Westwood Holdings Group (WHG) risk factors, FY2024 10-K

Risks Related to the Investment Industry

1. 01Our results of operations depend upon the market value and composition of AUM and AUA, which can fluctuate significantly based on various factors, some of which are beyond our control
2. 02The investment management and wealth management industry is highly competitive and innovative
3. 03Some of our strategies invest in the securities of non-U.S. companies, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks

Legal and Regulatory Risks

1. 04Our business is subject to extensive regulation, which is subject to frequent change, with attendant compliance costs and serious consequences for violations; expansion into international markets and introduction of new products and services increases our regulatory and operational risks

Business and Operational Risks

1. 05Due to the substantial cost and time required to introduce new investment strategies or expand the market for current strategies, we may not be able to successfully introduce investment strategies in a timely manner, or at all
2. 06We have incurred significant costs to develop new investment strategies, launch new mutual funds under the Westwood Funds® name, and upgrade our business infrastructure. We expect to continue to incur significant costs related to such improvements
3. 07Damage to our reputation could harm our business and have a material adverse effect on our results of operations
4. 08Our success depends on certain key employees and our ability to attract and develop new, talented professionals. Our inability to attract and retain key employees could compromise our future success
5. 09Failure to perform operational tasks or the misrepresentation of products and services could have an adverse effect on our reputation and our business, financial condition and results of operations
6. 10Failure to select appropriate third-party vendors and apply appropriate oversight of third-party vendors could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations
7. 11We are a holding company dependent on the operations and funds of our subsidiaries

Technology and Privacy Risks

1. 12Failure to implement and maintain effective cybersecurity controls could disrupt our operations and have a material adverse effect on our results of operations, reputation and stock price
2. 13Our business is vulnerable to systems failures that could have a material adverse effect on our business, financial condition and results of operations
3. 14Misuse of assets and information in the possession of our employees and third-party vendors could damage our reputation and result in costly litigation and liability for our clients and us

Risks Related to Ownership of Stock and Corporate Governance

1. 15Our stock is thinly traded and may be subject to volatility
2. 16Distributions to our common stockholders have included and may in the future include a return of capital
3. 17Actions of activist stockholders could cause us to incur substantial costs, divert the attention and resources of our management and the Board of Directors, and have an adverse effect on our business and stock price

Risks Related to our Clients

1. 18Competitive fee pressures could reduce revenues and profit margins
2. 19Our business is dependent on investment advisory, sub-advisory, and trust agreements that are subject to termination or non-renewal and investments we manage under such agreements may be redeemed. As a result, we could lose clients on very short notice
3. 20A small number of clients account for a substantial portion of our business, and a reduction or loss of business with any of these clients could have a material adverse effect on our business, financial condition and results of operations
4. 21We have made and may continue to make business combinations as a part of our business strategy, which may present risks and uncertainties
5. 22We believe that we have established a strong platform to support future growth but there is no assurance that we will appropriately execute our strategic plans, including but not limited to acquisitions, divestitures or other strategic transactions
6. 23Various factors may hinder the declaration and payment of dividends
7. 24We may not be able to fund future capital requirements on favorable terms, if at all
8. 25Failure to properly identify and address conflicts of interest could harm our reputation or cause clients to withdraw funds, which could adversely affect our business and results of operations
9. 26Insurance coverage may be inadequate to cover legal and regulatory proceedings
10. 27Failure to maintain effective internal controls could have a material adverse effect on our business and stock price