What changed in this filing

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Item 1A. Risk Factors

2022-02-14 compared with 2021-02-12 · 76 added, 48 removed, 161 unchanged (44% of the section changed)

4 unchanged sentences

The demand for the Company’s services, in particular its staffing services, is highly dependent upon the state of the economy and upon the staffing needs of the Company’s clients.

Certain of the Company’s markets have recently experienced economic uncertainty characterized by increasing unemployment, limited availability of credit and decreased consumer and business spending.

In addition, certain geopolitical events, including ongoing trade negotiations and the United Kingdom’s withdrawal from the European Union (“Brexit”), have caused significant economic, market, political and regulatory uncertainty in some of the Company’s markets.

In the recent past, certain of the Company’s markets experienced economic uncertainty characterized by increasing unemployment, limited availability of credit and decreased consumer and business spending.

In addition, certain geopolitical events, including the spread of COVID-19 and the United Kingdom’s withdrawal from the European Union (“Brexit”), have caused significant economic, market, political and regulatory uncertainty in some of the Company’s markets.

Any decline in the economic condition or employment levels of the U.S.

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legal requirements governing U.S.

companies operating in foreign countries, legal and cultural differences in the conduct of business, potential adverse tax consequences and difficulty in staffing and managing international operations.

companies operating in foreign

countries, legal and cultural differences in the conduct of business, potential adverse tax consequences and difficulty in staffing and managing international operations.

In addition, the Company’s business may be affected by foreign currency exchange fluctuations.

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In particular, Brexit has contributed to, and may continue to contribute to, European economic, market and regulatory uncertainty and could adversely affect European or worldwide economic, market, regulatory, or political conditions.

extent that adverse economic conditions and uncertainty in Europe (related to Brexit or otherwise) worsen, demand for the Company’s services may decline, which could significantly harm its business and results of operations.

To the extent that adverse economic conditions and uncertainty in Europe (related to Brexit or otherwise) worsen, demand for the Company’s services may decline, which could significantly harm its business and results of operations.

The currently evolving situation of the outbreak of a novel coronavirus disease ( “ COVID-19 ”) has impacted demand for the Company’s services, disrupted the Company’s operations and may continue to do so.

The COVID-19 outbreak has emerged as a serious threat to the health and economic well-being of the Company’s clients, candidates, employees, and the overall economy.

Since the beginning of the outbreak, many counties, states and countries have taken dramatic action including, without limitation, ordering all non-essential workers to stay home, mandating the closure of schools and non-essential business premises and imposing isolation measures on large portions of the population.

These measures, while intended to protect human life, have had serious adverse impacts on domestic and foreign economies and the severity and the duration of these is highly uncertain.

The effectiveness of economic stabilization efforts, including proposed government payments to affected citizens and industries, continue to be uncertain and many economists are predicting extended local or global recessions.

The accelerating number of deaths and hospitalizations resulting from this disease are further exacerbating the uncertainties and challenges facing the Company’s business.

Actions intended to mitigate the spread of COVID-19 have caused a dramatic increase in unemployment in the United States and in certain other regions in which the Company operates and created significant uncertainty and volatility in the Company’s business.

Mandated business closures and slowing economic activity have reduced use of temporary workers and reduced businesses’ recruitment of new employees resulting in less demand for the Company’s services, which may in the future materially harm the Company’s business and financial condition.

Many of the Company’s clients have or may be required to or choose to voluntarily close their worksites and the Company has at various times during the pandemic witnessed a significant drop in the demand of the Company’s services by clients, particularly the Company’s recruiting and temporary staffing clients, most of whom are small and midsize businesses that are feeling the crisis.

Deterioration in economic conditions or the financial or credit markets could also have an adverse impact on the Company’s clients’ ability to pay for services the Company has already provided.

Furthermore, the spread of COVID-19 may adversely impact the Company’s ability to recruit sufficient candidates for certain industries or regions in which the Company operates.

The Company has transitioned a significant number of the Company’s corporate employee population to a remote work environment in an effort to mitigate the spread of COVID-19.

The COVID-19 outbreak emerged as a serious threat to the health and economic well-being of the Company’s clients, candidates, employees, and the overall economy.

