20 “Do’s” & “Don’ts” for Risk Factors

Our guests – WilmerHale’s Lily Brown and American Express’ David Kanarek – run through the 20 “do’s” and “don’ts” when it comes to risk factors, including:

Here are 10 “Do’s”:

1. Use captions that tell the story – the essence
2. Use plain English – but that doesn’t mean brief necessarily
3. Order in terms of risk magnitude
4. Categorize by common themes
5. Cross-reference if you can
6. Look at peers – and other company – disclosures for ideas
7. Look at recent Corp Fin comment letters for ideas
8. Listen to your senior managers talk to others & see what risks they’re describing
9. Involve the audit committee – and risk or operations committee (if you have one) in the process
10. Do everything you can to get your business people to feed you information about the company’s risks

Here are 10 “Don’t’s”:

1. Don’t rein in your captions to look like every other caption you’ve ever written – for this purpose, they very well might be a sentence or two. It’s a summary, the bottom line
2. Don’t not include a risk just because it has a low probability
3. Don’t rely on your business people to tell you what the company risks are
4. Refrain from saying why it’s not a risk
5. Don’t generalize the risk if it’s happening already
6. Don’t keep the order the same every time – need to reorder as risk rises & falls
7. Don’t be too scared to include a macro risk
8. Don’t be scared to include a general economic conditions risk – just tailor it
9. Don’t worry about how many risk factors you have
10. Never kill a risk factor (sort of)

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