Fti Consulting (FCN) risk factors, FY2024 10-K

Risks Related to Our Reportable Segments

1. 01Our revenues, operating income and cash flows are likely to fluctuate
2. 02If we do not effectively manage the utilization of our professionals or billable rates, our financial results could decline
3. 03Our segments may face risks of fee non-payment, clients may seek to renegotiate existing fees and contract arrangements, and may not accept billable rate or price increases, which could result in loss of engagements, fee write-offs, reduced revenues and less profitable business
4. 04Our segments and practices could suffer competitive, reputational and business harm or increased liability arising from the rapid introduction, deployment, evolution and use of new technologies, including AI and machine learning
5. 05competitors more rapidly or successfully than we do could materially adversely affect our competitive position and financial results
6. 06In addition, AI and other technologies that are open source and available for no or low cost could result in low barriers to development and utilization, and additional competition from third parties
7. 07The success of our Technology segment and its ability to compete depends significantly on our ability to safeguard client data. There is no assurance that we will not incur losses related to cyber incidents or malicious data breach from external or internal sources in the future
8. 08We face certain risks relating to cybersecurity and the failure to protect the confidentiality of our or our client’s information against misuse or disclosure
9. 09We may not manage our growth effectively, and our profitability may suffer

Risks Related to Our Operations

1. 10Our operations involve financial and business risks that differ among the U.S. and foreign jurisdictions
2. 11If we are not able to quickly adapt to or effectively manage our operations in the geographic markets in which we conduct business, our business prospects and results of operations could be negatively impacted
3. 12Governmental focus on data privacy and security has increased, and could continue to increase, our costs of operations
4. 13Changes to corporate income tax rates, legislation, rules and regulations and tax treaties in countries in which we operate may negatively impact our effective tax rate and financial results and increase our cash tax payment obligations
5. 14We may be required to recognize goodwill impairment charges, which could materially affect our financial results
6. 15We are exposed to certain physical and regulatory risks related to climate change, which could adversely affect our business, financial condition and results of operations
7. 16Increasing scrutiny and changing expectations from governmental organizations, investors, clients and our colleagues with respect to our social-related practices and those of our clients may impose additional costs on us or expose us to new or additional risks, including reputational harm
8. 17Our business depends on our ability to use and access information systems, and modernize or replace such systems from time to time, and failure to effectively maintain such systems or modernize or replace systems could materially adversely affect our business and operations and harm our reputation
9. 18The compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely impact our financial results

Risks Related to Our People

1. 19Our failure to recruit and retain qualified professionals and manage headcount needs and utilization could negatively affect our financial results and our ability to staff client engagements, maintain relationships with clients and drive future growth
2. 20We incur substantial costs to hire and retain our professionals, and we expect these costs to continue and to grow
3. 21compensation paid by other segments. We expect that these arrangements will continue, and the Company has and will continue to enter into similar arrangements with other economists and professionals hired by the Company
4. 22We rely heavily on our executive officers and the heads of our segments and industry and regional leaders for the success of our business, the loss of whom may negatively impact our business and operations
5. 23Professionals may leave our Company to form or join competitors or clients, and the loss of such professionals may negatively impact our business and operations
6. 24We may not have, or may choose not to pursue, legal recourse against professionals that leave our Company to join competitors or clients
7. 25Our failure to achieve and maintain an inclusive workforce may impair our ability to attract and retain qualified employees, win and maintain clients, or attract investment, which could have a material adverse effect on our business and financial results, as well as reputational harm

Risks Related to Our Client Relationships

1. 26Damage to our reputation could result in material adverse consequences to our business and adversely impact our client engagements and financial results
2. 27If we are unable to accept or continue client engagements due to real or perceived relationship issues, our revenues, growth, client engagements and prospects may be negatively affected
3. 28Claims involving our services or adverse publicity could harm our overall professional reputation and our ability to compete and attract business or hire or retain qualified professionals
4. 29We may incur significant costs and may lose engagements as a result of claims by our clients regarding our services
5. 30Our clients may terminate our engagements with little or no notice and without penalty, which may result in unexpected declines in our utilization and revenues
6. 31We may not have, or may choose not to pursue, legal remedies against clients that terminate their engagements

Risks Related to Competition

1. 32If we fail to compete effectively, we may miss business opportunities or lose existing clients, and our revenues and profitability may decline
2. 33If we cannot compete effectively or if the costs of competing, including the costs of hiring and retaining professionals, become too expensive, our revenue growth and financial results could be negatively affected and may differ materially from our expectations
3. 34We may face competition from parties who sell us their businesses and from professionals who cease working for us

Risks Related to Acquisitions

1. 35We may have difficulty integrating acquisitions or convincing clients to allow assignment of their engagements to us, which can increase costs of, and reduce the benefits we receive from, acquisitions
2. 36We may have different systems of governance and management from a company we acquire or its parent, which could cause professionals who join us from an acquired company to leave us

Risks Related to Our Indebtedness

1. 37Our leverage could adversely affect our financial condition or operating flexibility if the Company fails to comply with operating covenants under applicable debt instruments
2. 38In addition, the Credit Facility includes a financial covenant that requires us not to exceed a maximum consolidated total net leverage ratio (the ratio of funded debt (less unrestricted cash up to $300.0 million) to Consolidated EBITDA, as defined in the Credit Facility)
3. 39We and our subsidiaries may incur substantial additional indebtedness, including additional secured indebtedness, in the future. The terms of the agreements governing our Credit Facility and other indebtedness limit, but do not prohibit, us from incurring additional indebtedness
4. 40We may be unable to generate sufficient cash to service our indebtedness, and we may be forced to take actions to satisfy our payment obligations under our indebtedness, which may not be successful
5. 41Our Credit Facility is guaranteed by substantially all of our wholly-owned domestic subsidiaries and will be required to be guaranteed by future wholly-owned domestic subsidiaries, including those that join us in connection with acquisitions
6. 42Our variable rate indebtedness will subject us to interest rate risk, which could cause our annual debt service obligations to increase significantly