We’ve been keeping an eye on pandemic risk factors since the “Before Time” (seriously, we first mentioned them in January). Most recently, we blogged about how to handle first quarter COVID-19 risk factor disclosure in second quarter filings. Now, a Bass Berry blog takes a look at what kind of pandemic risk factor disclosures companies actually made in their second quarter filings. The blog says that 97% of the 75 Nasdaq & NYSE company filings surveyed included COVID-19-related risk factors. This excerpt provides some insight into the content of those disclosures:
During our review, we noted that updates to the COVID-19 risk factor disclosure included in second quarter Form 10-Qs generally coalesced around certain topics such as uncertainty regarding the duration of the COVID-19 pandemic, impact of the economic downturn, and changes in consumer behaviors both during and potentially after the pandemic.
In addition, some common themes arose in certain industries such as healthcare, with updated disclosures regarding the uncertainty around vaccine efficacy and deployment, and travel and energy, with updated disclosure highlighting potential risks resulting from prolonged social distancing and stay-at-home orders. Such emerging themes reveal that COVID-19 may be having a similar impact on peer companies and, as a result, an ongoing review of peer company risk factor disclosures should be undertaken.
These disclosures don’t appear to be static — according to the blog, approximately two-thirds of the companies surveyed updated COVID-19 risk factor disclosure from their first quarter Form 10-Q disclosure. As for the 3% of companies that didn’t include a specific risk factor, all included language to the effect that the pandemic could exacerbate or heighten the risk factors that were previously disclosed in their Form 10-K.
-John Jenkins, TheCorporateCounsel.net September 8, 2020
