Competitor and Industry Public Information
It is a good practice to review the 10K reports for your competitors at least annually to see what risk factors they are considering. These are very useful even though they may be vague or just of an emerging nature.
The robustness of each company’s ERM program varies, and some may be more helpful than others. However, publishing risk factors in a financial reporting requirement should be included and comprehensive. Figure 9.1 shows an example of the annual review for the semiconductor industry.
Usually, an analysis was performed of the risk factors for at least 10 competitors of various sized and geographical footprint. It was noted that there was a total of 67 different risk topics just among the 10 competitors. The risk factors were captured from all the competitors in an Excel worksheet as shown in Figure 9.2, including the column headings across the top for all the competitors as well as our company. Just to point out that most of this information is publicly available and accessible and needs to be considered.
As the 10K risk factors are compared, there will, of course, be some differences. ERM team just needs to highlight in red those where the competitors have a stronger dialogue, especially if such risk is not in a company risk register. Conversely, where we found a risk topic that is in a company’s risk register and not in those of other companies it may represent an opportunity to exploit a risk to our company benefit.
Different types of analysis can be performed of the competitors’ 10K risk factors when compared to a company. There is also the benefit of reading and digesting the competitors risk topics to see if a company ERM team could or should further modify the risk statements.
Figure 9.1 Risk comparison against competitor 10K risk factors
Figure 9.2 Sample register of competitor 10K risk factor comparison
Figure 9.3 Competitor 10K risk factor comparison