EPAM Systems (EPAM) risk factors, FY2024 10-K

Risks Related to Geopolitical Events

1. 01Instability in geographies where we have significant operations and personnel or where we derive substantial amounts of revenue could have a material adverse effect on our business, clients, service delivery, and financial results
2. 02The invasion of Ukraine and the resulting war has had and could continue to have a material adverse effect on our personnel, business, and finances

Risks Related to Our Personnel and Growth

1. 03We may be unable to effectively manage our growth or achieve anticipated growth, which could place significant strain on our management, systems, resources, and results of operations
2. 04We must successfully attract, hire, train and retain qualified personnel to service our clients’ projects and we must productively utilize those personnel to remain profitable
3. 05If we are unable to keep pace with the adoption and use of generative AI technology in our business and effectively implement generative AI in our workforce planning and deployment, we could become less competitive in our industry
4. 06There may be adverse tax and employment law consequences if the independent contractor status of some of our personnel or the exempt status of our employees is successfully challenged
5. 07Our success depends substantially on the continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose their services and our succession planning efforts are ineffective
6. 08If we fail to integrate or manage acquired companies efficiently and effectively, or if acquisitions do not perform to our expectations individually or in the aggregate, our overall profitability and growth plans could be materially adversely affected

Risks Related to Our Operations

1. 09Increases in wages, equity compensation, and other compensation expenses could limit our competitive advantage, increase our costs, and result in dilution to our stockholders
2. 10Our operations in emerging markets subject us to greater economic, financial, and banking risks than we would face in more developed markets
3. 11If we are unable to compete successfully against competitors, pricing pressures or loss of market share could have a material adverse effect on our business
4. 12Complying with a wide variety of legal requirements in the jurisdictions where we operate can create risks to our operations and financial condition, including liquidation of the subsidiaries that operate some of our major delivery centers
5. 13The focus on environmental, social and governance topics, including commitments and disclosures we have made and may need to make, may result in additional operational costs and negative reputational impacts
6. 14Our operating results may be negatively impacted by the loss of certain tax benefits provided to companies in our industry by the governments of Belarus, Poland, and other countries

Risks Related to Regulation and Legislation

1. 15Existing policy and substantial changes to fiscal, political, regulatory and other federal policies may adversely affect our business and financial results

Risks Related to Our Industry and Clients

1. 16We generally do not have long-term commitments from our clients, our clients may terminate contracts before completion or choose not to renew contracts, and we are not guaranteed payment for services. Loss of business or non-payment from significant clients could materially affect our results of operations
2. 17Our revenues are highly dependent on a limited number of industries, and any decrease in demand for outsourced services in these industries could reduce our revenues and adversely affect our results of operations
3. 18If our pricing structures are based on inaccurate expectations and assumptions regarding the cost and complexity of performing our work, or if we are not able to maintain favorable pricing for our services, then our contracts could be unprofitable
4. 19There is a long selling and implementation cycle for our services that require us to make significant resource commitments prior to realizing revenues for those services
5. 20If we are unable to adapt to rapidly changing technologies, methodologies and evolving industry standards, we may lose clients and our business could be materially adversely affected
6. 21A significant failure in our systems, telecommunications or IT infrastructure could harm our service model, which could result in a reduction of our revenues and otherwise disrupt our business
7. 22Our ability to generate and retain business could depend on our reputation in the marketplace
8. 23We may not be able to prevent unauthorized use of our intellectual property, and our intellectual property rights may not be adequate to protect our business and competitive position
9. 24We may face intellectual property infringement claims that could be time-consuming and costly to defend. If we fail to defend ourselves against such claims, we may lose significant intellectual property rights and may be unable to continue providing our existing services

Risks Related to Information Security and Data Protection

1. 25Security breaches and other disruptions to our network security that compromise our information expose us to liability and cause our business and reputation to suffer
2. 26Development and deployment of measures to protect our information security or that of our clients may be inadequate and could adversely affect our results of operations
3. 27Changes in privacy and data protection regulations could expose us to risks of noncompliance and costs associated with compliance
4. 28Undetected software design defects, errors or failures may result in loss of business or in liabilities that could materially adversely affect our business
5. 29Our stock price is volatile
6. 30We may need additional capital, and a failure to raise additional capital on terms favorable to us, or at all, could limit our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges
7. 31Our hedging program is subject to counterparty default risk
8. 32War, terrorism, other acts of violence or natural or man-made disasters may affect the markets in which we operate, our clients, and our service delivery
9. 33Our effective tax rate could be materially adversely affected by several factors