks and horizon-scanning activities have also been addressed as part of financial and reputational impact assessments. These processes, along with twice-yearly Board strategy discussions, are reviewed regularly to ensure they continue to support our short- and long-term strategy. We regularly monitor and analyse market conditions, competitors and their potential.

Natural and Human Disruptions3 | 33.3%

Natural and Human Disruptions - Risk 1

Added

Climate change

There is a risk that we fail to identify and/or deliver upon actions necessary to address the transitional impacts (from a changing energy system) of climate change on our business and demonstrate our leadership of climate change in the energy sector. Putting in place measures to: • evolve our environmental sustainability metrics to better reflect our strategy, measure our impact and track our progress; • address our GHG emissions and meet our sustainability commitments, including net zero by 2050, hosting our first environmental, social and governance (ESG) investor seminar, including the publication of our Responsible Business Charter setting out what responsibility means for us and our commitments and ambitions over the coming years - progress is reported in our annual Responsible Business Report; • advocate for legislative and policy changes that advance decarbonisation, while proposing and delivering actions in the regions we operate to accelerate decarbonisation for the public and our customers. This work is wide-ranging from system improvements to supporting renewable generation connections, EV proposals, oil to gas/electricity heat conversions, energy efficiency, interconnectors, thought leadership and investment in new and emerging areas. Note that a number of the above measures also address the physical impacts of climate change on our operations; • regularly assess the potential range of net zero pathways and future impact on our gas assets, including evaluation of new and evolving technologies and alternative fuel sources (e.g. hydrogen); • work to include renewable gases in our US gas distribution networks; • commit to making disclosures which are aligned with the Task Force on Climaterelated Financial Disclosures (TCFD), including physical and transitional scenario analysis (see pages 70 - 83); • support the charging infrastructure required for increased use of EVs; • promote energy-efficiency programmes for customers in the US; • facilitate decarbonisation in the US and UK, including zero-carbon operation of the GB electricity system through ESO in the UK; and • continue work on programmes to develop skills in our current and future workforce.

Natural and Human Disruptions - Risk 2

Added

Significant disruption of energy

There is a risk that we fail to predict and respond to a significant disruption of energy supply. We continue to apply a holistic approach to managing this risk through preventative mitigating actions to maintain network reliability, and timely and effective response plans. Key management actions include the following: Ongoing preventative measures: • inspection and maintenance programmes including defect management; • flood contingency plans for substations; • System Operator supply and demand forecasting; • UK and US winter-preparedness plans; • US gas-mains replacement programmes; • US storm-hardening programme; • outage planning; and • diversity of suppliers in our US gas procurement. Event response: • emergency response plans; • incident-management system; • disaster recovery; and • business continuity management. We have also reviewed market resource adequacy and balancing (where applicable). The short-term controls and investments needed for a resilient network are in place, but further work remains to be done to build our climate adaptation forecasting and control framework for the next decade.

Natural and Human Disruptions - Risk 3

Added

Covid-19

There is a risk that we fail to respond to significant disruptive factors caused by the COVID-19 pandemic. The COVID-19 pandemic affected several areas of our business, and we responded with a comprehensive plan, supporting the safety of our workforce and customers. • Mitigating procedures are now part of business as usual, with further improvements to the Crisis Management Framework (CMF) planned. • As COVID-19 rates reduce and the UK and US begin to move to an endemic status, we expect the risk will be retired as a GPR in 2022/23. Throughout 2021/22 we have monitored effects on our people, operations, strategic objectives, regulatory and political engagement, and financial implications. Our approach has been proactive to ensure our business can continue to serve its customers appropriately.

