TheCorporateCounsel.net

With 10-Q deadlines just around the corner for many companies, this Bryan Cave blog provides a reminder about the need to take a hard look at prior risk factor disclosures to see if any need updating.  This excerpt addresses an area of the risk factors section that many companies will be scrutinizing closely – Covid 19 risk disclosures:

As a number of business sectors improve, it may be advisable to revise COVID-related risk factors to reflect the changing economic climate. In some cases, the focus may need to shift to address challenges in increasing production, managing supply chains, hiring workers or otherwise responding to increasing customer demand. In other cases, companies that benefited from dramatic changes in the economy during the pandemic peak may need to address potential risks associated with a return to normalcy.

For example, consider whether recent growth trends are viewed as sustainable in light of the MD&A requirement to discuss “known trends or uncertainties” that the company “reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income.” At the same time, it may be appropriate to continue to caution investors as to uncertainties as to the future course of the pandemic – particularly as concern with the impact of variants evolves.

Last month, I blogged about the need to keep in mind the implications of Form 10-Q’s risk factor updating requirement on the problem of “hypothetical” risk factors.  The blog highlights that concern too, and specifically points out the need to consider the impact of current events (e.g., heatwaves, cyberattacks & the President’s executive order on competition). Risk factors touching on these events should be reviewed to determine whether clarification that a risk is no longer hypothetical is necessary.

– John Jenkins