What changed in this filing

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Item 1A. Risk Factors

2021-10-22 compared with 2020-10-29 · 69 added, 60 removed, 226 unchanged (36% of the section changed)

The following risks could materially and adversely affect our business, financial condition, cash flows, and results of operations and, as a result, the trading price of our common stock could decline.

The following risks could materially and adversely affect our business, financial condition, results of operations, and cash flows and, as a result, the trading price of our common stock could decline.

These risk factors do not identify all risks that we face;

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Investors should also refer to the other information set forth in this Annual Report on Form 10-K, including Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation s and the Company’s Consolidated Financial Statements including the related Notes.

Management’s Discussion and Analysis of Financial Condition and Results of Operation s and our Consolidated Financial Statements including the related Notes.

Investors should carefully consider all risks, including those disclosed here, before making an investment decision.

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Loss, corruption and misappropriation of data and information relating to clients and others

Many of our products, as well as our internal systems and processes, involve the storage and transmission of our own, as well as supplier and customer, proprietary information and sensitive or confidential data.

This includes data from client portfolios and strategies.

Breaches of this confidentiality, should they occur, could result in the loss of clients and termination of arrangements with suppliers for the use of their data.

If we fail to maintain the adequacy of our internal data controls, unauthorized access or misappropriation of client or supplier data by an employee or an external third-party could occur.

Many of our products, as well as our internal systems and processes, involve the collection, retrieval, processing, storage and transmission through a variety of media channels of our own, as well as supplier and customer, proprietary information and sensitive or confidential data.

We rely on, and continuously invest in, a complex system of internal processes and controls, along with policies, procedures and training, designed to protect data that we receive in the ordinary course of business, including information from client portfolios and strategies.

However, these measures do not guarantee security, and improper access to or release of confidential information may still occur through, for example, employee error or malfeasance, system error, other inadvertent release, failure to properly purge and protect data, or cyberattack.

Additionally, the maintenance and enhancement of our systems may not be completely effective in preventing loss, unauthorized access or misappropriation.

Data misappropriation, unauthorized access or data loss could instill a lack of confidence in our products and systems and damage our brand, reputation and business.

Breaches of security measures could expose us, our clients or the individuals affected to a risk of loss or misuse of this information, potentially resulting in litigation and liability for us, as well as the loss of existing or potential clients.

May 25, 2018, and California's Consumer Privacy Act, which became effective January 1, 2020.

Both require companies to satisfy requirements regarding the handling of personal and sensitive data, including our use, protection and the ability of persons whose data is stored to correct or delete such data about themselves.

Many jurisdictions in which we operate have laws and regulations relating to data privacy and protection of personal information, including the European Union General Data Protection Regulation, which became effective May 25, 2018, California's Consumer Privacy Act, which became effective January 1, 2020, and China's Personal Information Protection Law, which becomes effective November 1, 2021.

These laws contain requirements regarding the handling of personal and sensitive data, including our use, protection and the ability of persons whose data is stored to correct or delete such data about themselves.

The law in this area continues to develop and the changing nature of privacy laws could impact our processing of personal and sensitive information related to our content, operations, employees, clients, and suppliers, and may expose us to claims of violations.

Successful cyber-attacks and the failure of cyber-security systems and procedures

In providing our digital-enabled services to clients, we rely on information technology infrastructure that is managed internally along with placing reliance on third-party service providers.

We and these third-party service providers are subject to the risks of system failures and security breaches, including cyber-attacks, such as phishing scams, viruses and denials of service attacks, as well as employee errors or malfeasance.

Successful prohibited data access and other cyber-attacks and the failure of cyber-security systems and procedures

In providing our digital-enabled services to clients, we rely on information technology infrastructure that is managed internally along with placing reliance on third-party service providers for critical functions.

We and these third-party service providers are subject to the risks of system failures and security breaches, including cyber-attacks (including those sponsored by nation-states, terrorist organizations, or global corporations seeking to illicitly obtain technology or other intellectual property), such as phishing scams, hacking, viruses, denials of service attacks, tampering, intrusions, physical break-ins, ransomware and malware as well as employee errors or malfeasance.

In some cases, these risks might be heightened when employees are working remotely.

Our and our vendors' use of mobile and cloud technologies may increase our risk for such threats.

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Our information technology systems must be constantly updated and patched to protect against known vulnerabilities and to optimize performance.

