Risk Factors Toolkit
Resources to help counsel prepare or review risk factor disclosure in periodic reports or a prospectus or other offering document.
Risk factors are cautionary statements about risks a company faces that could have a material adverse impact on the company's business, financial condition, and results of operations, or that otherwise make investing in the company or its securities speculative or risky. Risk factors are included in a company's disclosure documents, including:
Securities offering documents, including prospectuses ( www.practicallaw.com/4-382-3719) used in SEC-registered offerings and offering memoranda ( www.practicallaw.com/7-383-2213) used in unregistered offerings.
Periodic reports filed under the Securities Exchange Act ( www.practicallaw.com/5-382-3808) , including annual reports on Forms 10-K ( www.practicallaw.com/7-382-3483) and 20-F ( www.practicallaw.com/8-386-0012) and quarterly reports on Form 10-Q ( www.practicallaw.com/5-382-3484) .
Risk factor disclosure improves the overall quality of a disclosure document by highlighting for investors the challenges posed to the company's business and characteristics of the company or its securities that create uncertainties for the company's investors. The risk factors are included in a separately-captioned heading of a prospectus, offering memorandum, or periodic report and provide investors with management's views on the risks the company faces and, if those risks materialize, the effect they may have on:
The company's business, financial condition, and results of operations.
The value of company securities held by investors.
The resources in this Toolkit:
Explain the requirements for risk factor disclosure in prospectuses and periodic reports and identify common SEC comments on risk factor disclosure.
Help counsel quickly get up to speed on the type of risk factors commonly included in disclosure prepared by companies in particular industries.
Provide a starting point for drafting risk factors dealing with selected topics.
Risk factors must always be carefully tailored to a specific company's unique circumstances and must explain how each risk could affect the company in particular. Therefore, the resources in this Toolkit are only a starting point for understanding and drafting appropriate risk factors to be included in a disclosure document.