What changed in this filing

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Item 1A. Risk Factors

2022-02-24 compared with 2021-02-11 · 56 added, 38 removed, 246 unchanged (28% of the section changed)

11 unchanged sentences

If the investment performance of our managed investment portfolios is less than that of our competitors or applicable third-party benchmarks, we could lose existing and potential clients and suffer a decrease in assets under management.

• General Market Declines.

• General Financial Market Declines.

We derive a significant portion of our revenues from advisory fees on managed investment portfolios.

A downturn in stock or bond prices would cause the value of assets under our management to decrease, and may also cause investors to withdraw their investments, thereby further decreasing the level of assets under our management.

A downturn in financial markets would cause the value of assets under our management to decrease, and may also cause investors to withdraw their investments, thereby further decreasing the level of assets under our management.

• Investment Concentration.

The allocation of investment products for assets under management within market segments or strategies may impact associated fees that can vary depending on product offerings.

• Investor Mobility.

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• Investing Trends.

Changes in investing trends, particularly investor preference for passive or alternative investment products, and in retirement savings trends, may reduce interest in our products and may alter our mix of assets under management.

Changes in investing trends, particularly investor preference for passive or alternative investment products as well as increasing investor preference for environmentally and socially responsible investment products, and changes in retirement savings trends, may reduce interest in our products and may alter our mix of assets under management.

• Interest Rate Changes.

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As part of our continued efforts to attract and retain clients, we develop and launch new products and services, which may require expenditure of resources and may expose us to new regulatory or compliance requirements as well as increased risk of operational or client service errors.

In the event that we decide to reduce the fees we charge for investment advisory services in response to competitive pressures, which we have done selectively in the past, revenues and operating margins could be adversely impacted.

adversely impacted.

Fee reductions may vary depending on strategy and product offerings, which could result in investment rebalancing or reallocation adversely impacting revenues and operating margins.

Our operations are complex and a failure to properly execute operational processes could have an adverse effect on our reputation and decrease our revenues.

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Failure to properly execute or oversee these services could have an adverse impact on our business, financial results and reputation, and subject us to regulatory sanctions, fines, penalties, or litigation.

New investment strategies, investment vehicles, distribution channels, or other evolutions of our business may increase the risk that our existing systems may not be adequate to control the risks introduced by such changes.

New investment strategies, investment vehicles, distribution channels, or other evolutions of or additions to our business may increase the risk that our existing systems may not be adequate to control the risks introduced by such changes.

Significant business changes may require us to update our processes or technology and may increase risk to meeting our business objectives.

1 unchanged sentence

If any of these factors were to arise it could disrupt our operations, increase our expenses or result in financial exposure, regulatory inquiry or reputational damage.

Our business model is dependent on our personnel, as well as others involved in our business, such as third-party vendors, providers and other intermediaries, who support internal controls, supervision, technology and training to provide comfort that our activities do not violate applicable guidelines, rules and regulations or adversely affect our clients, counterparties or us, and all of which are subject to potential human errors.

Our personnel and others involved in our business may make errors that are not always immediately detected, which may disrupt our operations, cause losses, lead to regulatory fines or sanctions, litigation, or otherwise damage our reputation.

The quantitative models we use may contain errors, which could result in financial losses or adversely impact product performance and client relationships.

We use various quantitative models to support investment decisions and investment processes, including those related to portfolio management, portfolio risk analysis, and client investment guidance.

We use various quantitative models to support investment decisions and investment processes, including those related to portfolio management and portfolio risk analysis, as well as those related to client investment or savings advice or guidance.

Any errors in the underlying models or model assumptions could have unanticipated and adverse consequences on our business and reputation.

Any damage to our reputation could harm our business and lead to a loss of revenues and net income.

Any damage to our reputation could harm our business and lead to a loss of revenues and net income or access to capital.

We have spent many years developing our reputation for integrity, strong investment performance, and superior client service.

1 unchanged sentence

Regulatory inquiries and rumors can tarnish or substantially damage our reputation, even if those inquiries are satisfactorily addressed.

Actual or perceived failure to adequately address the environmental, social, and governance ("ESG") expectations of our various stakeholders could lead to a tarnished reputation and loss of customers.