While we have dedicated resources responsible for maintaining appropriate levels of cybersecurity and implemented systems and processes intended to help identify cyberattacks and protect and remediate our network infrastructure, we are aware that these attacks have become increasingly frequent, sophisticated, and difficult to

detect and, as a result, we may not be able to anticipate, prevent or detect all such attacks.

We also may be impacted by a cyberattack targeting one of our vendors or within our technology supply chain or infrastructure.

Our contracts with service providers typically require them to implement and maintain adequate security controls, but we may not have the ability to effectively monitor these security measures.

As a result, inadequacies of the third-party security technologies and practices may not be detected until after a security breach has occurred.

These risks may be heightened in connection with employees working from remote work environments, as our dependency on certain service providers, such as video conferencing and web conferencing services, has significantly increased.

In addition, to access our network, products and services, customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own security risk.

We could suffer significant damage to our brand and reputation:

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These types of security incidents could also lead to lawsuits, regulatory investigations and claims, loss of business and increased legal liability.

Cyberattacks, security breaches or third-party reports of perceived security vulnerability to our systems, even if no breach has occurred, also could damage our brand and reputation, result in litigation, regulatory actions, loss of client confidence and increased legal liability.

We also make acquisitions periodically.

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Our clients rely on us for the delivery of time-sensitive, up-to-date data and applications.

Our business is dependent on our ability to process substantial volumes of data and transactions rapidly and efficiently on our computer-based networks and systems.

Our business is dependent on our ability to process substantial volumes of data and transactions rapidly and efficiently on our computer-based networks, database storage facilities, and other network infrastructure, which are located across multiple facilities globally.

If we experience significant growth of our customer base or increases in the number of products or services or in the speed at which we are required to provide products and services, it may strain our systems.

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Our computer operations, as well as our other business centers, and those of our suppliers and clients, are vulnerable to interruption by fire, natural disaster, power loss, telecommunications failures, terrorist attacks, acts of war, civil unrest, internet failures, computer viruses, security breaches, and other events beyond our reasonable control.

In addition, in the remote work environments, the daily activities and productivity of our workforce is now more closely tied to key vendors, such as video conferencing services, consistently delivering their services without material disruption.

Our ability to deliver information using the internet and to operate in a remote working environment may be impaired because of infrastructure failures, service outages at third-party internet providers, malicious attacks, or other factors.

We maintain back-up facilities and certain other redundancies for each of our major data centers to minimize the risk that any such event will disrupt those operations.

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If the services to our clients are disrupted, or if there is unauthorized access to the confidential information of our clients or our vendors, we could suffer significant damage to our brand and reputation and lose clients.

As we increase our reliance on third party systems, our exposure to damages from services disruptions may increase, and we may incur additional costs to remedy damages caused by these disruptions.

We also may incur increased operating expenses to recover data, repair or remediate systems, equipment or facilities, and to protect ourselves from such disruptions.

As we increase our reliance on third-party

systems, our exposure to damages from services disruptions may increase, and we may incur additional costs to remedy damages caused by these disruptions.

Use of open source software could introduce security vulnerabilities, impose unanticipated restrictions on our ability to commercialize our products and services, and subject us to increased costs

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This would allow our competitors to create similar products with less development effort and time and ultimately put us at a competitive disadvantage.

We have implemented procedures to control the use of source code so was to mitigate this risk;

We have implemented procedures to control the use of source code so as to mitigate this risk;

however, the terms of many open source licenses are also ambiguous and have not been interpreted by U.S.

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While we believe the breadth and depth of our suite of products and applications offer benefits to our clients that are a competitive advantage, our competitors may offer price incentives to attract new business.

Future competitive pricing pressures may result in decreased sales volumes and price reductions, resulting in lower revenue.

Future competitive pricing pressures may result in decreased sales volumes and price reductions, resulting in lower revenue and ASV.

Weak economic conditions may also result in clients seeking to utilize lower-cost information that is available from alternative sources.

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If our clients merge with or are acquired by other entities that are not our clients, or that use fewer of our products and services, they may discontinue or reduce their use of our products and services.

Thus, economic uncertainty, lack of confidence

in the global financial system, and consolidation in this sector could adversely affect our business, financial results and future growth.

Thus, economic uncertainty, lack of confidence in the global financial system, and consolidation in this sector could adversely affect our business, financial results and future growth.

Volatility in the financial markets may delay the spending pattern of clients and reduce future ASV growth

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We have provisions in our client contracts to limit our exposure to potential liability claims brought by clients based on the use of our products or services or our delay or failure to provide services.

