Risk Factor Analysis Wells Fargo

Overview The primary source of risk information for external stakeholders of a publicly traded U.S. company is the “Risk Factors” section of its annual financial report (“Form 10-K”) filed with the Securities and Exchange Commission (SEC). This disclosure on a company’s risks is required under Item 503(c) of Regulation S-K, which was crafted in 1964. The regulation provides five specific examples of such factors: the company’s lack of operating history, lack of profitable operations in recent periods, financial position, business or proposed business, and lack of a market in the company’s securities Other than these examples, the disclosure is principles based and not prescriptive. Over the years, “Risk Factors” disclosures have evolved to parallel the increasing complexity of the modern business environment. The SEC has voiced concerns about the true value of the disclosures to investors and whether the “spirit” of Item 503(c) is being complied with by filing companies. Assessing risk is a critical input into any investment decision. As you read the risk factor sections you should be forming an opinion if they are materially helpful or just ‘check-the-box’ exercises. Assignment You are a high profile enterprise risk management (ERM) consultant. Your specialty is review of regulatory risk disclosures across multiple industries. You have been retained by the SEC to review the Risk Factors (Section 1-A) from the most recent 10-K’s of Fortune 500 companies. You were also asked to analyze the 10-K from Wells Fargo Corporation, S&P Global, and Facebook. SEC staff has asked you to prepare a report analyzing the three risk factor disclosures individually, in comparison to each other, and in comparison to their sectors from the 2016 Investor Responsibility Research Center Institute survey (“IRRCI (Links to an external site.)”). Your report shall use consistent definition of Risk Factors (Links to an external site.) from IRRCI (Links to an external site.).