At various times during the outbreak, many counties, states and countries took dramatic action including, without limitation, ordering all nonessential workers to stay home, mandating the closure of schools and nonessential business premises and imposing isolation measures on large portions of the population.

These measures, while intended to protect human life, had serious adverse impacts on domestic and foreign economies and may do so in the future if they are continued or reintroduced.

The COVID-19 pandemic has created significant uncertainty and volatility in the Company’s business.

Initially it caused a dramatic increase in unemployment in the United States and in certain other regions in which the Company operates, and mandated business closures and slowing economic activity reduced the use of temporary workers and reduced businesses’ recruitment of new employees resulting in less demand for the Company’s services.

During 2021, however, demand for workers and the Company’s services increased significantly as economic activity recovered, worksites reopened, and many business sought to restore or expand workforces that had shrunk during the course of the pandemic.

There can be no assurance, however, that this increased demand for workers and the Company’s services will be sustained.

Furthermore, the emergence of new variants of the coronavirus or of other illnesses may cause a rapid deterioration of economic conditions and the financial and credit markets, which could have a material adverse impact on the Company’s business, financial condition, results of operations and cash flows.

The Company has transitioned a significant number of the Company’s employee population to a remote work environment in an effort to mitigate the spread of COVID-19.

This transition to remote working and the spread of COVID-19 may negatively impact the availability of key personnel necessary to conduct the Company’s business and the business and operations of the Company’s third-party service providers who perform critical services for the Company’s business.

This transition to remote working has also increased the Company’s vulnerability to risks related to the Company’s computer and communications hardware and software systems and exacerbated certain related risks, including risks of phishing and other cybersecurity attacks.

The Company is continuing to monitor the spread of COVID-19, including the new recently announced variants of the disease, and related risks, including risks related to efforts to mitigate the disease’s spread.

The Company is continuing to monitor the spread of COVID-19, including the emerging variants of the disease, and related risks, including risks related to efforts to mitigate the disease’s spread.

The rapid development and fluidity of the situation, however, precludes any prediction as to its ultimate impact on us.

If the spread and related business restrictions continue, such impact could grow and the Company’s business, financial condition, results of operations and cash flows could be materially adversely affected.

The continued spread and related business restrictions could also adversely impact global economies and financial markets resulting in an economic downturn that would likely impact demand for the Company’s services.

While the Company has navigated the COVID-19 pandemic thus far, the ongoing surge of the COVID-19 pandemic in the United States, the United Kingdom and the European Union, among other territories, will have a continued negative impact on the Company’s business.

The emergence of new variants of the coronavirus or of other illnesses may adversely impact global economies and financial markets resulting in an economic downturn that would likely impact demand for the Company’s services.

While the Company has navigated the COVID-19 pandemic thus far, its continuation or worsening may have a negative impact on the Company’s business.

Any of the above factors, or other cascading effects of the COVID-19 pandemic that are not currently foreseeable, could materially increase the Company’s costs, severely negatively impact the Company’s revenue, net income, and other results of operations, and impact the Company’s liquidity position.

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Natural disasters and unusual weather conditions, pandemic outbreaks, terrorist acts, global political events and other serious catastrophic events could disrupt business and otherwise materially adversely affect the Company's business and financial condition.

With operations in many states and multiple foreign countries, the Company is subject to numerous risks outside of the Company's control, including risks arising from natural disasters, such as fires, earthquakes, hurricanes, floods, tornadoes, unusual weather conditions, pandemic outbreaks such as the COVID-19 pandemic and other global health emergencies, terrorist acts or disruptive global political events, or similar disruptions that could materially adversely affect the Company's business and financial performance.

Company's business and financial performance.

Historically, the Company’s operations are heavily dependent on the ability of employees and consultants to travel from business to business and from location to location.

Any public health emergencies, including a real or potential global pandemic such as those caused by the avian flu, SARS, Ebola, coronavirus, or even a

particularly virulent flu, could decrease demand for the Company's services and the Company's ability to offer them.

Uncharacteristic or significant weather conditions can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer the Company's services and materially adversely affect the Company's short-term results of operations.

Any public health emergencies, including a real or potential global pandemic such as those caused by the avian flu, SARS, Ebola, coronavirus, or even a particularly virulent flu, could decrease demand for the Company's services and the Company's ability to offer them.