Contracts with customers also increasingly include service level requirements and audits rights to review our security.

Contracts with customers also increasingly include service level requirements and audit rights to review our security.

Many of our customers in the financial services sector are also subject to regulations and requirements to adopt risk management processes commensurate with the level of risk and complexity of their third-party relationships, and provide rigorous oversight of relationships that involve certain "critical activities," some of which may be deemed to be provided by us.

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These may require improvements or replacement to meet the additional demands of a larger organization.

Further, the addition of new clients and the implementation of such improvements would require additional management time

and resources.

Further, the addition of new clients and the implementation of such improvements would require additional management time and resources.

These needs may result in increased costs that could negatively impact results of operations.

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Failure to enter into, renew or comply with contracts supplying new and existing data sets or products on competitive terms

We collect and aggregate third-party content from thousands of data suppliers, news sources, exchanges, brokers and contributors into our own dedicated online service, which clients access to perform their analyses.

We collect and aggregate third-party content from data suppliers, news sources, exchanges, brokers and contributors into our own dedicated online service, which clients access to perform their analyses.

We combine the data from these sources into our own dedicated databases.

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Certain data sets that we rely on have a limited number of suppliers, although we make every effort to assure that, where reasonable, alternative sources are available.

We are not dependent on any one third-party data supplier in order to meet the needs of our clients.

No single vendor or data supplier represented more than 10% of our total data costs during fiscal 2020, except for one vendor, which is a supplier of risk models and portfolio optimizer data to FactSet and represented 11% of our data costs in fiscal 2020.

We are not dependent on any one third-party data supplier in order to meet the needs of our clients, with only two data suppliers representing more than 10% of our total data costs for the twelve months ended August 31, 2021.

Our failure to be able to maintain these relationships, or the failure of our suppliers to deliver accurate data or in a timely manner, or the occurrence of a dispute with a vendor over use of their content, could increase our costs and reduce the type of content and products available to our clients, which could harm our reputation in the marketplace and adversely affect our business.

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The availability of free or relatively inexpensive information may reduce demand for our products.

While we believe our service offering is distinguished by such factors as customization, timeliness, accuracy, ease-of-use, completeness and other value-added factors, if users choose to obtain the information they need from public or other sources, our business and results of operations could be adversely affected.

While we believe our service offering is distinguished by such factors as customization, timeliness, accuracy, ease-of-use, completeness and other value-added factors, if users choose to obtain the information they need from public or other sources, our business, results of operations, and cash flows could be adversely affected.

Inability to hire and retain key qualified personnel

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Competition for talent, especially engineering personnel, is strong.

We need technical resources such as engineers to help develop new products and enhance existing services.

We need technical resources such as engineers to help

develop new products and enhance existing services.

We rely upon sales personnel to sell our products and services and maintain healthy business relationships.

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operations involve risks that differ from or are in addition to those faced by our U.S.

These risks include difficulties in

developing products, services and technology tailored to the needs of non-U.S.

These risks include difficulties in developing products, services and technology tailored to the needs of non-U.S.

clients, including in emerging markets;

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A significant outbreak, epidemic or pandemic of contagious diseases in the human population could result in a widespread health crisis adversely affecting the broader economies, financial markets and overall demand for our products.

In addition, any preventative or protective actions that governments implement or that we take in respect of a global health crisis such as COVID-19, such as travel restrictions, quarantines or site closures, may interfere with the ability of our employees, vendors, and data suppliers to perform their respective responsibilities and obligations relative to the conduct of our business, including our ability to gather content.

In addition, any preventative or protective actions that governments implement or that we take in respect of a global health crisis, such as travel restrictions, quarantines or site closures, may interfere with the ability of our employees, vendors, and data suppliers to perform their respective responsibilities and obligations relative to the conduct of our business, including our ability to gather content.

Such results could have a material adverse effect on our operations, business, financial condition, results of operations, or cash flows.

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For example, many jurisdictions have imposed a wide range of restrictions on the physical movement of our employees and vendors to limit the spread of COVID-19.

If the COVID-19 pandemic has a substantial impact on our employees' or vendors' attendance or productivity, our operations, including our ability to gather content, may suffer, and in turn our results of operations and overall financial performance may be impacted.

