Alliancebernstein Holding (AB) risk factors, FY2024 10-K

Business-related Risks

1. 01Our revenues and results of operations depend on the market value and composition of our AUM, which can fluctuate significantly based on various factors, including many factors outside of our control
2. 02The shift from actively managed investment services to passive services has negatively impacted our investment advisory and services fees, revenues and results of operations, and this trend may continue
3. 03EQH and its subsidiaries provide a significant amount of our AUM and fund a significant portion of our new product initiatives, and if our agreements with them terminate or they withdraw capital support it could have a material adverse effect on our business, results of operations and/or financial condition
4. 04Our business is dependent on investment advisory agreements with clients, and selling and distribution agreements with various financial intermediaries and consultants, which generally are subject to termination or non-renewal on short notice
5. 05Performance-based fee arrangements with our clients may cause greater fluctuations in our net revenues
6. 06We may be unable to develop new products and services, and the development of new products and services may expose us to reputational harm, additional costs or operational risk
7. 07Fluctuations in the exchange rates between the U.S. dollar and various other currencies can adversely affect our AUM, revenues and results of operations
8. 08We may engage in strategic transactions that could pose risks
9. 09We carry non-controlling interests of joint ventures on our balance sheet that impact our financial performance
10. 10We are the guarantor of certain guarantees and credit lines of our consolidated and unconsolidated affiliates, over which we may have limited influence
11. 11We may not accurately value the securities we hold on behalf of our clients or our company investments
12. 12The quantitative and systematic models we use in certain of our investment services may contain errors, resulting in imprecise risk assessments and unintended output
13. 13The financial services industry is intensely competitive
14. 14We may be unable to continue to attract, motivate and retain key personnel, and the cost to retain key personnel could put pressure on our adjusted operating margin
15. 15Our process of relocating our headquarters may not be executed as we have envisioned
16. 16Employee misconduct, which can be difficult to detect and deter, could harm us by impairing our ability to attract and retain clients and subjecting us to significant regulatory scrutiny, legal liability and reputational harm

Operational, Technology and Cyber-related Risks

1. 17Technology failures and disruptions, including failures to properly safeguard confidential information, can significantly constrain our operations and result in significant time and expense to remediate, which could result in a material adverse effect on our results of operations and business prospects
2. 18Any significant security breach of our information and cyber security infrastructure, as well as our failure to properly escalate and respond to such an incident, may significantly harm our operations and reputation
3. 19We also take precautions to password-protect and encrypt our laptops and other mobile devices. However, if these devices are stolen, misplaced, or left unattended, they could be hacked or used without authorization, posing a security risk and potentially leading to costly consequences
4. 20Climate change and other unpredictable events, including outbreak of infectious disease, natural disaster, dangerous weather conditions, technology failure, terrorist attack and political unrest, may adversely affect our ability to conduct business
5. 21Climate change may increase the severity and frequency of disasters, affect our investment portfolio, and influence investor sentiment. It may also lead to regulatory changes impacting the companies in which we invest
6. 22Weaknesses or failures in our internal processes or systems could disrupt operations, lead to client liability, disciplinary action, or harm our reputation. Our business relies on processing large, complex transactions daily across diverse markets, adhering to client guidelines and regulatory standards
7. 23The individuals and third-party vendors on whom we rely to perform services for us or our clients may be unable or unwilling to honor their contractual obligations to us
8. 24Financial market disruptions and economic challenges may cause our counterparties and vendors to face cash flow problems or insolvency, leading to significant costs and impairing our business operations. Weaknesses or failures in a vendor's processes, systems, or business continuity plans can disrupt our operations
9. 25We may not always successfully manage actual and potential conflicts of interest that arise in our business
10. 26Maintaining adequate liquidity for our general business needs depends on certain factors, including operating cash flows and our access to credit on reasonable terms
11. 27An impairment of goodwill may occur
12. 28The insurance that we purchase may not fully cover all potential exposures

Legal and Regulatory-related Risks

1. 29Our business is subject to pervasive, complex and continuously evolving global regulation, compliance with which involves substantial expenditures of time and money, and violation of which may result in material adverse consequences
2. 30We are involved in various legal proceedings and regulatory matters and may be involved in such proceedings in the future, any one or combination of which could have a material adverse effect on our reputation, financial condition, results of operations and business prospects
3. 31The partnership structure of AB Holding and AB limits Unitholders’ abilities to influence the management and operation of AB’s business and is highly likely to prevent a change in control of AB Holding and AB
4. 32AB Units are illiquid and subject to significant transfer restrictions
5. 33Changes in the treatment of AB Holding and AB as partnerships for tax purposes would have significant tax ramifications
6. 34Additionally, AB Units must not be considered publicly traded to maintain AB’s status as a private partnership for tax purposes. If AB Holding or AB were taxed as a corporation, Unitholders would face double taxation: first at the corporate level, then on dividends received
7. 35Changes in tax law governing us or an increase in business activities outside the U.S. could have a material impact on us
8. 36For taxable years beginning after December 31, 2017, a "partnership representative" that we designate (a “Partnership Representative”) has sole authority to act on our behalf in IRS audits and similar state or local audits. Actions taken by the Partnership Representative will be binding on us and our Unitholders
9. 37Additionally, we may request adjustments to passive losses from certain audits, which could reduce suspended passive loss carryovers
10. 38Non-U.S. unitholders may be subject to withholding tax on the sale of their AB Units or AB Holding Units, as well as on distributions, and we may be liable for any under-withholding