Furthermore, ESG issues have been the subject of increased focus by regulators and any inability to meet applicable requirements or expectations may adversely impact our reputation.

Misconduct by our employees or third-party service providers could likewise adversely impact our reputation and lead to a loss of client assets.

While we maintain policies, procedures, and controls to reduce the likelihood of unauthorized activities, we are subject to the risk that our associates or third parties acting on our behalf may circumvent controls or act in a manner inconsistent with our policies and procedures.

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We are subject to income taxes as well as non-income-based taxes, in both the United States and various foreign jurisdictions.

We cannot predict future changes in the tax regulations to which we are subject, and these regulations could have a material impact on our liability or result in increased costs of our tax compliance efforts.

We cannot predict future changes in the tax regulations to which we are subject, and these regulations could have a material impact on our tax liability or result in increased costs of our tax compliance efforts.

Additionally, changes in the status of tax deferred investment options, including retirement plans, tax-free municipal bonds, the capital gains and corporate dividend tax rates, and other individual and corporate tax rates could cause investors to view certain investment products less favorably and reduce investor demand for products and services we offer, which could have an adverse effect on our assets under management and revenues.

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These contracted third-party intermediaries generally offer their clients various investment products in addition to, and in competition with, our investment products, and have no contractual obligation to encourage investment in our products.

It would be difficult for us to acquire or retain the management of those assets without the assistance of the intermediaries, and we cannot assure that we will be able to maintain an adequate number of investment

product offerings and successful distribution relationships.

In addition, some investors rely on third-party financial planners, registered investment advisers, and other consultants or financial professionals to advise them on the choice of investment adviser and investment product.

These professionals and consultants can favor a competing investment product as better meeting their particular clients' needs.

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Mergers, acquisitions, and other ownership or management changes could also adversely impact our relationships with these third-party intermediaries.

As a result of these changes, more of our revenues may be concentrated with fewer intermediaries, which may impact our dependence on these intermediaries.

The presence of any of the adverse conditions discussed above would reduce revenues and net income, possibly by material amounts.

Natural disasters and other unpredictable events could adversely affect our operations.

Armed conflicts, trade wars, tariffs or sanctions, terrorist attacks, cyberattacks, power failures, pandemics, climate change, increased severity of weather events, and natural disasters and other events outside of our control could adversely affect our revenues, expenses, and net income by:

Armed conflicts, trade wars, tariffs or sanctions, terrorist attacks, cyberattacks, power failures, epidemics or pandemics, climate change, increased severity of weather events, or natural disasters and other events outside of our control could adversely affect our revenues, expenses, and net income by:

• decreasing investment valuations in, and returns on, the investment portfolios that we manage,

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• requiring substantial capital expenditures and operating expenses to remediate damage, replace our facilities, and restore our operations.

A significant portion of our business operations are concentrated in the Baltimore, Maryland region, Colorado Springs, Colorado, and in London, England.

A significant portion of our business operations are concentrated in the Baltimore, Maryland region;

Colorado Springs, Colorado;

and in London, England.

In addition, we maintain offices with associates in many other global locations, including Sydney, Australia;

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If we lose the availability of any associates, or, if we are unable to respond adequately to such an event in a timely manner, we may be unable to timely resume our business operations, which could lead to financial losses, a tarnished reputation and loss of clients that could result in a decrease in assets under management, lower revenues, and materially reduced net income.

Our business, financial condition, and results of operation may be adversely affected by the 2020 coronavirus outbreak.

Beginning in early 2020, global financial markets have been monitoring and reacting to the novel coronavirus pandemic.

The spread of the coronavirus has created significant volatility, uncertainty and economic disruption to the global economy and may impact our business, financial condition and results of operations.

While we have in place robust and well-established business continuity plans that address the potential impact to our associates and our facilities, and a comprehensive suite of technologies which enable our associates to work remotely and conduct business, no assurance can be given that the steps we have taken will continue to be effective or appropriate.

Additionally we must effectively manage the ongoing risks of a remote workforce, ensure a safe working environment for associates working onsite in our offices, and adequately manage the post-pandemic transition from remote to onsite or a hybrid working environment.

