Brookfield Asset Management (BAM) risk factors, FY2024 10-K

Risks Relating to Our Business

1. 01The trading price of the Class A Shares is subject to volatility due to market conditions and other factors and cannot be predicted
2. 02Deficiencies in our public company financial reporting and disclosures could adversely impact our reputation
3. 03Our internal controls over financial reporting may not prevent or detect misstatements in our financial disclosures on a timely basis, or at all. Some of these processes may be new for certain subsidiaries in our structure, and in the case of acquisitions, may take time to be fully implemented
4. 04Investors may find it difficult or impossible to effect service of process and enforce judgments against us, our directors and our executive officers
5. 05We are subject to numerous laws, rules and regulatory requirements which may impact our business, including resulting in financial penalties, loss of business and/or damage to our reputation in instances of non-compliance
6. 06We have and may become subject to additional regulatory and compliance requirements as we expand our product offerings and investment platform which likely will carry additional legal and compliance costs, as well as additional operating requirements that may also increase costs
7. 07liability for violations under these laws and regulations or other acts of bribery committed by entities in which we or our managed assets invest
8. 08Foreign exchange rate fluctuations could adversely impact our aggregate foreign currency exposure and hedging strategies may not be effective
9. 09Further increases in interest rates could increase our interest costs and adversely affect our financial performance
10. 10Political instability, changes in government policy or unfamiliar cultural factors could adversely impact the value of our investments
11. 11Unfavorable economic conditions or changes in the industries in which we operate could adversely impact our financial performance
12. 12Inflationary pressures could adversely impact our businesses
13. 13Our managed assets could be exposed to effects of catastrophic events, such as severe weather conditions, natural disasters, major accidents, pandemics/epidemics, acts of malicious destruction, climate change, war/military conflict or terrorism, which could materially adversely impact our operations
14. 14Ineffective management of environmental and sustainability issues, including climate change, and inadequate or ineffective health and safety programs could damage our reputation, adversely impact our financial performance and lead to regulatory action
15. 15Failure to maintain the security of our information and technology systems could have a material adverse effect on us
16. 16In addition, our operating equipment may not continue to perform as it has in the past, and there is a risk of equipment failure due to wear and tear, latent defect, design or operator errors or early obsolescence, among other things
17. 17We and our managed assets may become involved in legal disputes in the U.S. and internationally that could adversely impact our financial performance and reputation
18. 18Losses not covered by insurance may be large, which could adversely impact the assets under management
19. 19Should any uninsured or underinsured loss occur, we could lose our anticipated profits and cash flows from one or more of our assets under management
20. 20Inability to collect amounts owing to us could adversely impact financial performance
21. 21We are subject to operating and financial restrictions through covenants in our loan, debt and security agreements
22. 22The material assets of BAM consist solely of its interest in the common shares of the Asset Management Company. After giving effect to the 2025 Arrangement, BAM owns 100% of the Asset Management Company
23. 23BAM is solely liable for the debts and liabilities of the asset management business

Risks Relating to our Investment Activities

1. 24Actions or conduct that have a negative impact on our investors’ or stakeholders’ perception of us could adversely impact our ability to attract and/or retain investor capital and generate fee revenue
2. 25As a global alternative asset manager with various lines of business and investment products, some of which have overlapping mandates, we may be subject to a number of actual, potential or perceived conflicts of interest
3. 26Our renewable power and transition strategies invest in assets that are subject to changes in the weather, hydrology and price, but also include risks related to equipment or dam failure, counterparty performance, water rental costs, land rental costs, changes in regulatory requirements and other material disruptions
4. 27In certain cases, some catastrophic events may not excuse us from performing our obligations pursuant to agreements with third parties and we may be liable for damages or suffer further losses as a result
5. 28Our infrastructure managed assets include utilities, transport, midstream and data businesses
6. 29We face risks specific to our private equity strategies
7. 30We face risks specific to our real estate strategies
8. 31Additionally, rental rates could decline, tenant bankruptcies could increase, and tenant renewals may not be achieved, particularly in the event of an economic slowdown
9. 32We face risks specific to our credit strategies
10. 33Our business depends on our ability to fundraise third-party capital, deploy that capital effectively and produce targeted investment returns
11. 34value. In addition, investors may prefer to insource and make direct investments; therefore, becoming competitors and ceasing to be clients and/or making new capital commitments
12. 35The successful execution of our investing strategy is uncertain as it requires suitable opportunities, careful timing and business judgment, as well as the resources to complete asset purchases and restructure them, if required, notwithstanding difficulties experienced in a particular industry
13. 36Our cash flow must be available to meet our financial obligations when due and enable us to capitalize on investment opportunities when they arise
14. 37We may be exposed to risks associated with acquisitions
15. 38We may be required to make temporary investments and backstop commitments with respect to our business and managed assets and may be unable to syndicate, assign or transfer such investments and commitments
16. 39Our revenues may be adversely affected by a decline in the size or pace of investments made by our managed assets
17. 40Our revenue, earnings, net income and cash flow can materially vary from quarter to quarter, which may affect our earnings growth and dividend on a quarterly basis and can affect the trading price of the Class A Shares
18. 41The mark-to-market valuations of investments made by our funds are subject to volatility driven by economic and market conditions. Economic and market conditions may also negatively impact our realization opportunities
19. 42Our access to retail investors and selling retail directed products in numerous jurisdictions opens us up to potential litigation and regulatory enforcement risks
20. 43Information barriers may give rise to certain conflicts and risks and investment teams managing the activities of businesses that operate on opposite sides of an information barrier will not be aware of, and will not have the ability to manage, such conflicts and risks

Risks Relating to our Organizational and Ownership Structure

1. 44BN will exercise substantial influence over BAM
2. 45Moreover, a significant portion of our Fee-Bearing Capital is represented by the capital of the perpetual affiliates, which are controlled by BN. BN will therefore exercise significant influence over their operation, including (among other things) distribution policies that enable us to earn incentive distributions
3. 46The ownership of BN may change and the control of BAM may be transferred to a third party without shareholder approval
4. 47Our organizational and ownership structure may create conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of our shareholders
5. 48Ineffective maintenance of our culture or ineffective management of human capital could adversely impact our business and financial performance

Risks Relating to Taxation

1. 49Changes in Canadian federal income tax law might adversely affect BAM and/or holders of Class A Shares
2. 50Reassessments by tax authorities or changes in tax laws could create additional tax costs for us