Uncharacteristic or significant weather conditions may increase in frequency or severity due to climate change and can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer the Company's services and materially adversely affect the Company's short-term results of operations.

In addition, these events could result in delays in placing employees and consultants, the temporary disruption in the transport of employees and consultants overseas and domestically, the inability of employees and consultants to reach or have transportation to clients directly affected by such events and disruption to the Company's information systems.

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Candidates generally seek temporary or regular positions through multiple sources, including the Company and its competitors.

Before the COVID-19 pandemic, unemployment in the United States was at historic lows.

Before the COVID-19 pandemic, unemployment in the United States was at historic lows and during the second half of 2021, as the economy recovered, competition for workers in a number of industries became intense.

When unemployment levels are low, finding sufficient eligible candidates to meet employers’ demands is more challenging.

At various times during the pandemic, this challenge has been exacerbated by the withdrawal of some workers from the labor pool, whether due to health concerns, school and daycare closures or other reasons.

Any resurgence of COVID-19 may adversely impact the Company's ability to recruit sufficient candidates for certain industries or regions in which the Company operates.

Any shortage of candidates could materially adversely affect the Company.

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The Company also incurs a risk of liability to its clients resulting from allegations of errors, omissions or theft by its temporary employees, or allegations of misuse of client confidential information.

In many cases, the Company has agreed to indemnify its clients in respect of these types of claims.

In some cases, the Company has agreed to indemnify its clients in respect of these types of claims.

The Company maintains insurance with respect to many of such claims.

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There can be no assurance that the Company will be able to attract and retain the personnel that are essential to its success.

The Company’s results of operations and ability to grow could be materially negatively affected if it cannot successfully keep pace with technological changes impacting the development and implementation of its services and the evolving needs of its client s.

The Company’s success depends on its ability to keep pace with rapid technological changes affecting both the development and implementation of its services and the staffing needs of its clients.

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In addition, the Company’s business relies on a variety of technologies, including those that support hiring and tracking, order management, billing, and client data analytics.

If the Company does not sufficiently invest in new technology and industry

developments, appropriately implement new technologies, or evolve its business at sufficient speed and scale in response to such developments, or if it does not make the right strategic investments to respond to these developments, the Company’s services, results of operations, and ability to develop and maintain its business could be negatively affected.

The demand for the Company’s services related to Sarbanes-Oxley or other regulatory compliance may decline .

The operations of both the staffing services business and Protiviti include services related to Sarbanes-Oxley and other regulatory compliance.

If the Company does not sufficiently invest in new technology and industry developments, appropriately implement new technologies, or evolve its business at sufficient speed and scale in response to such developments, or if it does not make the right strategic investments to respond to these developments, the Company’s services, results of operations, and ability to develop and maintain its business could be negatively affected.

The demand for the Company’s services related to regulatory compliance may decline.

The operations of both the staffing services business and Protiviti include services related to Sarbanes-Oxley, Anti-Money Laundering Act of 2020 reviews ("AML"), and other regulatory compliance services.

There can be no assurance that there will be ongoing demand for these services.

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The Company has reported increased business from services rendered to the public sector during the pandemic due to, among other developments, the volume of unemployment claims and housing assistance claims, as well as the demands faced by public school districts that must meet the technical support requirements of virtual learning models.

This business has contributed to our revenue over the past year.

Additional business with public sector clients not directly related to the COVID-19 pandemic has been reported in 2021.

The pandemic-related services and other work for public sector clients has contributed to the Company's revenue over the past year.

It is unknown to what extent business with state, local and other public sector clients may decrease as the effects of the pandemic lessen or change over time.

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Because long-term contracts are not a significant part of the Company’s staffing services business, future results cannot be reliably predicted by considering past trends or extrapolating past results.

Additionally, the Company’s clients will frequently enter non-exclusive arrangements with several firms, which the client is generally able to terminate on short notice and without penalty.

Additionally, the Company’s clients will frequently enter nonexclusive arrangements with several firms, which the client is generally able to terminate on short notice and without penalty.

The nature of these arrangements further exacerbates the difficulty in predicting the Company's future results.

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The Company and certain subsidiaries are defendants in several lawsuits that could cause the Company to incur substantial liabilities .

