Burford Capital (BUR) risk factors, FY2024 10-K

Risks relating to our business and industry

1. 01Litigation outcomes are risky and difficult to predict, and a loss in a litigation matter may result in the total loss of our capital associated with that matter
2. 02Our revenues, earnings and cash flows can vary materially between periods as both the timing of resolution and the outcome of litigation matters are difficult to predict
3. 03Our success depends on our ability to identify and select suitable legal finance assets to finance, and our failure to do so could have a material adverse effect on our business, financial condition, results of operations and/or liquidity
4. 04Our business and operations could suffer if we are not able to prevent improper use or disclosure of, or access to, privileged information under our control due to cybersecurity breaches, unauthorized use or theft
5. 05The inaccuracy or failure of the probabilistic model and decision science tools, including AI technologies, we use to predict the returns on our legal finance assets and in our operations could have a material adverse effect on our business
6. 06The laws relating to privileged information are complex and continue to evolve, and any adverse court rulings, changes in law or other developments could impair our ability to conduct effective due diligence on potential legal finance assets
7. 07The due diligence process that we undertake in connection with financing legal finance assets may not reveal all facts that may be relevant in connection with such financing
8. 08Investors will not have an opportunity to independently evaluate our legal finance assets
9. 09We are subject to credit risk relating to our various legal finance assets that could adversely affect our business, financial condition, results of operations and/or liquidity
10. 10Our portfolio may be concentrated in cases likely to have correlated results, and we have a number of assets involving the same counterparty
11. 11The lack of liquidity of our legal finance assets may adversely affect our business, financial condition, results of operations and/or liquidity
12. 12We have commitments in excess of our available capital
13. 13Changes in market conditions may negatively impact our ability to obtain attractive external capital or to refinance our outstanding indebtedness and may increase the cost of such financing or refinancing if it is obtained
14. 14We face substantial competition for opportunities with respect to legal finance assets, which could delay commitment and/or deployment of our capital, reduce returns and result in losses
15. 15If lawyers who prosecute and/or defend claims which we have financed fail to exercise due skill and care, or the interests of their clients do not align with ours, there may be a material adverse effect on the value of our legal finance assets
16. 16We may not earn asset management fees and/or performance fees from our private funds
17. 17A significant portion of our AUM is attributable to private funds with a single investor
18. 18Negative publicity or public perception of the legal finance industry or us could adversely affect our reputation, business, financial condition, results of operations and/or liquidity
19. 19We report our capital provision assets at fair value, which may result in us recognizing non-cash income that may never be realized
20. 20Legal, political and economic uncertainty surrounding the effects, severity and duration of public health threats could adversely affect our business, financial condition, results of operations and/or liquidity
21. 21Developments in AI technologies could disrupt the markets in which we operate and subject us to increased competition, legal and regulatory risks and compliance costs
22. 22Expectations relating to ESG considerations could expose us to potential liabilities, increased costs and reputational harm and adversely affect our business, financial condition, results of operations and/or liquidity
23. 23There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of our consolidated financial statements
24. 24Our past performance may not be indicative of our future results of operations
25. 25Litigation and legal proceedings against us could adversely impact our business, financial condition, results of operations and/or liquidity
26. 26Our success depends substantially on the continued retention of certain key personnel and our ability to hire and retain qualified personnel in the future to support our growth and execute our business strategies
27. 27Our international operations subject us to increased risks
28. 28We may face exposure to foreign currency exchange rate fluctuations and may hold unhedged securities positions
29. 29The tax treatment of our financing arrangements is subject to significant uncertainty
30. 30Changes in tax laws and regulations or unanticipated tax liabilities could affect our effective tax rate, business, financial condition, results of operations and/or liquidity

Risks relating to regulation

1. 31The laws, regulations and rules relating to legal finance are evolving and may be uncertain, which may have negative consequences for the value or enforcement of our contractual agreements with our counterparties, our ability to do business in certain jurisdictions or our cost of doing business
2. 32Our asset management business is highly regulated, and changes in regulation or regulatory violations could adversely affect our business
3. 33We are subject to the risk of being deemed an investment company

Risks relating to cybersecurity, third-party service providers, information systems and data privacy and protection

1. 34Cybersecurity risks could result in the loss of data, interruptions in our business or damage to our reputation and subject us to regulatory actions, increased costs and financial losses, any of which could have a material adverse effect on our business, financial condition, results of operations and/or liquidity
2. 35Catastrophic events could materially adversely affect our business, financial condition, results of operations and/or liquidity
3. 36Public health emergencies have in the past affected and may in the future adversely affect workforces, economies and financial markets globally, leading to an economic downturn. We remain focused on protecting the health and well-being of our employees while assuring the continuity of our business operations
4. 37The failure of our third-party service providers to fulfill their obligations, or misconduct by our third-party service providers, may have a material adverse effect on our business, financial condition, results of operations and/or liquidity
5. 38Our operations are dependent on the proper functioning of information systems
6. 39We are required to maintain the privacy and security of personal information and comply with applicable data privacy and protection laws and regulations

Risks relating to our indebtedness

1. 40We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions to meet our obligations under our indebtedness, which may not be successful
2. 41do not have sufficient cash at the required time, we may have difficulty meeting our payment obligations under our existing indebtedness
3. 42Despite our level of indebtedness, we may be able to incur substantial additional indebtedness, which could further exacerbate the risks associated with our existing indebtedness

Risks relating to our ordinary shares

1. 43Our ordinary shares are traded on more than one market, which may result in price and volume variations
2. 44The trading price of our ordinary shares may fluctuate significantly
3. 45There can be no assurance that we will pay dividends or distributions
4. 46Future issuances or sales of our securities may cause the market price of our ordinary shares to decline
5. 47The requirements of being a US domestic public company require significant resources and management attention, which increases our legal and financial compliance costs and could affect our ability to attract and retain key personnel and qualified senior management and members of the Board of Directors
6. 48attestation requirements under Section 404(b) of the Sarbanes-Oxley Act, pursuant to which our independent auditor is required to attest to and report on management’s assessment of our internal control over financial reporting
7. 49If we are classified as a PFIC for US federal income tax purposes, such classification could result in adverse US federal income tax consequences to US investors

Risks relating to our incorporation in Guernsey

1. 50The rights and protections of our shareholders are governed by Guernsey law, which may differ in certain material respects from the rights and protections of shareholders under US law
2. 51The Royal Court of Guernsey may require a party to litigation to reimburse the prevailing party for its costs associated with the litigation, and our articles of incorporation entitle us to require shareholders to provide security against any such costs awarded to us by the Royal Court of Guernsey
3. 52The insolvency laws of Guernsey and other jurisdictions may not be as favorable to shareholders as the US bankruptcy laws
4. 53It may be complex or time-consuming to effect service of US court process or enforcement of US judgments against us or certain of our directors and officers