Simple English definitions for legal terms
Read a random definition: UPA
Term: Risk factors
Definition: Risk factors are things that could go wrong and hurt a company's business. Companies have to talk about these risks in a special document called a Form 10-K. They have to write the risks in a way that people can understand and put them in groups. Companies can't just write general risks, they have to be specific to their business. For example, Apple said that the COVID-19 pandemic, competition, and getting new products are risks for their business.
Risk factors refer to Item 105 of Regulation S-K which requires companies to discuss material risks to their operations. This means that companies must identify and explain potential risks that could negatively impact their business. The risks must be written in plain English and organized logically with relevant headings. Companies should avoid including generic risks that do not apply specifically to their business.
These examples illustrate how companies must identify and explain potential risks that could negatively impact their business. For example, Apple identifies the COVID-19 pandemic as a risk factor that has already affected their business and could continue to do so in the future. They also identify competition and technological change as potential risks that could impact their ability to compete effectively in the market. By identifying and explaining these risks, companies can help investors make informed decisions about whether to invest in their business.