Our business, financial condition, and results of operation may be adversely affected by the coronavirus or other global pandemics.

Since early 2020, global financial markets have been monitoring and reacting to the novel coronavirus pandemic.

The spread of the coronavirus has created significant volatility, uncertainty and economic disruption to the global economy and may further impact our business, financial condition and results of operations.

The coronavirus pandemic has adversely affected global financial markets and impacted global supply chains.

Health concerns and uncertainty regarding continued coronavirus impacts could lead to further and/or increased volatility in global capital and credit markets, adversely affect our key executives and other personnel, clients, investors, providers, suppliers, lessees, and other third parties, and negatively impact our assets under management ("AUM"), revenues, income, business and operations.

Since our revenue is based on the market value and composition of the assets under our management, the ultimate impact on global financial markets and our clients’ decisions related to this event could adversely affect our revenue and operating results.

Furthermore, while we have in place robust and well-established business continuity plans that address the potential impact to our associates and our facilities, and a comprehensive suite of technologies which enable our associates to work remotely and conduct business, and to date while we have been successful in navigating these challenges, no assurance can be given that the steps we have taken will continue to be effective or appropriate.

Additionally, we must effectively ensure a safe working environment for associates working onsite in our offices, and adequately manage the post-pandemic transition from remote to onsite or a hybrid working environment.

In the event that our associates become incapacitated by the coronavirus, our business operations may be impacted, which could lead to reputational and financial harm.

Our investment income and asset levels may be negatively impacted by fluctuations in our investment portfolio.

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We may not realize future returns from such investments or any collaborative activities that may develop in the future.

On December 29, 2021, we completed our acquisition of OHA.

Important ongoing integration-related risks, including that the anticipated benefits of the transaction may not be fully realized, or may take longer to realize than expected, or that the integration may cost more or take longer than expected, could adversely impact our operating results.

The ongoing integration of OHA is a time-consuming process that could distract our management and disrupt our business.

A significant portion of OHA's revenue is derived from performance fees on investment advisory agreements and carried interest from general partner interests in affiliated private investment funds.

Generally, OHA is entitled to a performance fee and carried interest under these agreements only in cases where the related

portfolio investment return exceeds agreed-upon relative or absolute investment return thresholds, and there can be no assurance that these thresholds will be met.

We are exposed to risks arising from our international operations.

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Strong financial services professionals are in demand, and we face significant competition for highly qualified employees.

Our U.S.-based associates do not have employment contracts, while our associates outside the U.S.

have employment contracts where basic employment terms are confirmed in writing.

Generally, our associates can terminate their employment with us at any time.

1 unchanged sentence

Due to the global nature of our investment advisory business, our key personnel may have reasons to travel to regions susceptible to higher risk of civil unrest, organized crime or terrorism, and we may be unable to ensure the safety of personnel traveling to these regions.

We have near- and long-term succession planning processes,

including programs to develop our future leaders, which are intended to address future talent needs and minimize the impact of losing key talent.

We have near- and long-term succession planning processes, including programs to develop our future leaders, which are intended to address future talent needs and minimize the impact of losing key talent.

However, in order to retain or replace our key personnel, we may be required to increase compensation, which would decrease net income.

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regulators and prospective litigants may not agree with reasoned interpretations we adopt.

Future changes could require us to modify or curtail our investment offerings and business operations or impact our expenses and profitability.

Future changes could require us to modify or curtail our investment offerings and business operations or impact our expenses and

profitability.

Additionally, some regulations may not directly apply to our business but may impact the capital markets, service providers or have other indirect effects on our ability to provide services to our clients.

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We could experience adverse business impacts if legislative and regulatory changes limit retirement plans to certain products and services, or favor certain investment vehicles, that we do not offer, materially limit retirement savings opportunities or foster substantial outflows from retirement savings plans for non-retirement purposes.

• There has been substantial regulatory and legislative activity at federal and state levels regarding standards of care for financial services firms, related to both retirement and taxable accounts and the United States Department of Labor intends to propose new fiduciary rules applicable to retirement plans and accounts that comprise a majority of our accounts.

Actions taken by applicable regulatory or legislative bodies may impact our business activities and increase our costs.

