risk factors

Risk factors refer to Item 105 of Regulation S-K which requires the registrant’s management to discuss material risks to the registrant’s operations. Item 105 requires that the registrant write their risk factors in plain English and organize them logically with relevant headings. It discourages registrants from including risks that could apply generically. 

As an example, see Apple’s 2020 Form 10-K. Among others, they list the following as risk factors: 

  • The Company’s business, results of operations, financial condition and stock price have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.
  • Global and regional economic conditions could materially adversely affect the Company’s business, results of operations, financial condition, and growth.
  • Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.
  • To remain competitive and stimulate customer demand, the Company must successfully manage frequent introductions and transitions of products and services.
  • The Company relies on access to third-party digital content, which may not be available to the Company on commercially reasonable terms or at all.
  • The Company’s future performance depends in part on support from third-party software developers.

[Last updated in February of 2022 by the Wex Definitions Team]