While to date the COVID-19 pandemic has not had a material negative impact on our financial condition, results of operations, or cash flows, due to the ongoing uncertainty related to the duration, magnitude and impact of the COVID-19 pandemic, its potential effects on our business remain uncertain.

The COVID-19 pandemic may still have a substantial impact on our employees' or vendors' productivity, which could result in our operations, including our ability to gather content, suffering, and in turn our results of operations, cash flows, and overall financial performance may be impacted.

Furthermore, if our employees incur substantial medical expenses due to COVID-19, our expenses may increase due to our self-funded employee medical insurance model.

Our management is focused on mitigating the effects of COVID-19 on our business, which has required and will continue to require a substantial investment of their time and may delay their other efforts.

The impact of COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, may also increase the severity or likelihood of the other risks described in this Item, any of which could have a material effect on us.

We closely monitor the impact of the COVID-19 pandemic and continually assess its potential effects on our business.

Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic cannot be reasonably estimated at this time.

The continued impact of COVID-19 may also increase the severity or likelihood of the other risks described in this Item, any of which could have a material effect on us.

We continue to closely monitor the impact of the COVID-19 pandemic and continually assess its potential effects on our business.

In response to the COVID-19 pandemic, we implemented a business continuity plan with a dedicated incident management team to respond quickly and provide ongoing guidance.

However, given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic cannot be reasonably estimated at this time.

The extent to which our business, financial condition, results of operations, or cash flows are affected by COVID-19 will depend in part on future developments which cannot be accurately predicted and are uncertain, as there are no comparable recent events that provide guidance as to the potential effect of the spread of a global pandemic.

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This situation is changing continually, and additional effects may arise that we are not presently aware of or that we currently do not consider to be significant risks to our operations.

If we are not able to respond to and manage the impact of such events effectively, our business and financial condition could be negatively impacted.

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations - COVID-19 Update for additional information.

If we are not able to respond to and manage the impact of such events effectively, our business and financial

condition could be negatively impacted.

Refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - COVID-19 Update for additional information.

Legal & Regulatory Risks

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regulators have increased their focus on the regulation of the financial services industry.

Increased regulation of our clients may increase their expenses, causing them to seek to limit or reduce their costs from outside services

such as ours.

Increased regulation of our clients may increase their expenses, causing them to seek to limit or reduce their costs from outside services such as ours.

Additionally, if our clients are subjected to investigations or legal proceedings they may be adversely impacted, possibly leading to their liquidation, bankruptcy, receivership, reduction in assets under management, or diminished operations, which would adversely affect our revenue.

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In the European Union, the new version of the Markets in Financial Instruments Directive (recast), also known as "MiFID II" became effective in January 2018.

Prior to the effectiveness of the UK's withdrawal from the European Union on January 1, 2021, the UK laws and regulations implementing MiFID II were modified to transpose aspects of EU law and address deficiencies that would have otherwise been created as a result of the withdrawal.

MiFID II built upon many of the initiatives introduced through MiFID and is intended to help improve the functioning of the European Union single market by achieving a greater consistency of regulatory standards.

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On January 31, 2020, the United Kingdom formally left the European Union when the UK-EU Withdrawal Agreement became effective.

Under the Withdrawal Agreement, a transition period began and will run until December 31, 2020 (but could be extended).

The UK and the EU are currently in the process of negotiating a UK-EU free trade deal and the terms of their future relationship, but have so far not been able to finalize their future arrangement.

The deadline for these negotiations is the expiry of the transition period and the UK government has made it clear that it will not ask to extend the transition period.

At this time, we cannot predict the impact that the future UK-EU arrangements will have on our business and our clients, as it will depend on the longer-term outcome of tariff, trade, regulatory and other negotiations.

Although the results of these negotiations are currently unknown, it is possible that new terms may adversely affect our operations and financial results.

While we evaluate our own risks and uncertainty related to Brexit, we continue to partner with our clients to help them navigate the fluctuating international markets.

Under the Withdrawal Agreement, a transition period began that ran until December 31, 2020.

On January 1, 2021, the UK left the EU Single Market and Customs Union, as well as all EU policies and international agreements.

As a result, the free movement of persons, goods, services and capital between the UK and the EU ended, and the EU and the UK formed two separate markets.

On December 24, 2020, the EU reached a trade agreement with the UK (the "Trade Agreement") The Trade Agreement offers UK and EU companies preferential access to each other's markets, ensuring imported goods will be free of tariffs and quotas;

however, economic relations between the UK and EU will now be on more restricted terms than existed previously.