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Rowe Price affiliate was deemed a SIFI, increased regulatory oversight would apply to our business, which may include enhanced capital, liquidity, leverage, stress testing, resolution planning, and risk management requirements.

• The Commodity Futures Trading Commission ("CFTC") has adopted rules that would limit the ability of T.

• The Commodity Futures Trading Commission ("CFTC") regulation may limit the ability of certain T.

Rowe Price investment products to use futures, swaps, and other derivatives.

12 unchanged sentences

Compliance with MiFID II has increased operational complexity and increased our costs.

For example, we began to pay for third-party investment research used by our UK-based investment manager, T.

For example, we began to pay for third-party

investment research used by our UK-based investment manager, T.

Rowe Price International Ltd, in 2018, and we now pay for all the research needs of our investment professionals globally.

• New laws or regulations involving ESG integration and disclosure may materially impact the asset management industry.

For example, the EU’s recent action plan on financing sustainable growth includes initiatives to integrate ESG into the financial system.

Furthermore, the SEC and other regulators in the U.S.

have announced plans to pursue similar initiatives, including additional disclosure obligations that would apply to our business operations, our employee and board diversity and other ESG-related matters.

We cannot predict the nature of future changes to the legal and regulatory requirements applicable to our business, nor the extent of the impacts that will result from current or future proposals.

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• regulatory compliance and reporting.

All of our technology systems, including those provided by vendors, are vulnerable to disability or failures due to cyberattacks, natural disasters, power failures, acts of war or terrorism, sabotage, and other causes.

A suspension or termination of vendor-provided software licenses or related support, upgrades, and maintenance could cause system delays or interruption.

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An externally caused information security incident, such as a cyberattack, a phishing scam, virus, ransomware attack, denial-of-service attack, or an attack launched from within the Company could materially interrupt business operations or cause disclosure or modification of confidential client or competitive information.

In addition, our third-party vendors and other intermediaries with which we conduct business and transmit data could be subject to a successful cyberattack or other information security event, and we cannot ensure that such third parties have all appropriate controls in place to protect the confidentiality of information in the custody of those third parties.

There have been increasing numbers of publicized cybersecurity incidents in recent years impacting other financial services firms as well as firms in other industries.

1 unchanged sentence

Should the technology operations on which we rely be compromised, we may have to make significant investments to upgrade, repair or replace our technology infrastructure or third-party vendors and may not be able to make such investments on a timely basis.

Although we maintain insurance coverage that we believe

is reasonable, prudent and adequate for the purpose of our business, it may be insufficient to protect us against all losses and costs stemming from breaches of security, cyberattacks and other types of unlawful activity, or any resulting disruptions from such events.

Although we maintain insurance coverage that we believe is reasonable, prudent and adequate for the purpose of our business, it may be insufficient to protect us against all losses and costs stemming from breaches of security, cyberattacks and other types of unlawful activity, or any resulting disruptions from such events.

We could be subject to losses if we fail to properly safeguard and maintain confidential information.

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• require significant capital and operating expenditures to investigate and remediate the breach.

Furthermore, if any person, including any of our associates, negligently disregards or intentionally breaches our established controls with respect to confidential data, or otherwise mismanages or misappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.

Furthermore, if any person, including any of our associates, negligently disregards or intentionally overrides or circumvents our established controls with respect to confidential data, or otherwise mismanages or misappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.

We are subject to numerous laws and regulations designed to protect this information, such as U.S.

federal and state laws and foreign regulations governing the protection of personal or confidential data.

In addition to the EU’s General Data Protection Regulation , other governmental authorities throughout the U.S.

and around the world are considering or enacting similar types of legislative and regulatory proposals concerning data protection.

For example, the CCPA came into effect on January 1, 2020.

The CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, and allows consumers to opt out of any sales of their data to third parties and provides a new cause of action for data breaches.

federal and state laws and foreign laws and regulations governing the protection of personal or confidential data, such as the EU’s General Data Protection Regulation.

G overnmental authorities throughout the U.S.

and around the world have enacted or are considering similar types of legislative and regulatory proposals concerning data protection.

Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the collection, use, dissemination and security of data.

2 unchanged sentences

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