The Company and certain subsidiaries are defendants in several actual or asserted class and representative action lawsuits brought by or on behalf of the Company’s current and former employees alleging violations of federal and state law with respect to certain wage and hour related matters, as well as claims challenging the Company’s compliance with the Fair Credit Reporting Act.

Fair Credit Reporting Act.

The various claims made in one or more of such lawsuits include, among other things, the misclassification of certain employees as exempt employees under applicable law, failure to comply with wage statement requirements, failure to compensate certain employees for time spent performing activities related to the interviewing process, and other related wage and hour violations.

Such suits seek, as applicable, unspecified amounts for unpaid overtime

compensation, penalties, and other damages, as well as attorneys’ fees.

Such suits seek, as applicable, unspecified amounts for unpaid overtime compensation, penalties, and other damages, as well as attorneys’ fees.

It is not possible to predict the outcome of these lawsuits.

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In addition, an unfavorable outcome in one or more of these cases could cause the Company to change its compensation plans for its employees, which could have a material adverse effect upon the Company’s business.

Government imposed vaccine mandates could have a material adverse impact on our business and results of operations .

In September 2021, President Biden announced two executive orders related to vaccine mandates that would impact the Company's operations in the United States.

The first executive order-- the OSHA Vaccination and Testing Emergency Temporary Standard (“ETS”) — was blocked by a stay of enforcement by the United States Supreme Court on January 13, 2022.

On January 25, 2022, the Department of Labor withdrew the ETS;

however, OSHA could still pursue a vaccine mandate through the regular federal rulemaking process.

A second Executive Order on Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors (“EO 14042”) would apply to the Company as a federal contractor and subcontractor.

EO 14042 is also subject to legal challenges and is currently subject to a nationwide injunction during the pendency of federal court proceedings.

At this time, it is unclear, among other things, if or when any federal vaccine mandates may go into effect.

Further, state and local governments in the United States and in international jurisdictions where we operate may implement vaccine mandates (currently New York City has a mandate) and it is not clear if such mandates will go into effect, or stay in effect;

whether any will apply to all employees or only to employees who work in the office;

and how compliance will be documented.

Should such mandates apply to us, we may be required to implement a requirement that all of our employees get vaccinated, subject to limited exceptions.

At this time, Protiviti has implemented a vaccine requirement for its operations;

however, the Company’s staffing operations do not have a vaccine requirement.

Currently, it is not possible to predict the impact that a federal vaccine mandate, any other vaccine mandate, or a vaccine requirement should we elect to adopt one, will have on us or on our workforce.

Any vaccine requirement or vaccine mandate, if implemented, may result in employee attrition;

however, any failure to implement a vaccine requirement or mandate may also result in employee attrition or resistance to returning to onsite work, either of which could materially and adversely affect our business and results of operations.

Government regulations may result in prohibition or restriction of certain types of employment services or the imposition of additional licensing or tax requirements that may reduce the Company’s future earnings.

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Additionally, trade unions in some countries have used the political process to target the industry in an effort to increase the regulatory burden and expense associated with offering or utilizing temporary staffing solutions.

The countries in which the Company operates may, among other things:

The countries in which we operate may, among other things:

• create additional regulations that prohibit or restrict the types of employment services that the Company currently provides;

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The Company’s business is subject to regulation or licensing in many states in the U.S.

and in certain foreign countries.

and in certain foreign

While the Company has had no material difficulty complying with regulations in the past, there can be no assurance that the Company will be able to continue to obtain all necessary licenses or approvals or that the cost of compliance will not prove to be material.

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An unfavorable outcome with respect to such litigation or any future lawsuits or proceedings could, individually or in the aggregate, cause the Company to incur substantial liabilities that may have a material adverse effect upon the Company’s business, financial condition or results of operations.

If the Company fails to comply with Anti-Bribery Laws or economic sanction regulations, it could be subject to substantial fines or other penalties .

In many parts of the world, including countries in which the Company operates and/or seeks to expand, practices in the local business community might not conform to international business standards and could violate the U.S.

Foreign Corrupt Practices Act ("FCPA") and other anti-corruption and anti-bribery laws and regulations (“Anti-Bribery Laws”).

These laws generally prohibit companies, their employees and third-party intermediaries from authorizing, promising, offering, providing, soliciting or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector.