Finance & Corporate

Total Risks: 2/9 (22%)Below Sector Average

Accounting & Financial Operations2 | 22.2%

Accounting & Financial Operations - Risk 1

Added

Asset failure

There is a risk of a catastrophic asset failure leading to a significant safety or environmental event. We continue to focus on risk mitigation actions designed to reduce the risk and help meet our business objectives, including the following: Ongoing preventative measures: • inspection and maintenance programmes including defect management; • UK and US winter-preparedness plans; • US storm-hardening programme; and • outage planning. Event response: • emergency response plans; • incident-management system; • disaster recovery; and • business continuity management. Embedded Group-wide process safety management system: • to make sure a rigorous and consistent framework of risk management exists across our high-hazard asset portfolio, with safety-critical assets clearly identified on the asset register. Implemented asset management and data management standards, including: • supporting guidelines to provide clarity on what is expected; and • a strong focus on what we need in place to keep us safe, secure and legally compliant. Established capability frameworks to make sure our workforce has the appropriate skills and expertise to meet the performance requirements in these standards.

Accounting & Financial Operations - Risk 2

Added

Financial risks

While all risks have a direct or indirect financial impact, financial risks are those which relate to financial objectives and performance. Financial risk management is a critical process used to make investment decisions and aims to maximise investment returns and earnings for a given level of risk. None of our financial risks are currently classified as GPR. Our key financial risks are described in note 32 to the financial statements on pages 211 – 223.

Tech & Innovation

Total Risks: 1/9 (11%)Above Sector Average

Cyber Security1 | 11.1%

Cyber Security - Risk 1

Added

Cyber security

There is a risk that we are unable to adequately anticipate and manage disruptive forces on our systems because of a cyber-attack, or poor recovery of critical systems or malicious external or internal parties. We are committed to providing secure and resilient services and continue to commit significant resources and financial investment to maintaining the security of our systems and our data. Our approach is holistic and includes: • close partnerships with UK and US government agencies, including the Department for Business, Energy and Industrial Strategy (BEIS), the Centre for Protection of National Infrastructure (CPNI), the Department of Energy and Climate Change and the Department of Homeland Security, to understand risks and collaborate on risk management activities; • utilising good practice frameworks including the National Institute of Standards and Technology Cybersecurity Framework to ensure we can identify, protect, detect, respond and recover from cyber security threats (i.e. implementation of control frameworks across our security programmes in IT, operational technologies and Critical National Infrastructure (CNI); and • a strong focus on compliance with our regulatory obligations including the European Union Directive on Security of Network and Information Systems Regulation (the ‘NIS Directive’) and US North American Electric Reliability Corporation Critical Infrastructure Protection.

Legal & Regulatory

Total Risks: 1/9 (11%)Below Sector Average

Regulation1 | 11.1%

Regulation - Risk 1

Added

Satisfactory regulatory outcomes

There is a risk that we fail to influence future energy policies and secure satisfactory regulatory agreements. In both the UK and the US, we strive to maintain a good understanding of the regulatory agenda and emerging issues, so that we can select and develop robust, public interest aligned responses in good time. Our reputation as a competent operator of important national infrastructure is critical to our ability to do this. We have plans and governance structures in place to address key regulatory proceedings such as UK price controls and US rate case filings. Ongoing work to support our regulatory relationships includes: • in the UK, influencing policy through a range of avenues, including inputting and responding to government consultations and other outputs, direct engagement with government departments and engagement with wider stakeholders such as parliamentarians, trade associations and third parties; • in the US, influencing policy through a range of avenues, including inputting and responding to legislative proposals, regulatory rulemakings and requests for information and other outputs; advocating with Congress and the Administration; and engagement with wider stakeholders such as trade associations, think tanks and other non-government organisations; • establishing a regulatory strategy focusing on a transition to performance-based regulation; • establishing US and UK regulatory steering committees; and • increased focus on understanding the needs and expectations of all our stakeholders through regulatory relationship surveys, investor surveys and review of media sentiment.

Production

Total Risks: 1/9 (11%)Below Sector Average

Employment / Personnel1 | 11.1%

Employment / Personnel - Risk 1

Added

Capability and leadership

There is a risk that we do not have sufficient capability and leadership capacity. There is a risk that we do not have sufficient capability and leadership capacity.

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.

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