Following up on our prior blog post regarding first quarter COVID-19 risk factor disclosure considerations and our prior blog post regarding second quarter COVID-19 risk factor disclosure considerations, we surveyed the risk factor disclosures of 75 calendar year-end NYSE- and Nasdaq-listed companies included in Quarterly Reports on Form 10-Q (Form 10-Qs) filed for the first and second quarters of 2020.

Risk Factor Survey Results

Of the companies surveyed, we found that 96%, or 72 of the companies surveyed, included standalone risk factors related to COVID-19 (the average number of COVID-19 risk factors was approximately 1.16). None of the companies surveyed included an additional standalone COVID-19 risk factor in the second quarter Form 10-Q that was not in the first quarter Form 10-Q.  Approximately 63%, or 47 of the companies surveyed, updated their COVID-19 risk factor disclosure from their first quarter 2020 Form 10-Q in their second quarter 2020 Form 10-Q.

The three companies that did not include a standalone COVID-19 risk factor disclosure during their first or second quarter 2020 Form 10-Q did include language indicating that COVID-19 could exacerbate or heighten the risk factors that were previously included in their 2019 Annual Report on Form 10-K. A small portion of the companies we surveyed repeated the risk factor disclosure from their first quarter Form 10-Q verbatim in their second quarter Form 10-Q. However, most of the companies that did not update their first quarter Form 10-Q COVID-19 risk factor disclosure in their second quarter Form 10-Q incorporated their first quarter Form 10-Q risk factor disclosure by reference.

General Themes Found in Risk Factor Updates

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.