In addition, the FCPA’s accounting provisions require the Company to maintain accurate books and records and a system of internal accounting controls.

Any violation of the FCPA or other applicable Anti-Bribery Laws could result in substantial fines, sanctions or civil and/or criminal penalties, debarment from business dealings with certain governments or government agencies or restrictions on the marketing of the Company’s products in certain countries, which could harm the Company’s business, financial condition or results of operations.

Additionally, the U.S.

Department of the Treasury’s Office of Foreign Assets Control and other relevant agencies of the U.S.

government administer certain laws and regulations that restrict U.S.

persons and, in some instances, non-U.S.

persons, from conducting activities, transacting business with or making investments in certain countries, or with governments, entities and individuals, subject to U.S.

economic sanctions.

Similar economic sanctions are imposed by the European Union and other jurisdictions.

The Company’s international operations subject it to these laws and regulations, which are complex, restrict the Company’s business dealings with certain countries, governments, entities and individuals, and are constantly changing.

Penalties for noncompliance with these complex laws and regulations can be significant and include substantial fines, sanctions or civil and/or criminal penalties, and violations can result in adverse publicity, which could harm the Company’s business, financial condition or results of operations.

Although the Company has implemented policies and procedures designed to ensure compliance with Anti-Bribery Laws, economic sanctions, and other laws and regulations, the Company cannot be sure that its employees, agents or other third parties will not violate such policies or applicable laws and regulations.

Any such violations could result in significant fines and penalties, criminal sanctions against the Company, its officers or its employees, prohibitions on the conduct of its business, and materially damage the Company’s reputation, brand, business and operating results.

Further, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of the Company’s senior management.

Health care reform could increase the costs of the Company’s temporary staffing operations .

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The Company’s employees or vendors may have access or exposure to personally identifiable or otherwise confidential information and customer data and systems, the misuse of which could result in legal liability.

Cyber-attacks, including attacks motivated by grievances against the business services industry in general or against the Company in particular, may disable or damage its systems.

Cyberattacks, including attacks motivated by grievances against the business services industry in general or against the Company in particular, may disable or damage its systems.

It is possible that the Company’s security controls or those of its third-party vendors over personal and other data, and other practices it follows, may not prevent the improper access to or disclosure of personally identifiable or otherwise confidential information.

Such disclosure or damage to the Company’s systems could harm its reputation and subject it to government sanctions and liability under its contracts and laws that protect personal data and confidential information, resulting in increased costs or loss of revenue.

The potential risk of security breaches and cyber-attacks may increase as the Company introduces new service offerings.

The potential risk of security breaches and cyberattacks may increase as the Company introduces new service offerings.

Changes in data privacy and protection laws and regulations in respect of control of personal information could increase the Company’s costs or otherwise adversely impact its operations.

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Although the Company has processes in place to attempt to identify and respond to risk issues in a timely manner, the Company's efforts may not be sufficient.

The collective impact of the tone at the top, tone in the middle and tone at the bottom on risk management, compliance and responsible business behavior has a huge effect on timely escalation of risk issues, particularly those affecting core operations , and the Company’s processes, corporate culture and general ethical climate may not be sufficient to ensure timely identification and escalation of significant risk issues.

The Company’s processes, corporate culture and general ethical climate may not be sufficient to ensure timely identification and escalation of significant risk issues.

General Risk Factors

The Company’s compliance policies and controls may not prevent violations that could result in significant fines and penalties.

The Company could also be exposed to fines and penalties under U.S.

or local jurisdiction trade sanctions and controls as well as laws prohibiting corrupt payments to governmental officials including the Foreign Corrupt Practices Act and similar laws that prohibit payments to foreign officials.

Failure to comply with local laws in a particular market may result in substantial liability and could have a significant and negative effect not only on the Company's business in that market but also on the Company's reputation generally.

Although the Company has implemented policies and procedures designed to ensure compliance with these laws, it cannot be sure that its employees, contractors or agents will not violate such policies.

Any such violations could materially damage the Company’s reputation, brand, business and operating results.

Further, changes in U.S.

laws and policies governing foreign trade or investment and use of foreign operations or workers, and any negative sentiments towards the United States as a result of such changes, could adversely affect the Company’s operations.

federal tax regulations and interpretations could adversely affect the Company.

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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