The Trade Agreement does not incorporate the full scope of the services sector, and businesses such as banking and finance face uncertainty.

In March, 2021, the UK and EU have agreed on a framework for voluntary regulatory cooperation and dialogue on financial services issues between the two countries in a Memorandum of Understanding (the "MOU"), which is expected to be signed after formal steps are completed, although this has not yet occurred.

At this time, we cannot predict the impact that the Trade Agreement, the MOU or any future agreements on services, particularly financial services, will have on our business and our clients.

It is possible that new terms may adversely affect our operations and financial results.

We continue to evaluate our own risks and uncertainty related to Brexit, and partner with our clients to help them navigate the fluctuating international markets.

This uncertainty may have an impact on our clients’ expansion or spending plans, which may in turn negatively impact our revenue or growth.

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The global and diverse nature of our business means that there could be additional examinations by governmental tax authorities and the resolution of ongoing and other probable audits which could impose a future risk to the results of our business.

In August 2019, we received a Notice of Intent to Assess (the "Notice") additional sales taxes, interest and underpayment penalties from the Commonwealth of Massachusetts Department of Revenue relating to prior tax periods.

The Notice follows FactSet’s previously disclosed response to a letter from the Commonwealth requesting additional sales

Based upon a preliminary review of the Notice, we believe the Commonwealth may assess sales tax, interest and underpayment penalties on previously recorded sales transactions.

We intend to contest any such assessment, if assessed, and continue to cooperate with the Commonwealth’s inquiry.

Due to uncertainty surrounding the assessment process, we are unable to reasonably estimate the ultimate outcome of this matter and, as such, have not recorded a liability as of August 31, 2020.

In August 2019 and July 2021, we received Notices of Intent to Assess (the "Notices") additional sales/use taxes, interest and underpayment penalties from the Commonwealth of Massachusetts Department of Revenue relating to prior tax periods.

Based upon a review of the Notices, we believe the Commonwealth may assess sales/use tax, interest and underpayment penalties on previously recorded sales transactions.

We filed an appeal to the Notices and we intend to contest any such assessment, if assessed, and continue to cooperate with the Commonwealth’s inquiry.

Further, on August 10, 2021, we received a letter (the “Letter”) from the Commonwealth relating to additional prior tax periods, requesting sales information to determine if a notice of intent to assess should be issued to FactSet with respect to these tax periods.

Based upon a preliminary review of the Letter, we believe the Commonwealth might seek to assess sales/use tax, interest and underpayment penalties on previously recorded sales transactions.

Due to the uncertainty surrounding the assessment process, we are unable to reasonably estimate the ultimate outcome of these matters and, as such, have not recorded a liability as of August 31, 2021.

We believe that we ultimately will prevail if we are presented with a formal assessment;

however, if we do not prevail, the amount could have a material impact on our consolidated financial position, cash flows and results of operations.

Changes in tax laws or the terms of tax treaties in a jurisdiction where we are subject to tax could increase our taxes payable.

On December 22, 2017, the U.S.

Tax Cuts and Jobs Act, ("TCJA") was signed into law.

The TCJA enacted broad changes to the U.S.

Internal Revenue code, including reducing the federal corporate income tax rate from 35% to 21%, among many other complex provisions.

The ultimate impact of such tax reform may differ from our current estimate due to changes in interpretations and assumptions made by us, as well as the issuance of further regulations or guidance, or further legislative changes to the U.S.

Internal Revenue code.

however, if we do not prevail, the amount could have a material impact on our consolidated financial position, results of operations and cash flows.

Changes in tax laws or the terms of tax treaties in a jurisdiction where we are subject to tax could have an impact on our taxes payable.

Financial Market Risks

Exposure to fluctuations in currency exchange rates and the failure of hedging arrangements

Due to the global nature of our operations, we conduct business o utside the U.S.

in se veral currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso .

Due to the global nature of our operations, we conduct business outside the U.S.

in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso.

To the extent our international activities increase in the future, our exposure to fluctuations in currency exchange rates may increase as well.

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Our primary objective in holding derivatives is to reduce the volatility of earnings with changes in foreign currency.

Although we believe that our foreign exchange hedging policies are reasonable and prudent under the circumstances, our attempt to hedge against these risks may not be successful, which could cause an adverse impact on our results of operations.

Business performance may not be sufficient to meet financial guidance or publicly disclosed long-term targets

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors