Question

Find an example of a publicly-traded company that lists two risk factors in their 10-K that you think will become greater liabilities for them in the near future. If you were the CEO, how would you mitigate those risks?

Answer 1

A publicly credit company which I would like to mention is Tesla which is the leader of the electronic car maker & two risk factor in their 10k are as follows -

A. Tesla has a higher amount of debt and its majority of the cash flows earned are set-off in repayment of the interest so it is left with very low cash in its hands and it has still not been a profitable company but the profitability has not been issue in recent era where cash is considered the king but when there will be adverse economic scenario, the company will not be able to generate cash and it could collapse on the debt payments and eventually can lead to bankruptcy.

B. Tesla also has no profits in its books of accounts and if it has to be materialize in longer period of time as it can be seen that this is the almost economic peak, as interest rates have been 0 and there have been a lower inflationary cycle and better supportive cycle from Federal Reserve also and even then this company has not been able to make the profitts, so when the economic situation would turn for the worse in case of global recession this company is less likely to survive and sustain.

I would have mitigated the risk by taking low amount of capital expenditure and maximizing upon the current core competencies of the company and helping the company in order to lower its debt and become almost debt free company so that in the long run there is no risk related to insolvency and this company can survive and sustain through major economic cycles.