{"QID":"q_Ri001","Question":"What are the key operational risks identified in JPMorgan Chase's 10-K report, and how could these impact the company's financial performance?","ground_truth_answer":"JPMorgan Chase's 10-K report identifies several operational risks, including risks related to cybersecurity, fraud, and data protection. The report highlights that the increasing sophistication of cyberattacks could lead to significant financial losses, legal liabilities, and reputational damage.","question_type":"Risk","page_number":"9, 20, 21, 22, 23, 24","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 20: \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n|    |    |\n|---:|---:|\n|  1 | 20 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 21: centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n|    |    |\n|---:|---:|\n|  1 | 21 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 22: \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n|    |    |\n|---:|---:|\n|  1 | 22 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 23: In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n|    |    |\n|---:|---:|\n|  1 | 23 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 24: \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n|    |    |\n|---:|---:|\n|  1 | 24 |\n","context_markdown_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n|    |    |\n|---:|---:|\n|  1 | 20 |\n, centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n|    |    |\n|---:|---:|\n|  1 | 21 |\n, \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n|    |    |\n|---:|---:|\n|  1 | 22 |\n, In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n|    |    |\n|---:|---:|\n|  1 | 23 |\n, \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n|    |    |\n|---:|---:|\n|  1 | 24 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 20: \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">20<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 21: centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">21<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 22: \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">22<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 23: In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">23<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 24: \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">24<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">20<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">21<\/td><\/tr><\/table>, \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">22<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">23<\/td><\/tr><\/table>, \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">24<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri002","Question":"What all kind of Risk JPMC faces? Categorise these risk.","ground_truth_answer":"The company's risks can be classified into operational risks, financial risks, market risks, regulatory risks, and strategic risks. Operational risks involve disruptions to business processes, financial risks include liquidity and credit risks, market risks involve exposure to market fluctuations, regulatory risks pertain to changes in laws, and strategic risks involve the alignment of business goals with market conditions.","question_type":"Risk","page_number":"9","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n","context_markdown_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>"}
{"QID":"q_Ri003","Question":"Summarize the most critical risks highlighted by the company's latest report. ","ground_truth_answer":"The most critical risks highlighted in the company's 10-K report include market risks from volatile interest rates and currency fluctuations, operational risks, regulatory risks, and strategic risks","question_type":"Risk","page_number":"9","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n","context_markdown_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>"}
{"QID":"q_Ri004","Question":"What are the company's key risk management strategies?","ground_truth_answer":"The company's key risk management strategies include diversification of revenue streams, investment in technology to enhance operational resilience, hedging financial risks with derivatives, maintaining a strong compliance program, and regularly reviewing and updating its risk management policies to adapt to changing market conditions.","question_type":"Risk","page_number":"28, 29","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 28: \nPart I\n\n\n\u2022materially and adversely affect JPMorgan Chase's business and results of operations or financial condition\n\u2022restrict its ability to access the capital markets \n\u2022require it to expend significant resources to correct the lapses or deficiencies\n\u2022expose it to litigation or regulatory fines, penalties or other sanctions\n\u2022harm its reputation, or \n\u2022otherwise diminish investor confidence in JPMorgan Chase. \n\nStrategic\n\nIf JPMorgan Chase's management fails to develop and execute effective business strategies, and to anticipate changes affecting those strategies, JPMorgan Chase's competitive standing and results could suffer.\nJPMorgan Chase's business strategies significantly affect its competitive standing and operations. These strategies relate to:\n\u2022the products and services that JPMorgan Chase offers\n\u2022the geographies in which it operates\n\u2022the types of clients and customers that it serves\n\u2022the businesses that it acquires or in which it invests\n\u2022the counterparties with which it does business, and \n\u2022the methods, distribution channels and third party service providers by or through which it offers products and services. \nIf management makes choices about these strategies and goals that prove to be incorrect, are based on incomplete, inaccurate or fraudulent information, do not accurately assess the competitive landscape and industry trends, or fail to address changing regulatory and market environments or the expectations of clients, customers, investors, employees and other stakeholders, then the franchise values and growth prospects of JPMorgan Chase's businesses may suffer and its earnings could decline.\nJPMorgan Chase's growth prospects also depend on management's ability to develop and execute effective business plans to address these strategic priorities, both in the near term and over longer time horizons. Management's effectiveness in this regard will affect JPMorgan Chase's ability to develop and enhance its resources, control expenses and return capital to shareholders. Each of these objectives could be adversely affected by any failure on the part of management to:\n\u2022devise effective business plans and strategies\n\u2022offer products and services that meet changing expectations of clients and customers\n\u2022allocate capital in a manner that promotes long-term stability to enable JPMorgan Chase to build and invest in \n\nmarket-leading businesses, even in a highly stressed environment\n\u2022allocate capital appropriately due to imprecise modeling or subjective judgments made in connection with those allocations\n\u2022appropriately assess and monitor principal investments made to enhance or accelerate JPMorgan Chase's business strategies\n\u2022conduct appropriate due diligence on prospective business acquisitions or investments, or effectively integrate newly-acquired businesses\n\u2022appropriately address concerns of clients, customers, investors, employees and other stakeholders, including with respect to climate and other ESG matters\n\u2022react quickly to changes in market conditions or market structures, or\n\u2022develop and enhance the operational, technology, risk, financial and managerial resources necessary to grow and manage JPMorgan Chase's businesses.\nFurthermore, JPMorgan Chase may incur costs in connection with disposing of excess properties, premises and facilities, and those costs could be material to its results of operations.\nJPMorgan Chase faces significant and increasing competition in the rapidly evolving financial services industry.\nJPMorgan Chase operates in a highly competitive environment in which it must evolve and adapt to changes in financial regulation, technological advances, increased public scrutiny and changes in economic conditions. JPMorgan Chase expects that competition in the U.S. and global financial services industry will continue to be intense. Competitors include:\n\u2022other banks and financial institutions\n\u2022trading, advisory and investment management firms\n\u2022finance companies\n\n\u2022technology companies, and\n\n\u2022other non-bank firms that are engaged in providing similar as well as new products and services.\nJPMorgan Chase cannot provide assurance that the significant competition in the financial services industry will not materially and adversely affect its future results of operations. For example, aggressive or less disciplined lending practices by non-bank competitors could lead to a loss of market share for traditional banks, and in an economic downturn could result in instability in the financial services industry and adversely impact other market participants, including JPMorgan Chase.\nNew competitors in the financial services industry continue to emerge. For example, technological advances and the growth of e-commerce have made it possible for non-\n\n\n|    |    |\n|---:|---:|\n|  1 | 28 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 29: depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities and cryptocurrency trading, lending and other extensions of credit to consumers, payments processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking competitors face the risk that payments processing and other products and services, including deposits and other traditional banking products, could be significantly disrupted by the use of new technologies, such as cryptocurrencies and other applications using secure distributed ledgers, that may not require intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies. In addition, new technologies may be used by customers, or breached or infiltrated by third parties, in unexpected ways, which can increase JPMorgan Chase's costs for complying with laws, rules and regulations that apply to the offering of products and services through those technologies and reduce the income that JPMorgan Chase earns from providing products and services through those technologies.\nOngoing or increased competition may put pressure on the pricing for JPMorgan Chase's products and services or may cause JPMorgan Chase to lose market share, particularly with respect to traditional banking products. This competition may be based on quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of JPMorgan Chase's businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to offer a particular product or service, changes in client and customer expectations or other factors, could affect JPMorgan Chase's ability to attract or retain clients and customers. Any such impact could, in turn, reduce JPMorgan Chase's revenues. Increased competition also may require JPMorgan Chase to make additional capital investments in its businesses, or to extend more of its capital on behalf of its clients to remain competitive.\nThe effects of climate change could adversely affect JPMorgan Chase's business and operations, both directly and as a result of impacts on its clients and customers.\nJPMorgan Chase operates in many regions, countries and communities around the world where its business, and the activities of its clients and customers, could be adversely affected by climate change. Climate change could manifest as a financial risk to JPMorgan Chase either through changes in the physical climate or from the process of transitioning to a low-carbon economy. Both physical risks and transition risks associated with climate change could have negative impacts on the financial condition or \n\ncreditworthiness of JPMorgan's clients and customers, and on its exposure to those clients and customers.\nPhysical risks include the increased frequency or severity of acute weather events, such as floods, wildfires and tropical cyclones, and chronic shifts in the climate, such as persistent changes in precipitation levels, rising sea levels, or increases in average ambient temperature. Potential adverse impacts of climate-related physical risks include:\n\u2022declines in asset values, including due to the destruction or degradation of property\n\u2022reduced availability or increased cost of insurance for clients of JPMorgan Chase\n\u2022interruptions to business operations, including supply chain disruption, and\n\u2022population migration or unemployment in affected regions.\nTransition risks arise from societal adjustment to a low-carbon economy, such as changes in public policy, adoption of new technologies or changes in consumer preferences towards low-carbon goods and services. These risks could also be influenced by changes in the physical climate. Potential adverse impacts of transition risks include: \n\u2022sudden devaluation of assets, including unanticipated write-downs (\"stranded assets\")\n\u2022increased operational and compliance costs driven by changes in climate policy \n\u2022increased energy costs driven by governmental actions and initiatives such as emission pricing and accelerated decarbonization policies\n\u2022negative consequences to business models, and the need to make changes in response to those consequences, and\n\u2022damage to JPMorgan Chase's reputation, including due to any perception that its business practices are contrary to public policy or the preferences of different stakeholders. \nClimate risks can also arise from inconsistencies and conflicts in the manner in which climate policy and financial regulations are implemented in the many regions where JPMorgan Chase operates, including initiatives to apply and enforce policy and regulation with extraterritorial effect. Additionally, internal models and estimations used in climate risk assessments have an increased level of uncertainty due to limited historical trend information and the absence of standardized, reliable and comprehensive greenhouse gas emissions data, which could lead to inaccurate disclosures or financial reporting. \n\nConduct\n\nConduct failure by JPMorgan Chase employees can harm clients and customers, impact market integrity, damage JPMorgan Chase's reputation and trigger litigation and regulatory action.\n\n\n|    |    |\n|---:|---:|\n|  1 | 29 |\n","context_markdown_without_headers":"\nPart I\n\n\n\u2022materially and adversely affect JPMorgan Chase's business and results of operations or financial condition\n\u2022restrict its ability to access the capital markets \n\u2022require it to expend significant resources to correct the lapses or deficiencies\n\u2022expose it to litigation or regulatory fines, penalties or other sanctions\n\u2022harm its reputation, or \n\u2022otherwise diminish investor confidence in JPMorgan Chase. \n\nStrategic\n\nIf JPMorgan Chase's management fails to develop and execute effective business strategies, and to anticipate changes affecting those strategies, JPMorgan Chase's competitive standing and results could suffer.\nJPMorgan Chase's business strategies significantly affect its competitive standing and operations. These strategies relate to:\n\u2022the products and services that JPMorgan Chase offers\n\u2022the geographies in which it operates\n\u2022the types of clients and customers that it serves\n\u2022the businesses that it acquires or in which it invests\n\u2022the counterparties with which it does business, and \n\u2022the methods, distribution channels and third party service providers by or through which it offers products and services. \nIf management makes choices about these strategies and goals that prove to be incorrect, are based on incomplete, inaccurate or fraudulent information, do not accurately assess the competitive landscape and industry trends, or fail to address changing regulatory and market environments or the expectations of clients, customers, investors, employees and other stakeholders, then the franchise values and growth prospects of JPMorgan Chase's businesses may suffer and its earnings could decline.\nJPMorgan Chase's growth prospects also depend on management's ability to develop and execute effective business plans to address these strategic priorities, both in the near term and over longer time horizons. Management's effectiveness in this regard will affect JPMorgan Chase's ability to develop and enhance its resources, control expenses and return capital to shareholders. Each of these objectives could be adversely affected by any failure on the part of management to:\n\u2022devise effective business plans and strategies\n\u2022offer products and services that meet changing expectations of clients and customers\n\u2022allocate capital in a manner that promotes long-term stability to enable JPMorgan Chase to build and invest in \n\nmarket-leading businesses, even in a highly stressed environment\n\u2022allocate capital appropriately due to imprecise modeling or subjective judgments made in connection with those allocations\n\u2022appropriately assess and monitor principal investments made to enhance or accelerate JPMorgan Chase's business strategies\n\u2022conduct appropriate due diligence on prospective business acquisitions or investments, or effectively integrate newly-acquired businesses\n\u2022appropriately address concerns of clients, customers, investors, employees and other stakeholders, including with respect to climate and other ESG matters\n\u2022react quickly to changes in market conditions or market structures, or\n\u2022develop and enhance the operational, technology, risk, financial and managerial resources necessary to grow and manage JPMorgan Chase's businesses.\nFurthermore, JPMorgan Chase may incur costs in connection with disposing of excess properties, premises and facilities, and those costs could be material to its results of operations.\nJPMorgan Chase faces significant and increasing competition in the rapidly evolving financial services industry.\nJPMorgan Chase operates in a highly competitive environment in which it must evolve and adapt to changes in financial regulation, technological advances, increased public scrutiny and changes in economic conditions. JPMorgan Chase expects that competition in the U.S. and global financial services industry will continue to be intense. Competitors include:\n\u2022other banks and financial institutions\n\u2022trading, advisory and investment management firms\n\u2022finance companies\n\n\u2022technology companies, and\n\n\u2022other non-bank firms that are engaged in providing similar as well as new products and services.\nJPMorgan Chase cannot provide assurance that the significant competition in the financial services industry will not materially and adversely affect its future results of operations. For example, aggressive or less disciplined lending practices by non-bank competitors could lead to a loss of market share for traditional banks, and in an economic downturn could result in instability in the financial services industry and adversely impact other market participants, including JPMorgan Chase.\nNew competitors in the financial services industry continue to emerge. For example, technological advances and the growth of e-commerce have made it possible for non-\n\n\n|    |    |\n|---:|---:|\n|  1 | 28 |\n, depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities and cryptocurrency trading, lending and other extensions of credit to consumers, payments processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking competitors face the risk that payments processing and other products and services, including deposits and other traditional banking products, could be significantly disrupted by the use of new technologies, such as cryptocurrencies and other applications using secure distributed ledgers, that may not require intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies. In addition, new technologies may be used by customers, or breached or infiltrated by third parties, in unexpected ways, which can increase JPMorgan Chase's costs for complying with laws, rules and regulations that apply to the offering of products and services through those technologies and reduce the income that JPMorgan Chase earns from providing products and services through those technologies.\nOngoing or increased competition may put pressure on the pricing for JPMorgan Chase's products and services or may cause JPMorgan Chase to lose market share, particularly with respect to traditional banking products. This competition may be based on quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of JPMorgan Chase's businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to offer a particular product or service, changes in client and customer expectations or other factors, could affect JPMorgan Chase's ability to attract or retain clients and customers. Any such impact could, in turn, reduce JPMorgan Chase's revenues. Increased competition also may require JPMorgan Chase to make additional capital investments in its businesses, or to extend more of its capital on behalf of its clients to remain competitive.\nThe effects of climate change could adversely affect JPMorgan Chase's business and operations, both directly and as a result of impacts on its clients and customers.\nJPMorgan Chase operates in many regions, countries and communities around the world where its business, and the activities of its clients and customers, could be adversely affected by climate change. Climate change could manifest as a financial risk to JPMorgan Chase either through changes in the physical climate or from the process of transitioning to a low-carbon economy. Both physical risks and transition risks associated with climate change could have negative impacts on the financial condition or \n\ncreditworthiness of JPMorgan's clients and customers, and on its exposure to those clients and customers.\nPhysical risks include the increased frequency or severity of acute weather events, such as floods, wildfires and tropical cyclones, and chronic shifts in the climate, such as persistent changes in precipitation levels, rising sea levels, or increases in average ambient temperature. Potential adverse impacts of climate-related physical risks include:\n\u2022declines in asset values, including due to the destruction or degradation of property\n\u2022reduced availability or increased cost of insurance for clients of JPMorgan Chase\n\u2022interruptions to business operations, including supply chain disruption, and\n\u2022population migration or unemployment in affected regions.\nTransition risks arise from societal adjustment to a low-carbon economy, such as changes in public policy, adoption of new technologies or changes in consumer preferences towards low-carbon goods and services. These risks could also be influenced by changes in the physical climate. Potential adverse impacts of transition risks include: \n\u2022sudden devaluation of assets, including unanticipated write-downs (\"stranded assets\")\n\u2022increased operational and compliance costs driven by changes in climate policy \n\u2022increased energy costs driven by governmental actions and initiatives such as emission pricing and accelerated decarbonization policies\n\u2022negative consequences to business models, and the need to make changes in response to those consequences, and\n\u2022damage to JPMorgan Chase's reputation, including due to any perception that its business practices are contrary to public policy or the preferences of different stakeholders. \nClimate risks can also arise from inconsistencies and conflicts in the manner in which climate policy and financial regulations are implemented in the many regions where JPMorgan Chase operates, including initiatives to apply and enforce policy and regulation with extraterritorial effect. Additionally, internal models and estimations used in climate risk assessments have an increased level of uncertainty due to limited historical trend information and the absence of standardized, reliable and comprehensive greenhouse gas emissions data, which could lead to inaccurate disclosures or financial reporting. \n\nConduct\n\nConduct failure by JPMorgan Chase employees can harm clients and customers, impact market integrity, damage JPMorgan Chase's reputation and trigger litigation and regulatory action.\n\n\n|    |    |\n|---:|---:|\n|  1 | 29 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 28: \nPart I\n\n\n\u2022materially and adversely affect JPMorgan Chase's business and results of operations or financial condition\n\u2022restrict its ability to access the capital markets \n\u2022require it to expend significant resources to correct the lapses or deficiencies\n\u2022expose it to litigation or regulatory fines, penalties or other sanctions\n\u2022harm its reputation, or \n\u2022otherwise diminish investor confidence in JPMorgan Chase. \n\nStrategic\n\nIf JPMorgan Chase's management fails to develop and execute effective business strategies, and to anticipate changes affecting those strategies, JPMorgan Chase's competitive standing and results could suffer.\nJPMorgan Chase's business strategies significantly affect its competitive standing and operations. These strategies relate to:\n\u2022the products and services that JPMorgan Chase offers\n\u2022the geographies in which it operates\n\u2022the types of clients and customers that it serves\n\u2022the businesses that it acquires or in which it invests\n\u2022the counterparties with which it does business, and \n\u2022the methods, distribution channels and third party service providers by or through which it offers products and services. \nIf management makes choices about these strategies and goals that prove to be incorrect, are based on incomplete, inaccurate or fraudulent information, do not accurately assess the competitive landscape and industry trends, or fail to address changing regulatory and market environments or the expectations of clients, customers, investors, employees and other stakeholders, then the franchise values and growth prospects of JPMorgan Chase's businesses may suffer and its earnings could decline.\nJPMorgan Chase's growth prospects also depend on management's ability to develop and execute effective business plans to address these strategic priorities, both in the near term and over longer time horizons. Management's effectiveness in this regard will affect JPMorgan Chase's ability to develop and enhance its resources, control expenses and return capital to shareholders. Each of these objectives could be adversely affected by any failure on the part of management to:\n\u2022devise effective business plans and strategies\n\u2022offer products and services that meet changing expectations of clients and customers\n\u2022allocate capital in a manner that promotes long-term stability to enable JPMorgan Chase to build and invest in \n\nmarket-leading businesses, even in a highly stressed environment\n\u2022allocate capital appropriately due to imprecise modeling or subjective judgments made in connection with those allocations\n\u2022appropriately assess and monitor principal investments made to enhance or accelerate JPMorgan Chase's business strategies\n\u2022conduct appropriate due diligence on prospective business acquisitions or investments, or effectively integrate newly-acquired businesses\n\u2022appropriately address concerns of clients, customers, investors, employees and other stakeholders, including with respect to climate and other ESG matters\n\u2022react quickly to changes in market conditions or market structures, or\n\u2022develop and enhance the operational, technology, risk, financial and managerial resources necessary to grow and manage JPMorgan Chase's businesses.\nFurthermore, JPMorgan Chase may incur costs in connection with disposing of excess properties, premises and facilities, and those costs could be material to its results of operations.\nJPMorgan Chase faces significant and increasing competition in the rapidly evolving financial services industry.\nJPMorgan Chase operates in a highly competitive environment in which it must evolve and adapt to changes in financial regulation, technological advances, increased public scrutiny and changes in economic conditions. JPMorgan Chase expects that competition in the U.S. and global financial services industry will continue to be intense. Competitors include:\n\u2022other banks and financial institutions\n\u2022trading, advisory and investment management firms\n\u2022finance companies\n\n\u2022technology companies, and\n\n\u2022other non-bank firms that are engaged in providing similar as well as new products and services.\nJPMorgan Chase cannot provide assurance that the significant competition in the financial services industry will not materially and adversely affect its future results of operations. For example, aggressive or less disciplined lending practices by non-bank competitors could lead to a loss of market share for traditional banks, and in an economic downturn could result in instability in the financial services industry and adversely impact other market participants, including JPMorgan Chase.\nNew competitors in the financial services industry continue to emerge. For example, technological advances and the growth of e-commerce have made it possible for non-\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">28<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 29: depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities and cryptocurrency trading, lending and other extensions of credit to consumers, payments processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking competitors face the risk that payments processing and other products and services, including deposits and other traditional banking products, could be significantly disrupted by the use of new technologies, such as cryptocurrencies and other applications using secure distributed ledgers, that may not require intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies. In addition, new technologies may be used by customers, or breached or infiltrated by third parties, in unexpected ways, which can increase JPMorgan Chase's costs for complying with laws, rules and regulations that apply to the offering of products and services through those technologies and reduce the income that JPMorgan Chase earns from providing products and services through those technologies.\nOngoing or increased competition may put pressure on the pricing for JPMorgan Chase's products and services or may cause JPMorgan Chase to lose market share, particularly with respect to traditional banking products. This competition may be based on quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of JPMorgan Chase's businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to offer a particular product or service, changes in client and customer expectations or other factors, could affect JPMorgan Chase's ability to attract or retain clients and customers. Any such impact could, in turn, reduce JPMorgan Chase's revenues. Increased competition also may require JPMorgan Chase to make additional capital investments in its businesses, or to extend more of its capital on behalf of its clients to remain competitive.\nThe effects of climate change could adversely affect JPMorgan Chase's business and operations, both directly and as a result of impacts on its clients and customers.\nJPMorgan Chase operates in many regions, countries and communities around the world where its business, and the activities of its clients and customers, could be adversely affected by climate change. Climate change could manifest as a financial risk to JPMorgan Chase either through changes in the physical climate or from the process of transitioning to a low-carbon economy. Both physical risks and transition risks associated with climate change could have negative impacts on the financial condition or \n\ncreditworthiness of JPMorgan's clients and customers, and on its exposure to those clients and customers.\nPhysical risks include the increased frequency or severity of acute weather events, such as floods, wildfires and tropical cyclones, and chronic shifts in the climate, such as persistent changes in precipitation levels, rising sea levels, or increases in average ambient temperature. Potential adverse impacts of climate-related physical risks include:\n\u2022declines in asset values, including due to the destruction or degradation of property\n\u2022reduced availability or increased cost of insurance for clients of JPMorgan Chase\n\u2022interruptions to business operations, including supply chain disruption, and\n\u2022population migration or unemployment in affected regions.\nTransition risks arise from societal adjustment to a low-carbon economy, such as changes in public policy, adoption of new technologies or changes in consumer preferences towards low-carbon goods and services. These risks could also be influenced by changes in the physical climate. Potential adverse impacts of transition risks include: \n\u2022sudden devaluation of assets, including unanticipated write-downs (\"stranded assets\")\n\u2022increased operational and compliance costs driven by changes in climate policy \n\u2022increased energy costs driven by governmental actions and initiatives such as emission pricing and accelerated decarbonization policies\n\u2022negative consequences to business models, and the need to make changes in response to those consequences, and\n\u2022damage to JPMorgan Chase's reputation, including due to any perception that its business practices are contrary to public policy or the preferences of different stakeholders. \nClimate risks can also arise from inconsistencies and conflicts in the manner in which climate policy and financial regulations are implemented in the many regions where JPMorgan Chase operates, including initiatives to apply and enforce policy and regulation with extraterritorial effect. Additionally, internal models and estimations used in climate risk assessments have an increased level of uncertainty due to limited historical trend information and the absence of standardized, reliable and comprehensive greenhouse gas emissions data, which could lead to inaccurate disclosures or financial reporting. \n\nConduct\n\nConduct failure by JPMorgan Chase employees can harm clients and customers, impact market integrity, damage JPMorgan Chase's reputation and trigger litigation and regulatory action.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">29<\/td><\/tr><\/table>","context_html_without_headers":"\nPart I\n\n\n\u2022materially and adversely affect JPMorgan Chase's business and results of operations or financial condition\n\u2022restrict its ability to access the capital markets \n\u2022require it to expend significant resources to correct the lapses or deficiencies\n\u2022expose it to litigation or regulatory fines, penalties or other sanctions\n\u2022harm its reputation, or \n\u2022otherwise diminish investor confidence in JPMorgan Chase. \n\nStrategic\n\nIf JPMorgan Chase's management fails to develop and execute effective business strategies, and to anticipate changes affecting those strategies, JPMorgan Chase's competitive standing and results could suffer.\nJPMorgan Chase's business strategies significantly affect its competitive standing and operations. These strategies relate to:\n\u2022the products and services that JPMorgan Chase offers\n\u2022the geographies in which it operates\n\u2022the types of clients and customers that it serves\n\u2022the businesses that it acquires or in which it invests\n\u2022the counterparties with which it does business, and \n\u2022the methods, distribution channels and third party service providers by or through which it offers products and services. \nIf management makes choices about these strategies and goals that prove to be incorrect, are based on incomplete, inaccurate or fraudulent information, do not accurately assess the competitive landscape and industry trends, or fail to address changing regulatory and market environments or the expectations of clients, customers, investors, employees and other stakeholders, then the franchise values and growth prospects of JPMorgan Chase's businesses may suffer and its earnings could decline.\nJPMorgan Chase's growth prospects also depend on management's ability to develop and execute effective business plans to address these strategic priorities, both in the near term and over longer time horizons. Management's effectiveness in this regard will affect JPMorgan Chase's ability to develop and enhance its resources, control expenses and return capital to shareholders. Each of these objectives could be adversely affected by any failure on the part of management to:\n\u2022devise effective business plans and strategies\n\u2022offer products and services that meet changing expectations of clients and customers\n\u2022allocate capital in a manner that promotes long-term stability to enable JPMorgan Chase to build and invest in \n\nmarket-leading businesses, even in a highly stressed environment\n\u2022allocate capital appropriately due to imprecise modeling or subjective judgments made in connection with those allocations\n\u2022appropriately assess and monitor principal investments made to enhance or accelerate JPMorgan Chase's business strategies\n\u2022conduct appropriate due diligence on prospective business acquisitions or investments, or effectively integrate newly-acquired businesses\n\u2022appropriately address concerns of clients, customers, investors, employees and other stakeholders, including with respect to climate and other ESG matters\n\u2022react quickly to changes in market conditions or market structures, or\n\u2022develop and enhance the operational, technology, risk, financial and managerial resources necessary to grow and manage JPMorgan Chase's businesses.\nFurthermore, JPMorgan Chase may incur costs in connection with disposing of excess properties, premises and facilities, and those costs could be material to its results of operations.\nJPMorgan Chase faces significant and increasing competition in the rapidly evolving financial services industry.\nJPMorgan Chase operates in a highly competitive environment in which it must evolve and adapt to changes in financial regulation, technological advances, increased public scrutiny and changes in economic conditions. JPMorgan Chase expects that competition in the U.S. and global financial services industry will continue to be intense. Competitors include:\n\u2022other banks and financial institutions\n\u2022trading, advisory and investment management firms\n\u2022finance companies\n\n\u2022technology companies, and\n\n\u2022other non-bank firms that are engaged in providing similar as well as new products and services.\nJPMorgan Chase cannot provide assurance that the significant competition in the financial services industry will not materially and adversely affect its future results of operations. For example, aggressive or less disciplined lending practices by non-bank competitors could lead to a loss of market share for traditional banks, and in an economic downturn could result in instability in the financial services industry and adversely impact other market participants, including JPMorgan Chase.\nNew competitors in the financial services industry continue to emerge. For example, technological advances and the growth of e-commerce have made it possible for non-\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">28<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities and cryptocurrency trading, lending and other extensions of credit to consumers, payments processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking competitors face the risk that payments processing and other products and services, including deposits and other traditional banking products, could be significantly disrupted by the use of new technologies, such as cryptocurrencies and other applications using secure distributed ledgers, that may not require intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies. In addition, new technologies may be used by customers, or breached or infiltrated by third parties, in unexpected ways, which can increase JPMorgan Chase's costs for complying with laws, rules and regulations that apply to the offering of products and services through those technologies and reduce the income that JPMorgan Chase earns from providing products and services through those technologies.\nOngoing or increased competition may put pressure on the pricing for JPMorgan Chase's products and services or may cause JPMorgan Chase to lose market share, particularly with respect to traditional banking products. This competition may be based on quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of JPMorgan Chase's businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to offer a particular product or service, changes in client and customer expectations or other factors, could affect JPMorgan Chase's ability to attract or retain clients and customers. Any such impact could, in turn, reduce JPMorgan Chase's revenues. Increased competition also may require JPMorgan Chase to make additional capital investments in its businesses, or to extend more of its capital on behalf of its clients to remain competitive.\nThe effects of climate change could adversely affect JPMorgan Chase's business and operations, both directly and as a result of impacts on its clients and customers.\nJPMorgan Chase operates in many regions, countries and communities around the world where its business, and the activities of its clients and customers, could be adversely affected by climate change. Climate change could manifest as a financial risk to JPMorgan Chase either through changes in the physical climate or from the process of transitioning to a low-carbon economy. Both physical risks and transition risks associated with climate change could have negative impacts on the financial condition or \n\ncreditworthiness of JPMorgan's clients and customers, and on its exposure to those clients and customers.\nPhysical risks include the increased frequency or severity of acute weather events, such as floods, wildfires and tropical cyclones, and chronic shifts in the climate, such as persistent changes in precipitation levels, rising sea levels, or increases in average ambient temperature. Potential adverse impacts of climate-related physical risks include:\n\u2022declines in asset values, including due to the destruction or degradation of property\n\u2022reduced availability or increased cost of insurance for clients of JPMorgan Chase\n\u2022interruptions to business operations, including supply chain disruption, and\n\u2022population migration or unemployment in affected regions.\nTransition risks arise from societal adjustment to a low-carbon economy, such as changes in public policy, adoption of new technologies or changes in consumer preferences towards low-carbon goods and services. These risks could also be influenced by changes in the physical climate. Potential adverse impacts of transition risks include: \n\u2022sudden devaluation of assets, including unanticipated write-downs (\"stranded assets\")\n\u2022increased operational and compliance costs driven by changes in climate policy \n\u2022increased energy costs driven by governmental actions and initiatives such as emission pricing and accelerated decarbonization policies\n\u2022negative consequences to business models, and the need to make changes in response to those consequences, and\n\u2022damage to JPMorgan Chase's reputation, including due to any perception that its business practices are contrary to public policy or the preferences of different stakeholders. \nClimate risks can also arise from inconsistencies and conflicts in the manner in which climate policy and financial regulations are implemented in the many regions where JPMorgan Chase operates, including initiatives to apply and enforce policy and regulation with extraterritorial effect. Additionally, internal models and estimations used in climate risk assessments have an increased level of uncertainty due to limited historical trend information and the absence of standardized, reliable and comprehensive greenhouse gas emissions data, which could lead to inaccurate disclosures or financial reporting. \n\nConduct\n\nConduct failure by JPMorgan Chase employees can harm clients and customers, impact market integrity, damage JPMorgan Chase's reputation and trigger litigation and regulatory action.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">29<\/td><\/tr><\/table>"}
{"QID":"q_Ri005","Question":"What risks does The Coca-Cola Company face if it fails to meet its sustainability goals or comply with evolving regulations?","ground_truth_answer":"If The Coca-Cola Company fails to meet its sustainability goals or comply with evolving regulations, it faces several risks. Sustainability goals are increasingly important to stakeholders, including investors and consumers. Failure to achieve these goals can result in negative publicity, which could harm Coca-Cola\u2019s brand reputation and consumer trust. Additionally, regulatory non-compliance can lead to fines and legal actions, increasing operational costs. Evolving regulations often require significant investments in new technologies, processes, or reporting mechanisms, and failure to adapt could place Coca-Cola at a competitive disadvantage. Increased scrutiny from investors and environmental groups could also lead to divestment or reduced investment. To avoid these risks, Coca-Cola needs to invest in sustainable practices, transparently report progress, and ensure compliance with all relevant environmental regulations.","question_type":"Risk","page_number":"24","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_markdown_without_headers":"for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_without_headers":"for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n"}
{"QID":"q_Ri006","Question":"What are the various risks related to business operations identified by P&G in its 10k report for FY 2024?","ground_truth_answer":"Procter & Gamble (P&G) identifies several business operations risks:\n\n1. Supply Chain Disruptions: Risks include loss or disruption of key manufacturing and supply arrangements due to labor disputes, cybersecurity incidents, natural disasters, or geopolitical events.\n2. Cost Fluctuations: Variability in commodity prices, labor costs, and transportation expenses can impact financial performance. Effective management is needed to mitigate these fluctuations.\n3. Competitive Pressures: Intense competition in the consumer products industry demands responsiveness to emerging trends and competitive factors to maintain sales and margins.\n4. Customer Relationship Risks: Changes in customer demand or relationships with key retail partners can affect product placement and sales.\n5. Reputation Risks: Damage to brand reputation from product issues, negative publicity, or environmental concerns can impact financial results.\n6. Third-Party Dependencies: Reliance on suppliers and partners introduces risks related to operational and data security.\n7. Cybersecurity and IT Failures: Cyberattacks or IT system failures can disrupt operations and lead to data breaches or financial losses.","question_type":"Risk","page_number":"7, 8","accession_number":"0000080424-24-000083","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 7: \nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 8: \n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n","context_markdown_without_headers":"\nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n, \n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 7: \nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 8: \n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n","context_html_without_headers":"\nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n, \n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n"}
{"QID":"q_Ri007","Question":"What are the potential risks associated with P&G's portfolio restructuring efforts, and how is the company managing these risks?","ground_truth_answer":"Procter & Gamble\u2019s (P&G) restructuring efforts face several key risks. Financially, the company expects to record post-tax restructuring charges of $1.0 to $1.5 billion due to foreign currency translation losses. In fiscal 2024, P&G incurred $659 million in restructuring costs, up from $329 million in 2023, including $216 million in non-cash charges for currency translation losses, particularly from operations in Nigeria.\n\nOperationally, business continuity may be disrupted due to the liquidation of markets like Nigeria and Argentina, affecting supply chains and customer relations. Significant asset write-downs are involved.\n\nExecution risks also arise from the complexity of restructuring, with annual costs historically ranging between $250 to $500 million. P&G mitigates these risks by implementing structured financial controls, detailed operational oversight, and a focus on optimizing manufacturing and workforce costs to ensure efficiency and competitiveness during transitions.","question_type":"Risk","page_number":"18, 24; 45, 46","accession_number":"0000080424-24-000083;0000080424-24-000083","item":"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.;Item 8. Financial Statements and Supplementary Data.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 18: \n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n|    |                                               |        |        |      |        |                       |        |    |    |    |    |\n|---:|:----------------------------------------------|:-------|:-------|:-----|:-------|:----------------------|:-------|:---|:---|:---|:---|\n|  1 | Amounts in millions, except per share amounts | 2024   |        | 2023 |        | Change vs. Prior Year |        |    |    |    |    |\n|  2 | Net sales                                     | $      | 84,039 |      |        | $                     | 82,006 |    |    | 2  | %  |\n|  3 | Operating income                              | 18,545 |        |      | 18,134 |                       |        | 2  | %  |    |    |\n|  4 | Net earnings                                  | 14,974 |        |      | 14,738 |                       |        | 2  | %  |    |    |\n|  5 | Net earnings attributable to Procter & Gamble | 14,879 |        |      | 14,653 |                       |        | 2  | %  |    |    |\n|  6 | Diluted net earnings per common share         | 6.02   |        |      | 5.90   |                       |        | 2  | %  |    |    |\n|  7 | Core earnings per share                       | 6.59   |        |      | 5.90   |                       |        | 12 | %  |    |    |\n|  8 | Cash flow from operating activities           | 19,846 |        |      | 16,848 |                       |        | 18 | %  |    |    |\n\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 24: \n24 The Procter & Gamble Company\n\n\nEurope (due to increased pricing), Latin America (due to increased competitive activity) and IMEA (due to increased pricing), partially offset by growth in North America (due to increased marketing support and distribution gains). Organic sales increased mid-single digits driven by mid-single-digit increases in Europe and IMEA and a low single-digit increase in North America. Market share of the feminine care category increased 0.2 points.\n\u2022Net sales in Family Care, which is predominantly a North American business, increased low single digits driven by a unit volume increase (due to market growth and increased marketing support) and higher pricing, partially offset by unfavorable product mix (due to growth of larger pack sizes with lower than category-average selling prices). Organic sales also increased low single digits. North America's share of the family care category decreased 0.4 points.\nNet earnings increased 13% to $4.0 billion due to a 230 basis-point increase in net earnings margin. Net earnings margin increased primarily due to an increase in gross margin, partially offset by an increase in SG&A as a percentage of net sales. Gross margin increased primarily due to lower commodity costs, productivity savings and increased pricing, partially offset by unfavorable foreign exchange. SG&A as a percentage of net sales increased due to an increase in marketing and overhead spending.\n\nCORPORATE\n\n\n|    |                     |          |        |                 |\n|---:|:--------------------|:---------|:-------|:----------------|\n|  1 | ($ millions)        | 2024     | 2023   | Change vs. 2023 |\n|  2 | Net sales           | $601     | $765   | (21)%           |\n|  3 | Net earnings\/(loss) | $(1,430) | $(399) | N\/A             |\n\nCorporate includes certain operating and non-operating activities not allocated to specific business segments. These include but are not limited to incidental businesses managed at the corporate level, gains and losses related to certain divested brands or businesses, impacts from various financing and investing activities, impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used within the reportable segments to U.S. GAAP. The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate.\nCorporate net sales decreased $164 million to $601 million due to a decrease in net sales of incidental businesses managed at the corporate level. Corporate net earnings decreased $1.0 billion due to a loss of $1.4 billion due primarily to the impairment charge of the Gillette intangible asset and incremental restructuring charges.\n\nRestructuring Program to Deliver Productivity and Cost Savings\n\nThe Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million before tax. On December 5, 2023, the Company announced an incremental limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria. \nIn fiscal 2024, the Company incurred before tax restructuring costs of $659 million, which include foreign currency translation losses recognized as a non-cash charge of approximately $216 million due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria. Restructuring accruals of $166 million as of June 30, 2024, are classified as current liabilities. Excluding the non-cash charges of foreign currency translation losses for certain Enterprise Markets, including Nigeria, approximately 64% of the restructuring charges incurred in fiscal 2024 either have been or will be settled with cash. Consistent with our policies for restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.\nSavings generated from the Company's restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment. In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins. Refer to Note 3 to the Consolidated Financial Statements for more details on the restructuring program.\n\nCASH FLOW, FINANCIAL CONDITION AND LIQUIDITY\n\nWe believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and to readily access capital markets at competitive rates.\nOperating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 45: \nThe Procter & Gamble Company 45\n\n\n\nNOTE 3\n\n\nSUPPLEMENTAL FINANCIAL INFORMATION\n\nThe components of property, plant and equipment were as follows:\n|    |                                     |          |        |      |          |    |        |\n|---:|:------------------------------------|:---------|:-------|:-----|:---------|:---|:-------|\n|  1 | As of June 30                       | 2024     |        | 2023 |          |    |        |\n|  2 | PROPERTY, PLANT AND EQUIPMENT       |          |        |      |          |    |        |\n|  3 | Machinery and equipment             | $        | 37,507 |      |          | $  | 36,521 |\n|  4 | Buildings                           | 8,534    |        |      | 8,277    |    |        |\n|  5 | Construction in progress            | 3,126    |        |      | 2,980    |    |        |\n|  6 | Land                                | 895      |        |      | 867      |    |        |\n|  7 | TOTAL PROPERTY, PLANT AND EQUIPMENT | 50,063   |        |      | 48,645   |    |        |\n|  8 | Accumulated depreciation            | (27,911) |        |      | (26,736) |    |        |\n|  9 | PROPERTY, PLANT AND EQUIPMENT, NET  | $        | 22,152 |      |          | $  | 21,909 |\nSelected components of current and noncurrent liabilities were as follows:|    |                                         |       |        |      |       |    |        |\n|---:|:----------------------------------------|:------|:-------|:-----|:------|:---|:-------|\n|  1 | As of June 30                           | 2024  |        | 2023 |       |    |        |\n|  2 | ACCRUED AND OTHER LIABILITIES - CURRENT |       |        |      |       |    |        |\n|  3 | Accrued marketing and promotion         | $     | 4,172  |      |       | $  | 3,894  |\n|  4 | Accrued compensation                    | 2,161 |        |      | 2,030 |    |        |\n|  5 | Taxes payable                           | 1,042 |        |      | 828   |    |        |\n|  6 | Accrued interest                        | 282   |        |      | 235   |    |        |\n|  7 | Lease liabilities                       | 243   |        |      | 222   |    |        |\n|  8 | Restructuring reserves                  | 166   |        |      | 174   |    |        |\n|  9 | Derivative liabilities                  | 54    |        |      | 631   |    |        |\n| 10 | Other                                   | 2,953 |        |      | 2,915 |    |        |\n| 11 | TOTAL                                   | $     | 11,073 |      |       | $  | 10,929 |\n| 13 | OTHER NONCURRENT LIABILITIES            |       |        |      |       |    |        |\n| 14 | Pension benefit obligations             | $     | 2,884  |      |       | $  | 3,116  |\n| 15 | Uncertain tax positions                 | 723   |        |      | 622   |    |        |\n| 16 | Lease liabilities                       | 666   |        |      | 595   |    |        |\n| 17 | Other retiree benefit obligations       | 653   |        |      | 690   |    |        |\n| 18 | U.S. Tax Act transitional tax payable   | 592   |        |      | 1,154 |    |        |\n| 19 | Derivative liabilities                  | 325   |        |      | 445   |    |        |\n| 20 | Other                                   | 555   |        |      | 530   |    |        |\n| 21 | TOTAL                                   | $     | 6,398  |      |       | $  | 7,152  |\n\nRESTRUCTURING PROGRAM\n\nThe Company has historically incurred an ongoing annual level of restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Before tax costs incurred under ongoing programs have generally ranged from $250 to $500 annually.\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company expects to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nThe Company incurred total restructuring charges of $659 and $329 for the fiscal years ended June 30, 2024 and 2023. Of the charges incurred for fiscal year 2024, $248 were recorded in Costs of products sold, $155 in SG&A and $255 in Other non-operating income, net. Of the charges incurred in fiscal year 2023, $160 were recorded in Costs of products sold, $160 in SG&A and $9 in Other non-operating income, net.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 46: \n46 The Procter & Gamble Company\n\n\nThe following table presents restructuring activity for the fiscal years ended June 30, 2024 and 2023:\n|    |                       |                  |                     |             |       |       |       |    |    |     |\n|---:|:----------------------|:-----------------|:--------------------|:------------|:------|:------|:------|:---|:---|:----|\n|  1 |                       | Separation Costs | Asset-Related Costs | Other Costs | Total |       |       |    |    |     |\n|  2 | RESERVE JUNE 30, 2022 | $                | 121                 |             | $     | -     | $     | 26 | $  | 147 |\n|  3 | Cost incurred         | 175              |                     | 43          |       | 111   | 329   |    |    |     |\n|  4 | Cost paid\/settled     | (141)            |                     | (43)        |       | (118) | (302) |    |    |     |\n|  5 | RESERVE JUNE 30, 2023 | 155              |                     | -           |       | 19    | 174   |    |    |     |\n|  6 | Cost incurred         | 202              |                     | 101         |       | 355   | 659   |    |    |     |\n|  7 | Cost paid\/settled     | (224)            |                     | (101)       |       | (342) | (667) |    |    |     |\n|  8 | RESERVE JUNE 30, 2024 | $                | 133                 |             | $     | -     | $     | 32 | $  | 166 |\n\nSeparation Costs\n\nEmployee separation costs relate to severance packages that are primarily voluntary and the amounts calculated are based on salary levels and past service periods.\n\nAsset-Related Costs\n\nAsset-related costs consist of both asset write-downs and accelerated depreciation for manufacturing and facilities consolidations. Asset write-downs relate to the establishment of a new fair value basis for assets held-for-sale or for disposal. These assets are written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, less minor disposal costs. Charges for accelerated depreciation relate to long-lived assets that will be taken out of service prior to the end of their normal service period.\n\nOther Costs\n\nOther restructuring-type charges are incurred as a direct result of the restructuring plan. Such charges include accumulated foreign currency translation losses, asset removal and termination of contracts related to Enterprise Market portfolio restructuring. As of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 for accumulated foreign currency translation losses previously included in Accumulated other comprehensive income\/(loss).\nConsistent with our historical policies for ongoing restructuring-type activities, the restructuring charges are funded by and included within Corporate for management and segment reporting. However, for information purposes, the following table summarizes the total restructuring costs related to our reportable segments: \n\n|    |                              |      |      |      |    |     |    |     |\n|---:|:-----------------------------|:-----|:-----|:-----|:---|:----|:---|:----|\n|  1 | Fiscal years ended June 30   | 2024 | 2023 | 2022 |    |     |    |     |\n|  2 | Beauty                       | $    | 43   |      | $  | 15  | $  | 11  |\n|  3 | Grooming                     | 76   |      | 17   |    | 14  |    |     |\n|  4 | Health Care                  | 33   |      | 28   |    | 32  |    |     |\n|  5 | Fabric & Home Care           | 84   |      | 87   |    | 42  |    |     |\n|  6 | Baby, Feminine & Family Care | 50   |      | 21   |    | 83  |    |     |\n|  7 | Corporate (1)                | 371  |      | 161  |    | 71  |    |     |\n|  8 | TOTAL                        | $    | 659  |      | $  | 329 | $  | 253 |\n\n(1)Corporate includes costs related to allocated overheads, including charges related to our Enterprise Markets, Global Business Services and Corporate Functions activities.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n","context_markdown_without_headers":"\n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n|    |                                               |        |        |      |        |                       |        |    |    |    |    |\n|---:|:----------------------------------------------|:-------|:-------|:-----|:-------|:----------------------|:-------|:---|:---|:---|:---|\n|  1 | Amounts in millions, except per share amounts | 2024   |        | 2023 |        | Change vs. Prior Year |        |    |    |    |    |\n|  2 | Net sales                                     | $      | 84,039 |      |        | $                     | 82,006 |    |    | 2  | %  |\n|  3 | Operating income                              | 18,545 |        |      | 18,134 |                       |        | 2  | %  |    |    |\n|  4 | Net earnings                                  | 14,974 |        |      | 14,738 |                       |        | 2  | %  |    |    |\n|  5 | Net earnings attributable to Procter & Gamble | 14,879 |        |      | 14,653 |                       |        | 2  | %  |    |    |\n|  6 | Diluted net earnings per common share         | 6.02   |        |      | 5.90   |                       |        | 2  | %  |    |    |\n|  7 | Core earnings per share                       | 6.59   |        |      | 5.90   |                       |        | 12 | %  |    |    |\n|  8 | Cash flow from operating activities           | 19,846 |        |      | 16,848 |                       |        | 18 | %  |    |    |\n\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, \n24 The Procter & Gamble Company\n\n\nEurope (due to increased pricing), Latin America (due to increased competitive activity) and IMEA (due to increased pricing), partially offset by growth in North America (due to increased marketing support and distribution gains). Organic sales increased mid-single digits driven by mid-single-digit increases in Europe and IMEA and a low single-digit increase in North America. Market share of the feminine care category increased 0.2 points.\n\u2022Net sales in Family Care, which is predominantly a North American business, increased low single digits driven by a unit volume increase (due to market growth and increased marketing support) and higher pricing, partially offset by unfavorable product mix (due to growth of larger pack sizes with lower than category-average selling prices). Organic sales also increased low single digits. North America's share of the family care category decreased 0.4 points.\nNet earnings increased 13% to $4.0 billion due to a 230 basis-point increase in net earnings margin. Net earnings margin increased primarily due to an increase in gross margin, partially offset by an increase in SG&A as a percentage of net sales. Gross margin increased primarily due to lower commodity costs, productivity savings and increased pricing, partially offset by unfavorable foreign exchange. SG&A as a percentage of net sales increased due to an increase in marketing and overhead spending.\n\nCORPORATE\n\n\n|    |                     |          |        |                 |\n|---:|:--------------------|:---------|:-------|:----------------|\n|  1 | ($ millions)        | 2024     | 2023   | Change vs. 2023 |\n|  2 | Net sales           | $601     | $765   | (21)%           |\n|  3 | Net earnings\/(loss) | $(1,430) | $(399) | N\/A             |\n\nCorporate includes certain operating and non-operating activities not allocated to specific business segments. These include but are not limited to incidental businesses managed at the corporate level, gains and losses related to certain divested brands or businesses, impacts from various financing and investing activities, impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used within the reportable segments to U.S. GAAP. The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate.\nCorporate net sales decreased $164 million to $601 million due to a decrease in net sales of incidental businesses managed at the corporate level. Corporate net earnings decreased $1.0 billion due to a loss of $1.4 billion due primarily to the impairment charge of the Gillette intangible asset and incremental restructuring charges.\n\nRestructuring Program to Deliver Productivity and Cost Savings\n\nThe Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million before tax. On December 5, 2023, the Company announced an incremental limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria. \nIn fiscal 2024, the Company incurred before tax restructuring costs of $659 million, which include foreign currency translation losses recognized as a non-cash charge of approximately $216 million due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria. Restructuring accruals of $166 million as of June 30, 2024, are classified as current liabilities. Excluding the non-cash charges of foreign currency translation losses for certain Enterprise Markets, including Nigeria, approximately 64% of the restructuring charges incurred in fiscal 2024 either have been or will be settled with cash. Consistent with our policies for restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.\nSavings generated from the Company's restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment. In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins. Refer to Note 3 to the Consolidated Financial Statements for more details on the restructuring program.\n\nCASH FLOW, FINANCIAL CONDITION AND LIQUIDITY\n\nWe believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and to readily access capital markets at competitive rates.\nOperating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.\n\n\n, \nThe Procter & Gamble Company 45\n\n\n\nNOTE 3\n\n\nSUPPLEMENTAL FINANCIAL INFORMATION\n\nThe components of property, plant and equipment were as follows:\n|    |                                     |          |        |      |          |    |        |\n|---:|:------------------------------------|:---------|:-------|:-----|:---------|:---|:-------|\n|  1 | As of June 30                       | 2024     |        | 2023 |          |    |        |\n|  2 | PROPERTY, PLANT AND EQUIPMENT       |          |        |      |          |    |        |\n|  3 | Machinery and equipment             | $        | 37,507 |      |          | $  | 36,521 |\n|  4 | Buildings                           | 8,534    |        |      | 8,277    |    |        |\n|  5 | Construction in progress            | 3,126    |        |      | 2,980    |    |        |\n|  6 | Land                                | 895      |        |      | 867      |    |        |\n|  7 | TOTAL PROPERTY, PLANT AND EQUIPMENT | 50,063   |        |      | 48,645   |    |        |\n|  8 | Accumulated depreciation            | (27,911) |        |      | (26,736) |    |        |\n|  9 | PROPERTY, PLANT AND EQUIPMENT, NET  | $        | 22,152 |      |          | $  | 21,909 |\nSelected components of current and noncurrent liabilities were as follows:|    |                                         |       |        |      |       |    |        |\n|---:|:----------------------------------------|:------|:-------|:-----|:------|:---|:-------|\n|  1 | As of June 30                           | 2024  |        | 2023 |       |    |        |\n|  2 | ACCRUED AND OTHER LIABILITIES - CURRENT |       |        |      |       |    |        |\n|  3 | Accrued marketing and promotion         | $     | 4,172  |      |       | $  | 3,894  |\n|  4 | Accrued compensation                    | 2,161 |        |      | 2,030 |    |        |\n|  5 | Taxes payable                           | 1,042 |        |      | 828   |    |        |\n|  6 | Accrued interest                        | 282   |        |      | 235   |    |        |\n|  7 | Lease liabilities                       | 243   |        |      | 222   |    |        |\n|  8 | Restructuring reserves                  | 166   |        |      | 174   |    |        |\n|  9 | Derivative liabilities                  | 54    |        |      | 631   |    |        |\n| 10 | Other                                   | 2,953 |        |      | 2,915 |    |        |\n| 11 | TOTAL                                   | $     | 11,073 |      |       | $  | 10,929 |\n| 13 | OTHER NONCURRENT LIABILITIES            |       |        |      |       |    |        |\n| 14 | Pension benefit obligations             | $     | 2,884  |      |       | $  | 3,116  |\n| 15 | Uncertain tax positions                 | 723   |        |      | 622   |    |        |\n| 16 | Lease liabilities                       | 666   |        |      | 595   |    |        |\n| 17 | Other retiree benefit obligations       | 653   |        |      | 690   |    |        |\n| 18 | U.S. Tax Act transitional tax payable   | 592   |        |      | 1,154 |    |        |\n| 19 | Derivative liabilities                  | 325   |        |      | 445   |    |        |\n| 20 | Other                                   | 555   |        |      | 530   |    |        |\n| 21 | TOTAL                                   | $     | 6,398  |      |       | $  | 7,152  |\n\nRESTRUCTURING PROGRAM\n\nThe Company has historically incurred an ongoing annual level of restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Before tax costs incurred under ongoing programs have generally ranged from $250 to $500 annually.\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company expects to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nThe Company incurred total restructuring charges of $659 and $329 for the fiscal years ended June 30, 2024 and 2023. Of the charges incurred for fiscal year 2024, $248 were recorded in Costs of products sold, $155 in SG&A and $255 in Other non-operating income, net. Of the charges incurred in fiscal year 2023, $160 were recorded in Costs of products sold, $160 in SG&A and $9 in Other non-operating income, net.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n, \n46 The Procter & Gamble Company\n\n\nThe following table presents restructuring activity for the fiscal years ended June 30, 2024 and 2023:\n|    |                       |                  |                     |             |       |       |       |    |    |     |\n|---:|:----------------------|:-----------------|:--------------------|:------------|:------|:------|:------|:---|:---|:----|\n|  1 |                       | Separation Costs | Asset-Related Costs | Other Costs | Total |       |       |    |    |     |\n|  2 | RESERVE JUNE 30, 2022 | $                | 121                 |             | $     | -     | $     | 26 | $  | 147 |\n|  3 | Cost incurred         | 175              |                     | 43          |       | 111   | 329   |    |    |     |\n|  4 | Cost paid\/settled     | (141)            |                     | (43)        |       | (118) | (302) |    |    |     |\n|  5 | RESERVE JUNE 30, 2023 | 155              |                     | -           |       | 19    | 174   |    |    |     |\n|  6 | Cost incurred         | 202              |                     | 101         |       | 355   | 659   |    |    |     |\n|  7 | Cost paid\/settled     | (224)            |                     | (101)       |       | (342) | (667) |    |    |     |\n|  8 | RESERVE JUNE 30, 2024 | $                | 133                 |             | $     | -     | $     | 32 | $  | 166 |\n\nSeparation Costs\n\nEmployee separation costs relate to severance packages that are primarily voluntary and the amounts calculated are based on salary levels and past service periods.\n\nAsset-Related Costs\n\nAsset-related costs consist of both asset write-downs and accelerated depreciation for manufacturing and facilities consolidations. Asset write-downs relate to the establishment of a new fair value basis for assets held-for-sale or for disposal. These assets are written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, less minor disposal costs. Charges for accelerated depreciation relate to long-lived assets that will be taken out of service prior to the end of their normal service period.\n\nOther Costs\n\nOther restructuring-type charges are incurred as a direct result of the restructuring plan. Such charges include accumulated foreign currency translation losses, asset removal and termination of contracts related to Enterprise Market portfolio restructuring. As of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 for accumulated foreign currency translation losses previously included in Accumulated other comprehensive income\/(loss).\nConsistent with our historical policies for ongoing restructuring-type activities, the restructuring charges are funded by and included within Corporate for management and segment reporting. However, for information purposes, the following table summarizes the total restructuring costs related to our reportable segments: \n\n|    |                              |      |      |      |    |     |    |     |\n|---:|:-----------------------------|:-----|:-----|:-----|:---|:----|:---|:----|\n|  1 | Fiscal years ended June 30   | 2024 | 2023 | 2022 |    |     |    |     |\n|  2 | Beauty                       | $    | 43   |      | $  | 15  | $  | 11  |\n|  3 | Grooming                     | 76   |      | 17   |    | 14  |    |     |\n|  4 | Health Care                  | 33   |      | 28   |    | 32  |    |     |\n|  5 | Fabric & Home Care           | 84   |      | 87   |    | 42  |    |     |\n|  6 | Baby, Feminine & Family Care | 50   |      | 21   |    | 83  |    |     |\n|  7 | Corporate (1)                | 371  |      | 161  |    | 71  |    |     |\n|  8 | TOTAL                        | $    | 659  |      | $  | 329 | $  | 253 |\n\n(1)Corporate includes costs related to allocated overheads, including charges related to our Enterprise Markets, Global Business Services and Corporate Functions activities.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 18: \n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Amounts in millions, except per share amounts<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change vs. Prior Year<\/td><\/tr><tr><td colspan=\"3\">Net sales<\/td><td>$<\/td><td>84,039 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>82,006 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Operating income<\/td><td colspan=\"2\">18,545 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,134 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings<\/td><td colspan=\"2\">14,974 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,738 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings attributable to Procter &amp; Gamble<\/td><td colspan=\"2\">14,879 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,653 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Diluted net earnings per common share<\/td><td colspan=\"2\">6.02 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Core earnings per share<\/td><td colspan=\"2\">6.59 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Cash flow from operating activities<\/td><td colspan=\"2\">19,846 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,848 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td>%<\/td><\/tr><\/table>\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 24: \n24 The Procter & Gamble Company\n\n\nEurope (due to increased pricing), Latin America (due to increased competitive activity) and IMEA (due to increased pricing), partially offset by growth in North America (due to increased marketing support and distribution gains). Organic sales increased mid-single digits driven by mid-single-digit increases in Europe and IMEA and a low single-digit increase in North America. Market share of the feminine care category increased 0.2 points.\n\u2022Net sales in Family Care, which is predominantly a North American business, increased low single digits driven by a unit volume increase (due to market growth and increased marketing support) and higher pricing, partially offset by unfavorable product mix (due to growth of larger pack sizes with lower than category-average selling prices). Organic sales also increased low single digits. North America's share of the family care category decreased 0.4 points.\nNet earnings increased 13% to $4.0 billion due to a 230 basis-point increase in net earnings margin. Net earnings margin increased primarily due to an increase in gross margin, partially offset by an increase in SG&A as a percentage of net sales. Gross margin increased primarily due to lower commodity costs, productivity savings and increased pricing, partially offset by unfavorable foreign exchange. SG&A as a percentage of net sales increased due to an increase in marketing and overhead spending.\n\nCORPORATE\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">($ millions)<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change vs. 2023<\/td><\/tr><tr><td colspan=\"3\">Net sales<\/td><td colspan=\"3\">$601<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">$765<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">(21)%<\/td><\/tr><tr><td colspan=\"3\">Net earnings\/(loss)<\/td><td colspan=\"3\">$(1,430)<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">$(399)<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">N\/A<\/td><\/tr><\/table>Corporate includes certain operating and non-operating activities not allocated to specific business segments. These include but are not limited to incidental businesses managed at the corporate level, gains and losses related to certain divested brands or businesses, impacts from various financing and investing activities, impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used within the reportable segments to U.S. GAAP. The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate.\nCorporate net sales decreased $164 million to $601 million due to a decrease in net sales of incidental businesses managed at the corporate level. Corporate net earnings decreased $1.0 billion due to a loss of $1.4 billion due primarily to the impairment charge of the Gillette intangible asset and incremental restructuring charges.\n\nRestructuring Program to Deliver Productivity and Cost Savings\n\nThe Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million before tax. On December 5, 2023, the Company announced an incremental limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria. \nIn fiscal 2024, the Company incurred before tax restructuring costs of $659 million, which include foreign currency translation losses recognized as a non-cash charge of approximately $216 million due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria. Restructuring accruals of $166 million as of June 30, 2024, are classified as current liabilities. Excluding the non-cash charges of foreign currency translation losses for certain Enterprise Markets, including Nigeria, approximately 64% of the restructuring charges incurred in fiscal 2024 either have been or will be settled with cash. Consistent with our policies for restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.\nSavings generated from the Company's restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment. In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins. Refer to Note 3 to the Consolidated Financial Statements for more details on the restructuring program.\n\nCASH FLOW, FINANCIAL CONDITION AND LIQUIDITY\n\nWe believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and to readily access capital markets at competitive rates.\nOperating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 45: \nThe Procter & Gamble Company 45\n\n\n\nNOTE 3\n\n\nSUPPLEMENTAL FINANCIAL INFORMATION\n\nThe components of property, plant and equipment were as follows:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">As of June 30<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><\/tr><tr><td colspan=\"12\">PROPERTY, PLANT AND EQUIPMENT<\/td><\/tr><tr><td colspan=\"3\">Machinery and equipment<\/td><td>$<\/td><td>37,507 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>36,521 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Buildings<\/td><td colspan=\"2\">8,534 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">8,277 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Construction in progress<\/td><td colspan=\"2\">3,126 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2,980 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Land<\/td><td colspan=\"2\">895 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">867 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL PROPERTY, PLANT AND EQUIPMENT<\/td><td colspan=\"2\">50,063 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">48,645 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Accumulated depreciation<\/td><td colspan=\"2\">(27,911)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26,736)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">PROPERTY, PLANT AND EQUIPMENT, NET<\/td><td>$<\/td><td>22,152 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>21,909 <\/td><td><\/td><\/tr><\/table>\nSelected components of current and noncurrent liabilities were as follows:<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">As of June 30<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><\/tr><tr><td colspan=\"12\">ACCRUED AND OTHER LIABILITIES - CURRENT<\/td><\/tr><tr><td colspan=\"3\">Accrued marketing and promotion<\/td><td>$<\/td><td>4,172 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>3,894 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Accrued compensation<\/td><td colspan=\"2\">2,161 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2,030 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Taxes payable<\/td><td colspan=\"2\">1,042 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">828 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Accrued interest<\/td><td colspan=\"2\">282 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">235 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Lease liabilities<\/td><td colspan=\"2\">243 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">222 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Restructuring reserves<\/td><td colspan=\"2\">166 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">174 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Derivative liabilities<\/td><td colspan=\"2\">54 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">631 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Other<\/td><td colspan=\"2\">2,953 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2,915 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL<\/td><td>$<\/td><td>11,073 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>10,929 <\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"12\">OTHER NONCURRENT LIABILITIES<\/td><\/tr><tr><td colspan=\"3\">Pension benefit obligations<\/td><td>$<\/td><td>2,884 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>3,116 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Uncertain tax positions<\/td><td colspan=\"2\">723 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">622 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Lease liabilities<\/td><td colspan=\"2\">666 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">595 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Other retiree benefit obligations<\/td><td colspan=\"2\">653 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">690 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. Tax Act transitional tax payable<\/td><td colspan=\"2\">592 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,154 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Derivative liabilities<\/td><td colspan=\"2\">325 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">445 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Other<\/td><td colspan=\"2\">555 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">530 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL<\/td><td>$<\/td><td>6,398 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>7,152 <\/td><td><\/td><\/tr><\/table>\nRESTRUCTURING PROGRAM\n\nThe Company has historically incurred an ongoing annual level of restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Before tax costs incurred under ongoing programs have generally ranged from $250 to $500 annually.\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company expects to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nThe Company incurred total restructuring charges of $659 and $329 for the fiscal years ended June 30, 2024 and 2023. Of the charges incurred for fiscal year 2024, $248 were recorded in Costs of products sold, $155 in SG&A and $255 in Other non-operating income, net. Of the charges incurred in fiscal year 2023, $160 were recorded in Costs of products sold, $160 in SG&A and $9 in Other non-operating income, net.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 46: \n46 The Procter & Gamble Company\n\n\nThe following table presents restructuring activity for the fiscal years ended June 30, 2024 and 2023:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">Separation Costs<\/td><td colspan=\"3\">Asset-Related Costs<\/td><td colspan=\"3\">Other Costs<\/td><td colspan=\"3\">Total<\/td><\/tr><tr><td colspan=\"3\">RESERVE JUNE 30, 2022<\/td><td>$<\/td><td>121 <\/td><td><\/td><td>$<\/td><td>- <\/td><td><\/td><td>$<\/td><td>26 <\/td><td><\/td><td>$<\/td><td>147 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost incurred<\/td><td colspan=\"2\">175 <\/td><td><\/td><td colspan=\"2\">43 <\/td><td><\/td><td colspan=\"2\">111 <\/td><td><\/td><td colspan=\"2\">329 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost paid\/settled<\/td><td colspan=\"2\">(141)<\/td><td><\/td><td colspan=\"2\">(43)<\/td><td><\/td><td colspan=\"2\">(118)<\/td><td><\/td><td colspan=\"2\">(302)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">RESERVE JUNE 30, 2023<\/td><td colspan=\"2\">155 <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">19 <\/td><td><\/td><td colspan=\"2\">174 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost incurred<\/td><td colspan=\"2\">202 <\/td><td><\/td><td colspan=\"2\">101 <\/td><td><\/td><td colspan=\"2\">355 <\/td><td><\/td><td colspan=\"2\">659 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost paid\/settled<\/td><td colspan=\"2\">(224)<\/td><td><\/td><td colspan=\"2\">(101)<\/td><td><\/td><td colspan=\"2\">(342)<\/td><td><\/td><td colspan=\"2\">(667)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">RESERVE JUNE 30, 2024<\/td><td>$<\/td><td>133 <\/td><td><\/td><td>$<\/td><td>- <\/td><td><\/td><td>$<\/td><td>32 <\/td><td><\/td><td>$<\/td><td>166 <\/td><td><\/td><\/tr><\/table>\n\nSeparation Costs\n\nEmployee separation costs relate to severance packages that are primarily voluntary and the amounts calculated are based on salary levels and past service periods.\n\nAsset-Related Costs\n\nAsset-related costs consist of both asset write-downs and accelerated depreciation for manufacturing and facilities consolidations. Asset write-downs relate to the establishment of a new fair value basis for assets held-for-sale or for disposal. These assets are written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, less minor disposal costs. Charges for accelerated depreciation relate to long-lived assets that will be taken out of service prior to the end of their normal service period.\n\nOther Costs\n\nOther restructuring-type charges are incurred as a direct result of the restructuring plan. Such charges include accumulated foreign currency translation losses, asset removal and termination of contracts related to Enterprise Market portfolio restructuring. As of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 for accumulated foreign currency translation losses previously included in Accumulated other comprehensive income\/(loss).\nConsistent with our historical policies for ongoing restructuring-type activities, the restructuring charges are funded by and included within Corporate for management and segment reporting. However, for information purposes, the following table summarizes the total restructuring costs related to our reportable segments: \n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Fiscal years ended June 30<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\">2022<\/td><\/tr><tr><td colspan=\"3\">Beauty<\/td><td>$<\/td><td>43 <\/td><td><\/td><td>$<\/td><td>15 <\/td><td><\/td><td>$<\/td><td>11 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Grooming<\/td><td colspan=\"2\">76 <\/td><td><\/td><td colspan=\"2\">17 <\/td><td><\/td><td colspan=\"2\">14 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Health Care<\/td><td colspan=\"2\">33 <\/td><td><\/td><td colspan=\"2\">28 <\/td><td><\/td><td colspan=\"2\">32 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Fabric &amp; Home Care<\/td><td colspan=\"2\">84 <\/td><td><\/td><td colspan=\"2\">87 <\/td><td><\/td><td colspan=\"2\">42 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Baby, Feminine &amp; Family Care<\/td><td colspan=\"2\">50 <\/td><td><\/td><td colspan=\"2\">21 <\/td><td><\/td><td colspan=\"2\">83 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate (1)<\/td><td colspan=\"2\">371 <\/td><td><\/td><td colspan=\"2\">161 <\/td><td><\/td><td colspan=\"2\">71 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL<\/td><td>$<\/td><td>659 <\/td><td><\/td><td>$<\/td><td>329 <\/td><td><\/td><td>$<\/td><td>253 <\/td><td><\/td><\/tr><\/table>\n(1)Corporate includes costs related to allocated overheads, including charges related to our Enterprise Markets, Global Business Services and Corporate Functions activities.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n","context_html_without_headers":"\n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Amounts in millions, except per share amounts<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change vs. Prior Year<\/td><\/tr><tr><td colspan=\"3\">Net sales<\/td><td>$<\/td><td>84,039 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>82,006 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Operating income<\/td><td colspan=\"2\">18,545 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,134 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings<\/td><td colspan=\"2\">14,974 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,738 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings attributable to Procter &amp; Gamble<\/td><td colspan=\"2\">14,879 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,653 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Diluted net earnings per common share<\/td><td colspan=\"2\">6.02 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Core earnings per share<\/td><td colspan=\"2\">6.59 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Cash flow from operating activities<\/td><td colspan=\"2\">19,846 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,848 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td>%<\/td><\/tr><\/table>\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, \n24 The Procter & Gamble Company\n\n\nEurope (due to increased pricing), Latin America (due to increased competitive activity) and IMEA (due to increased pricing), partially offset by growth in North America (due to increased marketing support and distribution gains). Organic sales increased mid-single digits driven by mid-single-digit increases in Europe and IMEA and a low single-digit increase in North America. Market share of the feminine care category increased 0.2 points.\n\u2022Net sales in Family Care, which is predominantly a North American business, increased low single digits driven by a unit volume increase (due to market growth and increased marketing support) and higher pricing, partially offset by unfavorable product mix (due to growth of larger pack sizes with lower than category-average selling prices). Organic sales also increased low single digits. North America's share of the family care category decreased 0.4 points.\nNet earnings increased 13% to $4.0 billion due to a 230 basis-point increase in net earnings margin. Net earnings margin increased primarily due to an increase in gross margin, partially offset by an increase in SG&A as a percentage of net sales. Gross margin increased primarily due to lower commodity costs, productivity savings and increased pricing, partially offset by unfavorable foreign exchange. SG&A as a percentage of net sales increased due to an increase in marketing and overhead spending.\n\nCORPORATE\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">($ millions)<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change vs. 2023<\/td><\/tr><tr><td colspan=\"3\">Net sales<\/td><td colspan=\"3\">$601<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">$765<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">(21)%<\/td><\/tr><tr><td colspan=\"3\">Net earnings\/(loss)<\/td><td colspan=\"3\">$(1,430)<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">$(399)<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">N\/A<\/td><\/tr><\/table>Corporate includes certain operating and non-operating activities not allocated to specific business segments. These include but are not limited to incidental businesses managed at the corporate level, gains and losses related to certain divested brands or businesses, impacts from various financing and investing activities, impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used within the reportable segments to U.S. GAAP. The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate.\nCorporate net sales decreased $164 million to $601 million due to a decrease in net sales of incidental businesses managed at the corporate level. Corporate net earnings decreased $1.0 billion due to a loss of $1.4 billion due primarily to the impairment charge of the Gillette intangible asset and incremental restructuring charges.\n\nRestructuring Program to Deliver Productivity and Cost Savings\n\nThe Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million before tax. On December 5, 2023, the Company announced an incremental limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria. \nIn fiscal 2024, the Company incurred before tax restructuring costs of $659 million, which include foreign currency translation losses recognized as a non-cash charge of approximately $216 million due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria. Restructuring accruals of $166 million as of June 30, 2024, are classified as current liabilities. Excluding the non-cash charges of foreign currency translation losses for certain Enterprise Markets, including Nigeria, approximately 64% of the restructuring charges incurred in fiscal 2024 either have been or will be settled with cash. Consistent with our policies for restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.\nSavings generated from the Company's restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment. In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins. Refer to Note 3 to the Consolidated Financial Statements for more details on the restructuring program.\n\nCASH FLOW, FINANCIAL CONDITION AND LIQUIDITY\n\nWe believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and to readily access capital markets at competitive rates.\nOperating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.\n\n\n, \nThe Procter & Gamble Company 45\n\n\n\nNOTE 3\n\n\nSUPPLEMENTAL FINANCIAL INFORMATION\n\nThe components of property, plant and equipment were as follows:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">As of June 30<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><\/tr><tr><td colspan=\"12\">PROPERTY, PLANT AND EQUIPMENT<\/td><\/tr><tr><td colspan=\"3\">Machinery and equipment<\/td><td>$<\/td><td>37,507 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>36,521 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Buildings<\/td><td colspan=\"2\">8,534 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">8,277 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Construction in progress<\/td><td colspan=\"2\">3,126 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2,980 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Land<\/td><td colspan=\"2\">895 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">867 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL PROPERTY, PLANT AND EQUIPMENT<\/td><td colspan=\"2\">50,063 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">48,645 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Accumulated depreciation<\/td><td colspan=\"2\">(27,911)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26,736)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">PROPERTY, PLANT AND EQUIPMENT, NET<\/td><td>$<\/td><td>22,152 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>21,909 <\/td><td><\/td><\/tr><\/table>\nSelected components of current and noncurrent liabilities were as follows:<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">As of June 30<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><\/tr><tr><td colspan=\"12\">ACCRUED AND OTHER LIABILITIES - CURRENT<\/td><\/tr><tr><td colspan=\"3\">Accrued marketing and promotion<\/td><td>$<\/td><td>4,172 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>3,894 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Accrued compensation<\/td><td colspan=\"2\">2,161 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2,030 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Taxes payable<\/td><td colspan=\"2\">1,042 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">828 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Accrued interest<\/td><td colspan=\"2\">282 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">235 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Lease liabilities<\/td><td colspan=\"2\">243 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">222 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Restructuring reserves<\/td><td colspan=\"2\">166 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">174 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Derivative liabilities<\/td><td colspan=\"2\">54 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">631 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Other<\/td><td colspan=\"2\">2,953 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2,915 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL<\/td><td>$<\/td><td>11,073 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>10,929 <\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"12\">OTHER NONCURRENT LIABILITIES<\/td><\/tr><tr><td colspan=\"3\">Pension benefit obligations<\/td><td>$<\/td><td>2,884 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>3,116 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Uncertain tax positions<\/td><td colspan=\"2\">723 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">622 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Lease liabilities<\/td><td colspan=\"2\">666 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">595 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Other retiree benefit obligations<\/td><td colspan=\"2\">653 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">690 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. Tax Act transitional tax payable<\/td><td colspan=\"2\">592 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,154 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Derivative liabilities<\/td><td colspan=\"2\">325 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">445 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Other<\/td><td colspan=\"2\">555 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">530 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL<\/td><td>$<\/td><td>6,398 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>7,152 <\/td><td><\/td><\/tr><\/table>\nRESTRUCTURING PROGRAM\n\nThe Company has historically incurred an ongoing annual level of restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Before tax costs incurred under ongoing programs have generally ranged from $250 to $500 annually.\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company expects to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nThe Company incurred total restructuring charges of $659 and $329 for the fiscal years ended June 30, 2024 and 2023. Of the charges incurred for fiscal year 2024, $248 were recorded in Costs of products sold, $155 in SG&A and $255 in Other non-operating income, net. Of the charges incurred in fiscal year 2023, $160 were recorded in Costs of products sold, $160 in SG&A and $9 in Other non-operating income, net.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n, \n46 The Procter & Gamble Company\n\n\nThe following table presents restructuring activity for the fiscal years ended June 30, 2024 and 2023:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">Separation Costs<\/td><td colspan=\"3\">Asset-Related Costs<\/td><td colspan=\"3\">Other Costs<\/td><td colspan=\"3\">Total<\/td><\/tr><tr><td colspan=\"3\">RESERVE JUNE 30, 2022<\/td><td>$<\/td><td>121 <\/td><td><\/td><td>$<\/td><td>- <\/td><td><\/td><td>$<\/td><td>26 <\/td><td><\/td><td>$<\/td><td>147 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost incurred<\/td><td colspan=\"2\">175 <\/td><td><\/td><td colspan=\"2\">43 <\/td><td><\/td><td colspan=\"2\">111 <\/td><td><\/td><td colspan=\"2\">329 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost paid\/settled<\/td><td colspan=\"2\">(141)<\/td><td><\/td><td colspan=\"2\">(43)<\/td><td><\/td><td colspan=\"2\">(118)<\/td><td><\/td><td colspan=\"2\">(302)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">RESERVE JUNE 30, 2023<\/td><td colspan=\"2\">155 <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">19 <\/td><td><\/td><td colspan=\"2\">174 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost incurred<\/td><td colspan=\"2\">202 <\/td><td><\/td><td colspan=\"2\">101 <\/td><td><\/td><td colspan=\"2\">355 <\/td><td><\/td><td colspan=\"2\">659 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Cost paid\/settled<\/td><td colspan=\"2\">(224)<\/td><td><\/td><td colspan=\"2\">(101)<\/td><td><\/td><td colspan=\"2\">(342)<\/td><td><\/td><td colspan=\"2\">(667)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">RESERVE JUNE 30, 2024<\/td><td>$<\/td><td>133 <\/td><td><\/td><td>$<\/td><td>- <\/td><td><\/td><td>$<\/td><td>32 <\/td><td><\/td><td>$<\/td><td>166 <\/td><td><\/td><\/tr><\/table>\n\nSeparation Costs\n\nEmployee separation costs relate to severance packages that are primarily voluntary and the amounts calculated are based on salary levels and past service periods.\n\nAsset-Related Costs\n\nAsset-related costs consist of both asset write-downs and accelerated depreciation for manufacturing and facilities consolidations. Asset write-downs relate to the establishment of a new fair value basis for assets held-for-sale or for disposal. These assets are written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, less minor disposal costs. Charges for accelerated depreciation relate to long-lived assets that will be taken out of service prior to the end of their normal service period.\n\nOther Costs\n\nOther restructuring-type charges are incurred as a direct result of the restructuring plan. Such charges include accumulated foreign currency translation losses, asset removal and termination of contracts related to Enterprise Market portfolio restructuring. As of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 for accumulated foreign currency translation losses previously included in Accumulated other comprehensive income\/(loss).\nConsistent with our historical policies for ongoing restructuring-type activities, the restructuring charges are funded by and included within Corporate for management and segment reporting. However, for information purposes, the following table summarizes the total restructuring costs related to our reportable segments: \n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Fiscal years ended June 30<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\">2022<\/td><\/tr><tr><td colspan=\"3\">Beauty<\/td><td>$<\/td><td>43 <\/td><td><\/td><td>$<\/td><td>15 <\/td><td><\/td><td>$<\/td><td>11 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Grooming<\/td><td colspan=\"2\">76 <\/td><td><\/td><td colspan=\"2\">17 <\/td><td><\/td><td colspan=\"2\">14 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Health Care<\/td><td colspan=\"2\">33 <\/td><td><\/td><td colspan=\"2\">28 <\/td><td><\/td><td colspan=\"2\">32 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Fabric &amp; Home Care<\/td><td colspan=\"2\">84 <\/td><td><\/td><td colspan=\"2\">87 <\/td><td><\/td><td colspan=\"2\">42 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Baby, Feminine &amp; Family Care<\/td><td colspan=\"2\">50 <\/td><td><\/td><td colspan=\"2\">21 <\/td><td><\/td><td colspan=\"2\">83 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate (1)<\/td><td colspan=\"2\">371 <\/td><td><\/td><td colspan=\"2\">161 <\/td><td><\/td><td colspan=\"2\">71 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">TOTAL<\/td><td>$<\/td><td>659 <\/td><td><\/td><td>$<\/td><td>329 <\/td><td><\/td><td>$<\/td><td>253 <\/td><td><\/td><\/tr><\/table>\n(1)Corporate includes costs related to allocated overheads, including charges related to our Enterprise Markets, Global Business Services and Corporate Functions activities.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n"}
{"QID":"q_Ri008","Question":"What key risks related to geopolitical events are highlighted by Johnson & Johnson, and what are their summarized implications?","ground_truth_answer":"Johnson & Johnson highlights several key risks related to geopolitical events, including global tensions, conflicts, and economic sanctions. The implications of these geopolitical risks include foreign currency volatility, which can affect the Company\u2019s financial results and operational costs. Decreased demand for products in affected regions due to geopolitical instability or conflict can lead to revenue losses. Additionally, the imposition of trade protection measures or sanctions may disrupt the Company\u2019s global supply chain and impact its ability to operate effectively in certain markets.","question_type":"Risk","page_number":"14","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_markdown_without_headers":"countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>","context_html_without_headers":"countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>"}
{"QID":"q_Ri009","Question":"What steps does Apple take to ensure liquidity and meet its capital return program commitments?","ground_truth_answer":"Apple takes several steps to ensure liquidity and meet its capital return program commitments. It maintains a strong balance of cash, cash equivalents, and unrestricted marketable securities, supplemented by cash generated from ongoing operations and continued access to debt markets. These resources are expected to cover the company\u2019s cash requirements for at least the next 12 months.\n\nTo manage its operational cash needs, Apple works with multiple outsourcing partners for subassemblies and final product assembly, maintaining manufacturing purchase obligations of $38.4 billion, with $38.3 billion due within 12 months as of June 29, 2024.\n\nFor its capital return program, Apple has authorized share repurchase programs and consistently pays dividends. In the third quarter of 2024, it repurchased $26 billion worth of common stock and paid $3.9 billion in dividends and equivalents. The company also plans to increase its dividend annually, subject to the Board of Directors' approval\u200b.","question_type":"Risk","page_number":"17","accession_number":"0000320193-24-000081","item":"Item 2.    Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 17: \nSelling, General and Administrative\n\nSelling, general and administrative expense increased $347 million during the third quarter of 2024 and $793 million during the first nine months of 2024 compared to the same periods in 2023.\n\nProvision for Income Taxes\n\nProvision for income taxes, effective tax rate and statutory federal income tax rate for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 were as follows (dollars in millions):\n\n|    |                                   |                    |       |                   |      |              |       |             |    |    |        |    |    |        |\n|---:|:----------------------------------|:-------------------|:------|:------------------|:-----|:-------------|:------|:------------|:---|:---|:-------|:---|:---|:-------|\n|  1 |                                   | Three Months Ended |       | Nine Months Ended |      |              |       |             |    |    |        |    |    |        |\n|  2 |                                   | June 29,2024       |       | July 1,2023       |      | June 29,2024 |       | July 1,2023 |    |    |        |    |    |        |\n|  3 | Provision for income taxes        | $                  | 4,046 |                   |      | $            | 2,852 |             |    | $  | 14,875 |    | $  | 12,699 |\n|  4 | Effective tax rate                | 15.9               | %     |                   | 12.5 | %            |       | 15.8        | %  |    | 14.6   | %  |    |        |\n|  5 | Statutory federal income tax rate | 21                 | %     |                   | 21   | %            |       | 21          | %  |    | 21     | %  |    |        |\n\nThe Company's effective tax rate for the third quarter and first nine months of 2024 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S. federal R&D credit, and tax benefits from share-based compensation, partially offset by state income taxes.\nThe Company's effective tax rate for the third quarter and first nine months of 2024 was higher compared to the same periods in 2023 due primarily to a higher effective tax rate on foreign earnings and lower tax benefits from share-based compensation, partially offset by lower state income taxes.\n\nLiquidity and Capital Resources\n\nThe Company believes its balances of cash, cash equivalents and unrestricted marketable securities, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.\nThe Company's contractual cash requirements have not changed materially since the 2023 Form 10-K, except for manufacturing purchase obligations.\n\nManufacturing Purchase Obligations\n\nThe Company utilizes several outsourcing partners to manufacture subassemblies for the Company's products and to perform final assembly and testing of finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. As of June 29, 2024, the Company had manufacturing purchase obligations of $38.4 billion, with $38.3 billion payable within 12 months.\n\nCapital Return Program\n\nIn addition to its contractual cash requirements, the Company has authorized share repurchase programs. The programs do not obligate the Company to acquire a minimum amount of shares. As of June 29, 2024, the Company's quarterly cash dividend was $0.25 per share. The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.\nDuring the third quarter of 2024, the Company repurchased $26.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.\n\nRecent Accounting Pronouncements\n\n\nIncome Taxes\n\nIn December 2023, the Financial Accounting Standards Board (the \"FASB\") issued Accounting Standards Update (\"ASU\") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (\"ASU 2023-09\"), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt ASU 2023-09 in its fourth quarter of 2026 using a prospective transition method.\n\nApple Inc. | Q3 2024 Form 10-Q | 17\n\n\n\n\n\n","context_markdown_without_headers":"\nSelling, General and Administrative\n\nSelling, general and administrative expense increased $347 million during the third quarter of 2024 and $793 million during the first nine months of 2024 compared to the same periods in 2023.\n\nProvision for Income Taxes\n\nProvision for income taxes, effective tax rate and statutory federal income tax rate for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 were as follows (dollars in millions):\n\n|    |                                   |                    |       |                   |      |              |       |             |    |    |        |    |    |        |\n|---:|:----------------------------------|:-------------------|:------|:------------------|:-----|:-------------|:------|:------------|:---|:---|:-------|:---|:---|:-------|\n|  1 |                                   | Three Months Ended |       | Nine Months Ended |      |              |       |             |    |    |        |    |    |        |\n|  2 |                                   | June 29,2024       |       | July 1,2023       |      | June 29,2024 |       | July 1,2023 |    |    |        |    |    |        |\n|  3 | Provision for income taxes        | $                  | 4,046 |                   |      | $            | 2,852 |             |    | $  | 14,875 |    | $  | 12,699 |\n|  4 | Effective tax rate                | 15.9               | %     |                   | 12.5 | %            |       | 15.8        | %  |    | 14.6   | %  |    |        |\n|  5 | Statutory federal income tax rate | 21                 | %     |                   | 21   | %            |       | 21          | %  |    | 21     | %  |    |        |\n\nThe Company's effective tax rate for the third quarter and first nine months of 2024 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S. federal R&D credit, and tax benefits from share-based compensation, partially offset by state income taxes.\nThe Company's effective tax rate for the third quarter and first nine months of 2024 was higher compared to the same periods in 2023 due primarily to a higher effective tax rate on foreign earnings and lower tax benefits from share-based compensation, partially offset by lower state income taxes.\n\nLiquidity and Capital Resources\n\nThe Company believes its balances of cash, cash equivalents and unrestricted marketable securities, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.\nThe Company's contractual cash requirements have not changed materially since the 2023 Form 10-K, except for manufacturing purchase obligations.\n\nManufacturing Purchase Obligations\n\nThe Company utilizes several outsourcing partners to manufacture subassemblies for the Company's products and to perform final assembly and testing of finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. As of June 29, 2024, the Company had manufacturing purchase obligations of $38.4 billion, with $38.3 billion payable within 12 months.\n\nCapital Return Program\n\nIn addition to its contractual cash requirements, the Company has authorized share repurchase programs. The programs do not obligate the Company to acquire a minimum amount of shares. As of June 29, 2024, the Company's quarterly cash dividend was $0.25 per share. The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.\nDuring the third quarter of 2024, the Company repurchased $26.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.\n\nRecent Accounting Pronouncements\n\n\nIncome Taxes\n\nIn December 2023, the Financial Accounting Standards Board (the \"FASB\") issued Accounting Standards Update (\"ASU\") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (\"ASU 2023-09\"), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt ASU 2023-09 in its fourth quarter of 2026 using a prospective transition method.\n\nApple Inc. | Q3 2024 Form 10-Q | 17\n\n\n\n\n\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 17: \nSelling, General and Administrative\n\nSelling, general and administrative expense increased $347 million during the third quarter of 2024 and $793 million during the first nine months of 2024 compared to the same periods in 2023.\n\nProvision for Income Taxes\n\nProvision for income taxes, effective tax rate and statutory federal income tax rate for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 were as follows (dollars in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"9\">Three Months Ended<\/td><td colspan=\"3\"><\/td><td colspan=\"9\">Nine Months Ended<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><\/tr><tr><td colspan=\"3\">Provision for income taxes<\/td><td>$<\/td><td>4,046 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>2,852 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>14,875 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>12,699 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Effective tax rate<\/td><td colspan=\"2\">15.9 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12.5 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">15.8 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14.6 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Statutory federal income tax rate<\/td><td colspan=\"2\">21 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">21 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">21 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">21 <\/td><td>%<\/td><\/tr><\/table>The Company's effective tax rate for the third quarter and first nine months of 2024 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S. federal R&D credit, and tax benefits from share-based compensation, partially offset by state income taxes.\nThe Company's effective tax rate for the third quarter and first nine months of 2024 was higher compared to the same periods in 2023 due primarily to a higher effective tax rate on foreign earnings and lower tax benefits from share-based compensation, partially offset by lower state income taxes.\n\nLiquidity and Capital Resources\n\nThe Company believes its balances of cash, cash equivalents and unrestricted marketable securities, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.\nThe Company's contractual cash requirements have not changed materially since the 2023 Form 10-K, except for manufacturing purchase obligations.\n\nManufacturing Purchase Obligations\n\nThe Company utilizes several outsourcing partners to manufacture subassemblies for the Company's products and to perform final assembly and testing of finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. As of June 29, 2024, the Company had manufacturing purchase obligations of $38.4 billion, with $38.3 billion payable within 12 months.\n\nCapital Return Program\n\nIn addition to its contractual cash requirements, the Company has authorized share repurchase programs. The programs do not obligate the Company to acquire a minimum amount of shares. As of June 29, 2024, the Company's quarterly cash dividend was $0.25 per share. The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.\nDuring the third quarter of 2024, the Company repurchased $26.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.\n\nRecent Accounting Pronouncements\n\n\nIncome Taxes\n\nIn December 2023, the Financial Accounting Standards Board (the \"FASB\") issued Accounting Standards Update (\"ASU\") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (\"ASU 2023-09\"), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt ASU 2023-09 in its fourth quarter of 2026 using a prospective transition method.\n\nApple Inc. | Q3 2024 Form 10-Q | 17\n\n\n\n\n\n","context_html_without_headers":"\nSelling, General and Administrative\n\nSelling, general and administrative expense increased $347 million during the third quarter of 2024 and $793 million during the first nine months of 2024 compared to the same periods in 2023.\n\nProvision for Income Taxes\n\nProvision for income taxes, effective tax rate and statutory federal income tax rate for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 were as follows (dollars in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"9\">Three Months Ended<\/td><td colspan=\"3\"><\/td><td colspan=\"9\">Nine Months Ended<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><\/tr><tr><td colspan=\"3\">Provision for income taxes<\/td><td>$<\/td><td>4,046 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>2,852 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>14,875 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>12,699 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Effective tax rate<\/td><td colspan=\"2\">15.9 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12.5 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">15.8 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14.6 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Statutory federal income tax rate<\/td><td colspan=\"2\">21 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">21 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">21 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">21 <\/td><td>%<\/td><\/tr><\/table>The Company's effective tax rate for the third quarter and first nine months of 2024 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S. federal R&D credit, and tax benefits from share-based compensation, partially offset by state income taxes.\nThe Company's effective tax rate for the third quarter and first nine months of 2024 was higher compared to the same periods in 2023 due primarily to a higher effective tax rate on foreign earnings and lower tax benefits from share-based compensation, partially offset by lower state income taxes.\n\nLiquidity and Capital Resources\n\nThe Company believes its balances of cash, cash equivalents and unrestricted marketable securities, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.\nThe Company's contractual cash requirements have not changed materially since the 2023 Form 10-K, except for manufacturing purchase obligations.\n\nManufacturing Purchase Obligations\n\nThe Company utilizes several outsourcing partners to manufacture subassemblies for the Company's products and to perform final assembly and testing of finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. As of June 29, 2024, the Company had manufacturing purchase obligations of $38.4 billion, with $38.3 billion payable within 12 months.\n\nCapital Return Program\n\nIn addition to its contractual cash requirements, the Company has authorized share repurchase programs. The programs do not obligate the Company to acquire a minimum amount of shares. As of June 29, 2024, the Company's quarterly cash dividend was $0.25 per share. The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.\nDuring the third quarter of 2024, the Company repurchased $26.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.\n\nRecent Accounting Pronouncements\n\n\nIncome Taxes\n\nIn December 2023, the Financial Accounting Standards Board (the \"FASB\") issued Accounting Standards Update (\"ASU\") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (\"ASU 2023-09\"), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt ASU 2023-09 in its fourth quarter of 2026 using a prospective transition method.\n\nApple Inc. | Q3 2024 Form 10-Q | 17\n\n\n\n\n\n"}
{"QID":"q_Ri010","Question":"How does Consumers ensure liquidity and financial stability?","ground_truth_answer":"Consumers Energy ensures liquidity and financial stability through a variety of financial strategies and instruments. The company relies on cash flows from operations, external financing, and stockholder contributions from CMS Energy to fund capital expenditures, retire debt, pay dividends, and fulfill other obligations. Consumers maintains robust access to capital markets and expects to continue leveraging these resources barring any major market disruptions.\n\nAs of March 31, 2024, Consumers had $1.3 billion available under its revolving credit facilities, which are used for general working capital purposes and issuing letters of credit. Additionally, Consumers operates a commercial paper program with a capacity of $500 million, supported by these credit facilities, to manage short-term funding needs. The company also benefits from CMS Energy\u2019s equity offering program, which provides flexibility to raise capital through various transactions.\nThese measures, along with stringent adherence to dividend restrictions and financial covenants, ensure Consumers maintains sufficient liquidity and financial resilience.","question_type":"Risk","page_number":"29","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 29: \nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n","context_markdown_without_headers":"\nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 29: \nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n","context_html_without_headers":"\nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n"}
{"QID":"q_Ri011","Question":" What strategies are in place to manage the company\u2019s debt-to-capital ratio?","ground_truth_answer":"CMS Energy and Consumers Energy implement several strategies to manage their debt-to-capital ratio and maintain financial stability. These include utilizing dividends and tax-sharing payments from subsidiaries, external financing, and capital transactions to support both utility and non-utility operations. The companies rely on cash flows from operations, external financing transactions, and stockholder contributions to fund capital expenditures, retire debt, and meet other financial obligations.\n\nTo ensure liquidity, Consumers maintains access to $1.3 billion in revolving credit facilities and operates a commercial paper program with a $500 million capacity, supported by these credit lines. As of March 31, 2024, there were no outstanding commercial paper notes, preserving borrowing capacity. CMS Energy also maintains a revolving credit facility with $521 million available as of the same date. These financial instruments provide flexibility for managing working capital and addressing debt maturities.\n\nAdditionally, CMS Energy has an equity offering program allowing for the issuance of common stock up to $1 billion, enhancing its ability to leverage favorable market conditions when necessary.","question_type":"Risk","page_number":"29","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 29: \nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n","context_markdown_without_headers":"\nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 29: \nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n","context_html_without_headers":"\nCapital Resources and Liquidity\n\nCMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non\u2011utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy's subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary's revenues, earnings, cash needs, and other factors. In addition, Consumers' ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers' dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization-Dividend Restrictions. During the three months ended March 31, 2024, Consumers paid $265 million in dividends on its common stock to CMS Energy.\nConsumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.\nFinancing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.\nIn 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in \"at the market\" offerings, or through forward sales transactions. There have been no sales of securities under this program. \nAt March 31, 2024, CMS Energy had $521 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers' commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers' revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At March 31, 2024, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy's and Consumers' secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements-Note 3, Financings and Capitalization.\n29\n\n\n\n\n"}
{"QID":"q_Ri012","Question":"What are Consumers\u2019 key priorities in environmental compliance?","ground_truth_answer":"Consumers Energy prioritizes environmental compliance across several critical areas to align with federal, state, and local regulations. A key focus is on air quality, where the company complies with standards like the Mercury and Air Toxics Standards (MATS) and the Cross-State Air Pollution Rule (CSAPR), including its recent Good Neighbor Plan revisions. While these regulations tighten emission allowances, Consumers anticipates minimal near-term impacts. In greenhouse gas management, the company is on track to eliminate coal-fueled generation by 2025, supporting its goal of net-zero carbon emissions by 2040. It aligns with Michigan\u2019s Healthy Climate Plan, which aims for carbon neutrality by 2050.\nConsumers also addresses coal combustion residuals (CCR) through compliance with EPA regulations, working with Michigan\u2019s EGLE to ensure safe closure of CCR units. Water compliance remains a priority, particularly under the Clean Water Act, where the company focuses on reducing impacts from cooling water intake systems and meeting effluent limitation guidelines for wastewater discharge. Additionally, Consumers actively complies with wildlife protection laws such as the Endangered Species Act and the Migratory Bird Treaty Act, ensuring minimal impact on protected species during the operation of renewable energy projects.\nThese efforts are supported by $240 million in planned capital expenditures from 2024 through 2028, which Consumers expects to recover in customer rates, ensuring both compliance and financial sustainability.","question_type":"Risk","page_number":"34, 35, 36","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 34: MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 35: strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 36: While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative, executive, or regulatory initiatives involving the potential regulation or reporting of greenhouse gases, it intends to move forward with its Clean Energy Plan, its present net-zero goals, and its emphasis on reliable and resilient supply. Litigation, international treaties, executive orders, federal laws and regulations (including regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately impact Consumers. Consumers may be required to:\n\u2022replace equipment\n\u2022install additional emission control equipment\n\u2022purchase emission allowances or credits (including potential greenhouse gas offset credits)\n\u2022curtail operations\n\u2022arrange for alternative sources of supply\n\u2022purchase or build facilities that generate fewer emissions\n\u2022mothball, sell, or retire facilities that generate certain emissions\n\u2022pursue energy efficiency or demand response measures more swiftly\n\u2022take other steps to manage, sequester, or lower the emission of greenhouse gases\nAlthough associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.\nCCRs: In 2015, the EPA published a rule regulating CCRs under RCRA. This rule adopts minimum standards for the disposal of non\u2011hazardous CCRs in CCR landfills and surface impoundments and criteria for the beneficial use of CCRs. The rule also sets out conditions under which some CCR units would be forced to cease receiving CCR wastewater and initiate closure. Due to continued litigation, many aspects of the rule have been remanded to the EPA, resulting in more proposed and final rules.\nSeparately, Congress passed legislation in 2016 allowing participating states to develop permitting programs for CCRs under RCRA Subtitle D. The EPA was granted authority to review these permitting programs to determine if permits issued under the proposed program would be as protective as the federal rule. Once approved, permits issued from an authorized state would replace the requirement to certify compliance with each aspect of the CCR rule. In 2020, EGLE submitted a regulatory package for Michigan's permit program to the EPA for its review, which is still pending.\nConsumers, with agreement from EGLE, completed the work necessary to initiate closure by excavating CCRs or placing a final cover over each of its relevant CCR units prior to the closure initiation deadline. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.\nWater: Multiple water-related regulations apply, or may apply, to Consumers.\nThe EPA regulates cooling water intake systems of existing electric generating plants under Section 316(b) of the Clean Water Act. The rules seek to reduce alleged harmful impacts on aquatic organisms, such as fish. In 2018, Consumers submitted to EGLE for approval all required studies and recommended plans to comply with Section 316(b) for its coal-fueled units, but has not yet received final approval.\nThe EPA also regulates the discharge of wastewater through its effluent limitation guidelines for steam electric generating plants. In 2020, the EPA revised previous guidelines related to the discharge of certain wastewater, but allowed for extension of the compliance deadline from the end of 2023 to the end of 2025, upon approval by EGLE through the NPDES permitting process. Consumers received such an \n36\n\n\n\n\n","context_markdown_without_headers":"MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n, While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative, executive, or regulatory initiatives involving the potential regulation or reporting of greenhouse gases, it intends to move forward with its Clean Energy Plan, its present net-zero goals, and its emphasis on reliable and resilient supply. Litigation, international treaties, executive orders, federal laws and regulations (including regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately impact Consumers. Consumers may be required to:\n\u2022replace equipment\n\u2022install additional emission control equipment\n\u2022purchase emission allowances or credits (including potential greenhouse gas offset credits)\n\u2022curtail operations\n\u2022arrange for alternative sources of supply\n\u2022purchase or build facilities that generate fewer emissions\n\u2022mothball, sell, or retire facilities that generate certain emissions\n\u2022pursue energy efficiency or demand response measures more swiftly\n\u2022take other steps to manage, sequester, or lower the emission of greenhouse gases\nAlthough associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.\nCCRs: In 2015, the EPA published a rule regulating CCRs under RCRA. This rule adopts minimum standards for the disposal of non\u2011hazardous CCRs in CCR landfills and surface impoundments and criteria for the beneficial use of CCRs. The rule also sets out conditions under which some CCR units would be forced to cease receiving CCR wastewater and initiate closure. Due to continued litigation, many aspects of the rule have been remanded to the EPA, resulting in more proposed and final rules.\nSeparately, Congress passed legislation in 2016 allowing participating states to develop permitting programs for CCRs under RCRA Subtitle D. The EPA was granted authority to review these permitting programs to determine if permits issued under the proposed program would be as protective as the federal rule. Once approved, permits issued from an authorized state would replace the requirement to certify compliance with each aspect of the CCR rule. In 2020, EGLE submitted a regulatory package for Michigan's permit program to the EPA for its review, which is still pending.\nConsumers, with agreement from EGLE, completed the work necessary to initiate closure by excavating CCRs or placing a final cover over each of its relevant CCR units prior to the closure initiation deadline. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.\nWater: Multiple water-related regulations apply, or may apply, to Consumers.\nThe EPA regulates cooling water intake systems of existing electric generating plants under Section 316(b) of the Clean Water Act. The rules seek to reduce alleged harmful impacts on aquatic organisms, such as fish. In 2018, Consumers submitted to EGLE for approval all required studies and recommended plans to comply with Section 316(b) for its coal-fueled units, but has not yet received final approval.\nThe EPA also regulates the discharge of wastewater through its effluent limitation guidelines for steam electric generating plants. In 2020, the EPA revised previous guidelines related to the discharge of certain wastewater, but allowed for extension of the compliance deadline from the end of 2023 to the end of 2025, upon approval by EGLE through the NPDES permitting process. Consumers received such an \n36\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 34: MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 35: strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 36: While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative, executive, or regulatory initiatives involving the potential regulation or reporting of greenhouse gases, it intends to move forward with its Clean Energy Plan, its present net-zero goals, and its emphasis on reliable and resilient supply. Litigation, international treaties, executive orders, federal laws and regulations (including regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately impact Consumers. Consumers may be required to:\n\u2022replace equipment\n\u2022install additional emission control equipment\n\u2022purchase emission allowances or credits (including potential greenhouse gas offset credits)\n\u2022curtail operations\n\u2022arrange for alternative sources of supply\n\u2022purchase or build facilities that generate fewer emissions\n\u2022mothball, sell, or retire facilities that generate certain emissions\n\u2022pursue energy efficiency or demand response measures more swiftly\n\u2022take other steps to manage, sequester, or lower the emission of greenhouse gases\nAlthough associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.\nCCRs: In 2015, the EPA published a rule regulating CCRs under RCRA. This rule adopts minimum standards for the disposal of non\u2011hazardous CCRs in CCR landfills and surface impoundments and criteria for the beneficial use of CCRs. The rule also sets out conditions under which some CCR units would be forced to cease receiving CCR wastewater and initiate closure. Due to continued litigation, many aspects of the rule have been remanded to the EPA, resulting in more proposed and final rules.\nSeparately, Congress passed legislation in 2016 allowing participating states to develop permitting programs for CCRs under RCRA Subtitle D. The EPA was granted authority to review these permitting programs to determine if permits issued under the proposed program would be as protective as the federal rule. Once approved, permits issued from an authorized state would replace the requirement to certify compliance with each aspect of the CCR rule. In 2020, EGLE submitted a regulatory package for Michigan's permit program to the EPA for its review, which is still pending.\nConsumers, with agreement from EGLE, completed the work necessary to initiate closure by excavating CCRs or placing a final cover over each of its relevant CCR units prior to the closure initiation deadline. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.\nWater: Multiple water-related regulations apply, or may apply, to Consumers.\nThe EPA regulates cooling water intake systems of existing electric generating plants under Section 316(b) of the Clean Water Act. The rules seek to reduce alleged harmful impacts on aquatic organisms, such as fish. In 2018, Consumers submitted to EGLE for approval all required studies and recommended plans to comply with Section 316(b) for its coal-fueled units, but has not yet received final approval.\nThe EPA also regulates the discharge of wastewater through its effluent limitation guidelines for steam electric generating plants. In 2020, the EPA revised previous guidelines related to the discharge of certain wastewater, but allowed for extension of the compliance deadline from the end of 2023 to the end of 2025, upon approval by EGLE through the NPDES permitting process. Consumers received such an \n36\n\n\n\n\n","context_html_without_headers":"MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n, While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative, executive, or regulatory initiatives involving the potential regulation or reporting of greenhouse gases, it intends to move forward with its Clean Energy Plan, its present net-zero goals, and its emphasis on reliable and resilient supply. Litigation, international treaties, executive orders, federal laws and regulations (including regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately impact Consumers. Consumers may be required to:\n\u2022replace equipment\n\u2022install additional emission control equipment\n\u2022purchase emission allowances or credits (including potential greenhouse gas offset credits)\n\u2022curtail operations\n\u2022arrange for alternative sources of supply\n\u2022purchase or build facilities that generate fewer emissions\n\u2022mothball, sell, or retire facilities that generate certain emissions\n\u2022pursue energy efficiency or demand response measures more swiftly\n\u2022take other steps to manage, sequester, or lower the emission of greenhouse gases\nAlthough associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.\nCCRs: In 2015, the EPA published a rule regulating CCRs under RCRA. This rule adopts minimum standards for the disposal of non\u2011hazardous CCRs in CCR landfills and surface impoundments and criteria for the beneficial use of CCRs. The rule also sets out conditions under which some CCR units would be forced to cease receiving CCR wastewater and initiate closure. Due to continued litigation, many aspects of the rule have been remanded to the EPA, resulting in more proposed and final rules.\nSeparately, Congress passed legislation in 2016 allowing participating states to develop permitting programs for CCRs under RCRA Subtitle D. The EPA was granted authority to review these permitting programs to determine if permits issued under the proposed program would be as protective as the federal rule. Once approved, permits issued from an authorized state would replace the requirement to certify compliance with each aspect of the CCR rule. In 2020, EGLE submitted a regulatory package for Michigan's permit program to the EPA for its review, which is still pending.\nConsumers, with agreement from EGLE, completed the work necessary to initiate closure by excavating CCRs or placing a final cover over each of its relevant CCR units prior to the closure initiation deadline. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.\nWater: Multiple water-related regulations apply, or may apply, to Consumers.\nThe EPA regulates cooling water intake systems of existing electric generating plants under Section 316(b) of the Clean Water Act. The rules seek to reduce alleged harmful impacts on aquatic organisms, such as fish. In 2018, Consumers submitted to EGLE for approval all required studies and recommended plans to comply with Section 316(b) for its coal-fueled units, but has not yet received final approval.\nThe EPA also regulates the discharge of wastewater through its effluent limitation guidelines for steam electric generating plants. In 2020, the EPA revised previous guidelines related to the discharge of certain wastewater, but allowed for extension of the compliance deadline from the end of 2023 to the end of 2025, upon approval by EGLE through the NPDES permitting process. Consumers received such an \n36\n\n\n\n\n"}
{"QID":"q_Ri013","Question":"What strategic initiatives are in place to expand Fortinet\u2019s market presence?","ground_truth_answer":"Fortinet is expanding its market presence through several strategic initiatives centered around innovation, global reach, and customer engagement. Its integrated Fortinet Security Fabric platform combines secure networking, Unified Secure Access Service Edge (SASE), and AI-driven Security Operations (SecOps) to meet diverse customer needs across industries such as financial services, healthcare, retail, and government. The company leverages proprietary technologies, including FortiOS and ASIC hardware, to enhance performance and scalability, delivering over 30 functions across physical, virtual, cloud, and SaaS environments. Fortinet's commitment to innovation is reflected in its extensive patent portfolio, comprising 985 U.S. patents and 1,323 global patents as of June 30, 2024. Additionally, Fortinet maintains a robust global presence with R&D centers in the United States and Canada and support centers worldwide. To address the cybersecurity skills gap, the Fortinet Training Institute has issued over one million certifications, fostering a skilled workforce and strengthening customer trust. These initiatives position Fortinet as a leader in the cybersecurity market.","question_type":"Risk","page_number":"27","accession_number":"0001262039-24-000037","item":"ITEM 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations","context_markdown_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 27: \u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n","context_markdown_without_headers":"\u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n","context_html_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 27: \u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n","context_html_without_headers":"\u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n"}
{"QID":"q_Ri014","Question":"What strategies are implemented to ensure operational resilience against IT failures?","ground_truth_answer":"Fortinet implements several strategies to ensure operational resilience against IT failures. The company relies on multiple layers of security, including advanced threat protection, data encryption, and continuous system monitoring, to protect its internal enterprise IT networks, operational networks, and research and development networks. These measures are designed to safeguard against a range of threats, such as phishing attacks, ransomware, denial-of-service attacks, and vulnerabilities in third-party hardware and software. Additionally, Fortinet acknowledges the risk of insider threats and has programs and training in place to mitigate this risk, though it notes that these may not be fully effective in all cases. The company also highlights the importance of business continuity and disaster recovery plans, including system redundancies and backups hosted across its data centers, colocation vendors, and public cloud providers. By distributing its operations and hosting services across multiple environments, Fortinet aims to reduce the risk of complete service disruption due to IT failures. Moreover, Fortinet continuously monitors and upgrades its internal systems, such as ERP and CRM, to ensure they meet operational requirements and provide reliable support for critical business functions.","question_type":"Risk","page_number":"63, 64","accession_number":"0001262039-24-000037","item":"ITEM 1A. Risk Factors","context_markdown_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 63: and face additional costs associated with any failure to meet service-level agreements. Any service-level failures could adversely affect our business, financial condition and results of operations.\n\nRisks Related to our Systems and Technology\n\nIf our internal enterprise IT networks, on which we conduct internal business and interface externally, our operational networks, through which we connect to customers, vendors and partners systems and provide services, or our research and development networks, our back-end labs and cloud stacks hosted in our data centers, colocation vendors or public cloud providers, through which we research, develop and host products and services, are compromised, public perception of our products and services may be harmed, our customers may be breached and harmed, we may become subject to liability, and our business, operating results and stock price may be adversely impacted.\nOur success depends on the market's confidence in our ability to provide effective network security protection. Despite our efforts and processes to prevent breaches of our internal networks, systems and websites, whether in our owned data centers, cloud providers or colocations, we are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, attempts to overload our servers with denial-of-service, vulnerabilities in vendor hardware and software that we leverage, advanced persistent threats from sophisticated actors and other cyber-attacks and similar disruptions from unauthorized access to our internal networks, systems or websites, whether in our owned data centers, cloud providers or colocations. Our security measures may also be breached due to employee error, malfeasance or otherwise, which breaches may be more difficult to detect than outsider threats, and the existing programs and trainings we have in place to prevent such insider threats may not be effective or sufficient. Third parties may also attempt to fraudulently induce our employees to transfer funds or disclose information in order to gain access to our networks and confidential information. Third parties may also send our customers or others malware or malicious emails that falsely indicate that we are the source, potentially causing lost confidence in us and reputational harm. We cannot guarantee that the measures we have taken to protect our networks, systems and websites, whether in our owned data centers, cloud providers or colocations, will provide adequate security. Moreover, because we provide network security products, we may be a more attractive target for attacks by computer hackers and any security breaches and other security incidents involving us may result in more harm to our reputation and brand than companies that do not sell network security solutions. Hackers and malicious parties may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products and customers, that impersonate our update servers in an effort to access customer networks and negatively impact customers, or otherwise exploit any security vulnerabilities of our products, or attempt to fraudulently induce our employees, customers or others to disclose passwords or other sensitive information or unwittingly provide access to our internal networks, systems or data. Moreover, the threat landscape continues to evolve as a result of new technologies, including artificial intelligence (\"AI\"), and malicious parties may use AI to help attack our solutions, systems, and our customers.\nFor example, from time to time, we have discovered that unauthorized parties have targeted us using sophisticated techniques, including by stealing technical data and attempting to steal private encryption keys, in an effort to both impersonate our products and threat intelligence update services and possibly attempt other attack methodologies. Using these techniques, these unauthorized parties have tried, and may in the future try, to gain access to certain of our and our customers' systems. We have also, for example, discovered that unauthorized parties have targeted vulnerabilities in our product software and infrastructure in an effort to gain entry into our customers' networks. In addition, in general threat actors use dark web forums to sell organizations' stolen credentials. If threat actors sell valid credentials used by our customers to access our services, it is possible that unauthorized third parties may use such stolen credentials to try to gain access to our services. These and other hacking efforts against us and our customers may be ongoing and may happen in the future.\nAlthough we take numerous measures and implement multiple layers of security to protect our networks, we cannot guarantee that our security products, processes and services will secure against all threats. Further, we cannot be sure that third parties have not been, or will not in the future be, successful in improperly accessing our systems and our customers' systems, which could negatively impact us and our customers. An actual breach could significantly harm us and our customers, and an actual or perceived breach, or any other actual or perceived data security incident, threat or vulnerability, that involves our supply chains, networks, systems or websites and\/or our customers' supply chains, networks, systems or websites could adversely affect the market perception of our products and services and investor confidence in our company. Any breach of our networks, systems or websites could impair our ability to operate our business, including our ability to provide FortiGuard and other security subscription and FortiCare technical support services to our end-customers, lead to interruptions or system slowdowns, cause loss of critical data or lead to the unauthorized disclosure or use of confidential, proprietary or sensitive information. We could also be subject to liability and litigation and reputational harm and our channel partners and end-customers may be harmed, lose confidence in us and decrease or cease using our products and services. Any breach of our internal networks, systems or websites could have an adverse effect on our business, operating results and stock price.\nIn addition, there has been a general increase in phishing attempts and spam emails as well as social engineering attempts from hackers, and many of our employees continue to work remotely which may pose additional data security risks in \n63\n\n\n\n\n, Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 64: the event remote work environments are not as secure as office environments. Any security incident could negatively impact our reputation and results of operations.\nIf we do not appropriately manage any future growth, including through the expansion of our real estate facilities, or are unable to improve our systems, processes and controls, our operating results will be negatively affected.\n\nWe rely heavily on information technology to help manage critical functions such as order configuration, pricing and quoting, revenue recognition, financial forecasts, inventory and supply chain management and trade compliance reviews. In addition, we have been slow to adopt and implement certain automated functions, which could have a negative impact on our business. For example, our order processing relies on both manual data entry of customer purchase orders received through email and electronic data interchange (EDI). Due to the use of manual processes and the fact that we may receive a large amount of our orders in the last few weeks of any given quarter, an interruption in our email service or other systems could result in delayed order fulfillment and decreased billings and revenue for that quarter.\nTo manage any future growth effectively, we must continue to improve and expand our information technology and financial, operating, security and administrative systems and controls, and our business continuity and disaster recovery plans and processes. We must also continue to manage headcount, capital and processes in an efficient manner. We may not be able to successfully implement requisite improvements to these systems, controls and processes, such as system capacity, access, security and change management controls, in a timely or efficient manner. Our failure to improve our systems and processes, or their failure to operate in the intended manner, whether as a result of the significant growth of our business or otherwise, may result in our inability to manage the growth of our business and to accurately forecast our revenue, expenses and earnings, or to prevent certain losses. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely and reliable reports on our financial and operating results and could impact the effectiveness of our internal control over financial reporting. \nIn addition, our systems, processes and controls may not prevent or detect all errors, omissions, malfeasance or fraud, such as corruption and improper \"side agreements\" that may impact revenue recognition or result in financial liability. Our productivity and the quality of our products and services may also be adversely affected if we do not integrate and train our new employees quickly and effectively. Any future growth would add complexity to our organization and require effective coordination throughout our organization. Failure to ensure appropriate systems, processes and controls and to manage any future growth effectively could result in increased costs and harm our reputation and results of operations. \nWe have expanded our office real estate holdings to meet our projected growing need for office space. These plans will require significant capital expenditure over the next several years and involve certain risks, including impairment charges and acceleration of depreciation, changes in future business strategy that may decrease the need for expansion (such as a decrease in headcount or increase in work from home) and risks related to construction. Future changes in growth or fluctuations in cash flow may also negatively impact our ability to pay for these projects or free cash flow. Additionally, inaccuracies in our projected capital expenditures could negatively impact our business, operating results and financial condition.\n\nWe may experience difficulties maintaining and expanding our internal business management systems.\n\nThe maintenance of our internal business management systems, such as our Enterprise Resource Planning (\"ERP\") and Customer Relationship Management (\"CRM\") systems, has required, and will continue to require, the investment of significant financial and human resources. In addition, we may choose to upgrade or expand the functionality of our internal systems, leading to additional costs. Deficiencies in our design or maintenance of our internal systems may adversely affect our ability to sell products and services, forecast orders, process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results or otherwise operate our business. Additionally, if any of our internal systems does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed. Further, we may expand the scope of our ERP and CRM systems. Our operating results may be adversely affected if these upgrades or expansions are delayed or if the systems do not function as intended or are not sufficient to meet our operating requirements.\nWe may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.\nAI presents new risks and challenges that may affect our business. We have made, and expect to continue to make investments to integrate AI and machine learning technology into our solutions, as evidenced by our acquisition of Lacework. AI presents risks, challenges, and potentially unintended consequences that could impact our ability to effectively use of AI successfully in our business. Given the nature of AI technology, we face an evolving regulatory landscape and significant competition from other companies. Our AI efforts may not be successful and our competitors may incorporate AI into their \n64\n\n\n\n\n","context_markdown_without_headers":"and face additional costs associated with any failure to meet service-level agreements. Any service-level failures could adversely affect our business, financial condition and results of operations.\n\nRisks Related to our Systems and Technology\n\nIf our internal enterprise IT networks, on which we conduct internal business and interface externally, our operational networks, through which we connect to customers, vendors and partners systems and provide services, or our research and development networks, our back-end labs and cloud stacks hosted in our data centers, colocation vendors or public cloud providers, through which we research, develop and host products and services, are compromised, public perception of our products and services may be harmed, our customers may be breached and harmed, we may become subject to liability, and our business, operating results and stock price may be adversely impacted.\nOur success depends on the market's confidence in our ability to provide effective network security protection. Despite our efforts and processes to prevent breaches of our internal networks, systems and websites, whether in our owned data centers, cloud providers or colocations, we are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, attempts to overload our servers with denial-of-service, vulnerabilities in vendor hardware and software that we leverage, advanced persistent threats from sophisticated actors and other cyber-attacks and similar disruptions from unauthorized access to our internal networks, systems or websites, whether in our owned data centers, cloud providers or colocations. Our security measures may also be breached due to employee error, malfeasance or otherwise, which breaches may be more difficult to detect than outsider threats, and the existing programs and trainings we have in place to prevent such insider threats may not be effective or sufficient. Third parties may also attempt to fraudulently induce our employees to transfer funds or disclose information in order to gain access to our networks and confidential information. Third parties may also send our customers or others malware or malicious emails that falsely indicate that we are the source, potentially causing lost confidence in us and reputational harm. We cannot guarantee that the measures we have taken to protect our networks, systems and websites, whether in our owned data centers, cloud providers or colocations, will provide adequate security. Moreover, because we provide network security products, we may be a more attractive target for attacks by computer hackers and any security breaches and other security incidents involving us may result in more harm to our reputation and brand than companies that do not sell network security solutions. Hackers and malicious parties may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products and customers, that impersonate our update servers in an effort to access customer networks and negatively impact customers, or otherwise exploit any security vulnerabilities of our products, or attempt to fraudulently induce our employees, customers or others to disclose passwords or other sensitive information or unwittingly provide access to our internal networks, systems or data. Moreover, the threat landscape continues to evolve as a result of new technologies, including artificial intelligence (\"AI\"), and malicious parties may use AI to help attack our solutions, systems, and our customers.\nFor example, from time to time, we have discovered that unauthorized parties have targeted us using sophisticated techniques, including by stealing technical data and attempting to steal private encryption keys, in an effort to both impersonate our products and threat intelligence update services and possibly attempt other attack methodologies. Using these techniques, these unauthorized parties have tried, and may in the future try, to gain access to certain of our and our customers' systems. We have also, for example, discovered that unauthorized parties have targeted vulnerabilities in our product software and infrastructure in an effort to gain entry into our customers' networks. In addition, in general threat actors use dark web forums to sell organizations' stolen credentials. If threat actors sell valid credentials used by our customers to access our services, it is possible that unauthorized third parties may use such stolen credentials to try to gain access to our services. These and other hacking efforts against us and our customers may be ongoing and may happen in the future.\nAlthough we take numerous measures and implement multiple layers of security to protect our networks, we cannot guarantee that our security products, processes and services will secure against all threats. Further, we cannot be sure that third parties have not been, or will not in the future be, successful in improperly accessing our systems and our customers' systems, which could negatively impact us and our customers. An actual breach could significantly harm us and our customers, and an actual or perceived breach, or any other actual or perceived data security incident, threat or vulnerability, that involves our supply chains, networks, systems or websites and\/or our customers' supply chains, networks, systems or websites could adversely affect the market perception of our products and services and investor confidence in our company. Any breach of our networks, systems or websites could impair our ability to operate our business, including our ability to provide FortiGuard and other security subscription and FortiCare technical support services to our end-customers, lead to interruptions or system slowdowns, cause loss of critical data or lead to the unauthorized disclosure or use of confidential, proprietary or sensitive information. We could also be subject to liability and litigation and reputational harm and our channel partners and end-customers may be harmed, lose confidence in us and decrease or cease using our products and services. Any breach of our internal networks, systems or websites could have an adverse effect on our business, operating results and stock price.\nIn addition, there has been a general increase in phishing attempts and spam emails as well as social engineering attempts from hackers, and many of our employees continue to work remotely which may pose additional data security risks in \n63\n\n\n\n\n, the event remote work environments are not as secure as office environments. Any security incident could negatively impact our reputation and results of operations.\nIf we do not appropriately manage any future growth, including through the expansion of our real estate facilities, or are unable to improve our systems, processes and controls, our operating results will be negatively affected.\n\nWe rely heavily on information technology to help manage critical functions such as order configuration, pricing and quoting, revenue recognition, financial forecasts, inventory and supply chain management and trade compliance reviews. In addition, we have been slow to adopt and implement certain automated functions, which could have a negative impact on our business. For example, our order processing relies on both manual data entry of customer purchase orders received through email and electronic data interchange (EDI). Due to the use of manual processes and the fact that we may receive a large amount of our orders in the last few weeks of any given quarter, an interruption in our email service or other systems could result in delayed order fulfillment and decreased billings and revenue for that quarter.\nTo manage any future growth effectively, we must continue to improve and expand our information technology and financial, operating, security and administrative systems and controls, and our business continuity and disaster recovery plans and processes. We must also continue to manage headcount, capital and processes in an efficient manner. We may not be able to successfully implement requisite improvements to these systems, controls and processes, such as system capacity, access, security and change management controls, in a timely or efficient manner. Our failure to improve our systems and processes, or their failure to operate in the intended manner, whether as a result of the significant growth of our business or otherwise, may result in our inability to manage the growth of our business and to accurately forecast our revenue, expenses and earnings, or to prevent certain losses. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely and reliable reports on our financial and operating results and could impact the effectiveness of our internal control over financial reporting. \nIn addition, our systems, processes and controls may not prevent or detect all errors, omissions, malfeasance or fraud, such as corruption and improper \"side agreements\" that may impact revenue recognition or result in financial liability. Our productivity and the quality of our products and services may also be adversely affected if we do not integrate and train our new employees quickly and effectively. Any future growth would add complexity to our organization and require effective coordination throughout our organization. Failure to ensure appropriate systems, processes and controls and to manage any future growth effectively could result in increased costs and harm our reputation and results of operations. \nWe have expanded our office real estate holdings to meet our projected growing need for office space. These plans will require significant capital expenditure over the next several years and involve certain risks, including impairment charges and acceleration of depreciation, changes in future business strategy that may decrease the need for expansion (such as a decrease in headcount or increase in work from home) and risks related to construction. Future changes in growth or fluctuations in cash flow may also negatively impact our ability to pay for these projects or free cash flow. Additionally, inaccuracies in our projected capital expenditures could negatively impact our business, operating results and financial condition.\n\nWe may experience difficulties maintaining and expanding our internal business management systems.\n\nThe maintenance of our internal business management systems, such as our Enterprise Resource Planning (\"ERP\") and Customer Relationship Management (\"CRM\") systems, has required, and will continue to require, the investment of significant financial and human resources. In addition, we may choose to upgrade or expand the functionality of our internal systems, leading to additional costs. Deficiencies in our design or maintenance of our internal systems may adversely affect our ability to sell products and services, forecast orders, process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results or otherwise operate our business. Additionally, if any of our internal systems does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed. Further, we may expand the scope of our ERP and CRM systems. Our operating results may be adversely affected if these upgrades or expansions are delayed or if the systems do not function as intended or are not sufficient to meet our operating requirements.\nWe may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.\nAI presents new risks and challenges that may affect our business. We have made, and expect to continue to make investments to integrate AI and machine learning technology into our solutions, as evidenced by our acquisition of Lacework. AI presents risks, challenges, and potentially unintended consequences that could impact our ability to effectively use of AI successfully in our business. Given the nature of AI technology, we face an evolving regulatory landscape and significant competition from other companies. Our AI efforts may not be successful and our competitors may incorporate AI into their \n64\n\n\n\n\n","context_html_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 63: and face additional costs associated with any failure to meet service-level agreements. Any service-level failures could adversely affect our business, financial condition and results of operations.\n\nRisks Related to our Systems and Technology\n\nIf our internal enterprise IT networks, on which we conduct internal business and interface externally, our operational networks, through which we connect to customers, vendors and partners systems and provide services, or our research and development networks, our back-end labs and cloud stacks hosted in our data centers, colocation vendors or public cloud providers, through which we research, develop and host products and services, are compromised, public perception of our products and services may be harmed, our customers may be breached and harmed, we may become subject to liability, and our business, operating results and stock price may be adversely impacted.\nOur success depends on the market's confidence in our ability to provide effective network security protection. Despite our efforts and processes to prevent breaches of our internal networks, systems and websites, whether in our owned data centers, cloud providers or colocations, we are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, attempts to overload our servers with denial-of-service, vulnerabilities in vendor hardware and software that we leverage, advanced persistent threats from sophisticated actors and other cyber-attacks and similar disruptions from unauthorized access to our internal networks, systems or websites, whether in our owned data centers, cloud providers or colocations. Our security measures may also be breached due to employee error, malfeasance or otherwise, which breaches may be more difficult to detect than outsider threats, and the existing programs and trainings we have in place to prevent such insider threats may not be effective or sufficient. Third parties may also attempt to fraudulently induce our employees to transfer funds or disclose information in order to gain access to our networks and confidential information. Third parties may also send our customers or others malware or malicious emails that falsely indicate that we are the source, potentially causing lost confidence in us and reputational harm. We cannot guarantee that the measures we have taken to protect our networks, systems and websites, whether in our owned data centers, cloud providers or colocations, will provide adequate security. Moreover, because we provide network security products, we may be a more attractive target for attacks by computer hackers and any security breaches and other security incidents involving us may result in more harm to our reputation and brand than companies that do not sell network security solutions. Hackers and malicious parties may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products and customers, that impersonate our update servers in an effort to access customer networks and negatively impact customers, or otherwise exploit any security vulnerabilities of our products, or attempt to fraudulently induce our employees, customers or others to disclose passwords or other sensitive information or unwittingly provide access to our internal networks, systems or data. Moreover, the threat landscape continues to evolve as a result of new technologies, including artificial intelligence (\"AI\"), and malicious parties may use AI to help attack our solutions, systems, and our customers.\nFor example, from time to time, we have discovered that unauthorized parties have targeted us using sophisticated techniques, including by stealing technical data and attempting to steal private encryption keys, in an effort to both impersonate our products and threat intelligence update services and possibly attempt other attack methodologies. Using these techniques, these unauthorized parties have tried, and may in the future try, to gain access to certain of our and our customers' systems. We have also, for example, discovered that unauthorized parties have targeted vulnerabilities in our product software and infrastructure in an effort to gain entry into our customers' networks. In addition, in general threat actors use dark web forums to sell organizations' stolen credentials. If threat actors sell valid credentials used by our customers to access our services, it is possible that unauthorized third parties may use such stolen credentials to try to gain access to our services. These and other hacking efforts against us and our customers may be ongoing and may happen in the future.\nAlthough we take numerous measures and implement multiple layers of security to protect our networks, we cannot guarantee that our security products, processes and services will secure against all threats. Further, we cannot be sure that third parties have not been, or will not in the future be, successful in improperly accessing our systems and our customers' systems, which could negatively impact us and our customers. An actual breach could significantly harm us and our customers, and an actual or perceived breach, or any other actual or perceived data security incident, threat or vulnerability, that involves our supply chains, networks, systems or websites and\/or our customers' supply chains, networks, systems or websites could adversely affect the market perception of our products and services and investor confidence in our company. Any breach of our networks, systems or websites could impair our ability to operate our business, including our ability to provide FortiGuard and other security subscription and FortiCare technical support services to our end-customers, lead to interruptions or system slowdowns, cause loss of critical data or lead to the unauthorized disclosure or use of confidential, proprietary or sensitive information. We could also be subject to liability and litigation and reputational harm and our channel partners and end-customers may be harmed, lose confidence in us and decrease or cease using our products and services. Any breach of our internal networks, systems or websites could have an adverse effect on our business, operating results and stock price.\nIn addition, there has been a general increase in phishing attempts and spam emails as well as social engineering attempts from hackers, and many of our employees continue to work remotely which may pose additional data security risks in \n63\n\n\n\n\n, Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 64: the event remote work environments are not as secure as office environments. Any security incident could negatively impact our reputation and results of operations.\nIf we do not appropriately manage any future growth, including through the expansion of our real estate facilities, or are unable to improve our systems, processes and controls, our operating results will be negatively affected.\n\nWe rely heavily on information technology to help manage critical functions such as order configuration, pricing and quoting, revenue recognition, financial forecasts, inventory and supply chain management and trade compliance reviews. In addition, we have been slow to adopt and implement certain automated functions, which could have a negative impact on our business. For example, our order processing relies on both manual data entry of customer purchase orders received through email and electronic data interchange (EDI). Due to the use of manual processes and the fact that we may receive a large amount of our orders in the last few weeks of any given quarter, an interruption in our email service or other systems could result in delayed order fulfillment and decreased billings and revenue for that quarter.\nTo manage any future growth effectively, we must continue to improve and expand our information technology and financial, operating, security and administrative systems and controls, and our business continuity and disaster recovery plans and processes. We must also continue to manage headcount, capital and processes in an efficient manner. We may not be able to successfully implement requisite improvements to these systems, controls and processes, such as system capacity, access, security and change management controls, in a timely or efficient manner. Our failure to improve our systems and processes, or their failure to operate in the intended manner, whether as a result of the significant growth of our business or otherwise, may result in our inability to manage the growth of our business and to accurately forecast our revenue, expenses and earnings, or to prevent certain losses. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely and reliable reports on our financial and operating results and could impact the effectiveness of our internal control over financial reporting. \nIn addition, our systems, processes and controls may not prevent or detect all errors, omissions, malfeasance or fraud, such as corruption and improper \"side agreements\" that may impact revenue recognition or result in financial liability. Our productivity and the quality of our products and services may also be adversely affected if we do not integrate and train our new employees quickly and effectively. Any future growth would add complexity to our organization and require effective coordination throughout our organization. Failure to ensure appropriate systems, processes and controls and to manage any future growth effectively could result in increased costs and harm our reputation and results of operations. \nWe have expanded our office real estate holdings to meet our projected growing need for office space. These plans will require significant capital expenditure over the next several years and involve certain risks, including impairment charges and acceleration of depreciation, changes in future business strategy that may decrease the need for expansion (such as a decrease in headcount or increase in work from home) and risks related to construction. Future changes in growth or fluctuations in cash flow may also negatively impact our ability to pay for these projects or free cash flow. Additionally, inaccuracies in our projected capital expenditures could negatively impact our business, operating results and financial condition.\n\nWe may experience difficulties maintaining and expanding our internal business management systems.\n\nThe maintenance of our internal business management systems, such as our Enterprise Resource Planning (\"ERP\") and Customer Relationship Management (\"CRM\") systems, has required, and will continue to require, the investment of significant financial and human resources. In addition, we may choose to upgrade or expand the functionality of our internal systems, leading to additional costs. Deficiencies in our design or maintenance of our internal systems may adversely affect our ability to sell products and services, forecast orders, process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results or otherwise operate our business. Additionally, if any of our internal systems does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed. Further, we may expand the scope of our ERP and CRM systems. Our operating results may be adversely affected if these upgrades or expansions are delayed or if the systems do not function as intended or are not sufficient to meet our operating requirements.\nWe may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.\nAI presents new risks and challenges that may affect our business. We have made, and expect to continue to make investments to integrate AI and machine learning technology into our solutions, as evidenced by our acquisition of Lacework. AI presents risks, challenges, and potentially unintended consequences that could impact our ability to effectively use of AI successfully in our business. Given the nature of AI technology, we face an evolving regulatory landscape and significant competition from other companies. Our AI efforts may not be successful and our competitors may incorporate AI into their \n64\n\n\n\n\n","context_html_without_headers":"and face additional costs associated with any failure to meet service-level agreements. Any service-level failures could adversely affect our business, financial condition and results of operations.\n\nRisks Related to our Systems and Technology\n\nIf our internal enterprise IT networks, on which we conduct internal business and interface externally, our operational networks, through which we connect to customers, vendors and partners systems and provide services, or our research and development networks, our back-end labs and cloud stacks hosted in our data centers, colocation vendors or public cloud providers, through which we research, develop and host products and services, are compromised, public perception of our products and services may be harmed, our customers may be breached and harmed, we may become subject to liability, and our business, operating results and stock price may be adversely impacted.\nOur success depends on the market's confidence in our ability to provide effective network security protection. Despite our efforts and processes to prevent breaches of our internal networks, systems and websites, whether in our owned data centers, cloud providers or colocations, we are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, attempts to overload our servers with denial-of-service, vulnerabilities in vendor hardware and software that we leverage, advanced persistent threats from sophisticated actors and other cyber-attacks and similar disruptions from unauthorized access to our internal networks, systems or websites, whether in our owned data centers, cloud providers or colocations. Our security measures may also be breached due to employee error, malfeasance or otherwise, which breaches may be more difficult to detect than outsider threats, and the existing programs and trainings we have in place to prevent such insider threats may not be effective or sufficient. Third parties may also attempt to fraudulently induce our employees to transfer funds or disclose information in order to gain access to our networks and confidential information. Third parties may also send our customers or others malware or malicious emails that falsely indicate that we are the source, potentially causing lost confidence in us and reputational harm. We cannot guarantee that the measures we have taken to protect our networks, systems and websites, whether in our owned data centers, cloud providers or colocations, will provide adequate security. Moreover, because we provide network security products, we may be a more attractive target for attacks by computer hackers and any security breaches and other security incidents involving us may result in more harm to our reputation and brand than companies that do not sell network security solutions. Hackers and malicious parties may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products and customers, that impersonate our update servers in an effort to access customer networks and negatively impact customers, or otherwise exploit any security vulnerabilities of our products, or attempt to fraudulently induce our employees, customers or others to disclose passwords or other sensitive information or unwittingly provide access to our internal networks, systems or data. Moreover, the threat landscape continues to evolve as a result of new technologies, including artificial intelligence (\"AI\"), and malicious parties may use AI to help attack our solutions, systems, and our customers.\nFor example, from time to time, we have discovered that unauthorized parties have targeted us using sophisticated techniques, including by stealing technical data and attempting to steal private encryption keys, in an effort to both impersonate our products and threat intelligence update services and possibly attempt other attack methodologies. Using these techniques, these unauthorized parties have tried, and may in the future try, to gain access to certain of our and our customers' systems. We have also, for example, discovered that unauthorized parties have targeted vulnerabilities in our product software and infrastructure in an effort to gain entry into our customers' networks. In addition, in general threat actors use dark web forums to sell organizations' stolen credentials. If threat actors sell valid credentials used by our customers to access our services, it is possible that unauthorized third parties may use such stolen credentials to try to gain access to our services. These and other hacking efforts against us and our customers may be ongoing and may happen in the future.\nAlthough we take numerous measures and implement multiple layers of security to protect our networks, we cannot guarantee that our security products, processes and services will secure against all threats. Further, we cannot be sure that third parties have not been, or will not in the future be, successful in improperly accessing our systems and our customers' systems, which could negatively impact us and our customers. An actual breach could significantly harm us and our customers, and an actual or perceived breach, or any other actual or perceived data security incident, threat or vulnerability, that involves our supply chains, networks, systems or websites and\/or our customers' supply chains, networks, systems or websites could adversely affect the market perception of our products and services and investor confidence in our company. Any breach of our networks, systems or websites could impair our ability to operate our business, including our ability to provide FortiGuard and other security subscription and FortiCare technical support services to our end-customers, lead to interruptions or system slowdowns, cause loss of critical data or lead to the unauthorized disclosure or use of confidential, proprietary or sensitive information. We could also be subject to liability and litigation and reputational harm and our channel partners and end-customers may be harmed, lose confidence in us and decrease or cease using our products and services. Any breach of our internal networks, systems or websites could have an adverse effect on our business, operating results and stock price.\nIn addition, there has been a general increase in phishing attempts and spam emails as well as social engineering attempts from hackers, and many of our employees continue to work remotely which may pose additional data security risks in \n63\n\n\n\n\n, the event remote work environments are not as secure as office environments. Any security incident could negatively impact our reputation and results of operations.\nIf we do not appropriately manage any future growth, including through the expansion of our real estate facilities, or are unable to improve our systems, processes and controls, our operating results will be negatively affected.\n\nWe rely heavily on information technology to help manage critical functions such as order configuration, pricing and quoting, revenue recognition, financial forecasts, inventory and supply chain management and trade compliance reviews. In addition, we have been slow to adopt and implement certain automated functions, which could have a negative impact on our business. For example, our order processing relies on both manual data entry of customer purchase orders received through email and electronic data interchange (EDI). Due to the use of manual processes and the fact that we may receive a large amount of our orders in the last few weeks of any given quarter, an interruption in our email service or other systems could result in delayed order fulfillment and decreased billings and revenue for that quarter.\nTo manage any future growth effectively, we must continue to improve and expand our information technology and financial, operating, security and administrative systems and controls, and our business continuity and disaster recovery plans and processes. We must also continue to manage headcount, capital and processes in an efficient manner. We may not be able to successfully implement requisite improvements to these systems, controls and processes, such as system capacity, access, security and change management controls, in a timely or efficient manner. Our failure to improve our systems and processes, or their failure to operate in the intended manner, whether as a result of the significant growth of our business or otherwise, may result in our inability to manage the growth of our business and to accurately forecast our revenue, expenses and earnings, or to prevent certain losses. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely and reliable reports on our financial and operating results and could impact the effectiveness of our internal control over financial reporting. \nIn addition, our systems, processes and controls may not prevent or detect all errors, omissions, malfeasance or fraud, such as corruption and improper \"side agreements\" that may impact revenue recognition or result in financial liability. Our productivity and the quality of our products and services may also be adversely affected if we do not integrate and train our new employees quickly and effectively. Any future growth would add complexity to our organization and require effective coordination throughout our organization. Failure to ensure appropriate systems, processes and controls and to manage any future growth effectively could result in increased costs and harm our reputation and results of operations. \nWe have expanded our office real estate holdings to meet our projected growing need for office space. These plans will require significant capital expenditure over the next several years and involve certain risks, including impairment charges and acceleration of depreciation, changes in future business strategy that may decrease the need for expansion (such as a decrease in headcount or increase in work from home) and risks related to construction. Future changes in growth or fluctuations in cash flow may also negatively impact our ability to pay for these projects or free cash flow. Additionally, inaccuracies in our projected capital expenditures could negatively impact our business, operating results and financial condition.\n\nWe may experience difficulties maintaining and expanding our internal business management systems.\n\nThe maintenance of our internal business management systems, such as our Enterprise Resource Planning (\"ERP\") and Customer Relationship Management (\"CRM\") systems, has required, and will continue to require, the investment of significant financial and human resources. In addition, we may choose to upgrade or expand the functionality of our internal systems, leading to additional costs. Deficiencies in our design or maintenance of our internal systems may adversely affect our ability to sell products and services, forecast orders, process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results or otherwise operate our business. Additionally, if any of our internal systems does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed. Further, we may expand the scope of our ERP and CRM systems. Our operating results may be adversely affected if these upgrades or expansions are delayed or if the systems do not function as intended or are not sufficient to meet our operating requirements.\nWe may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.\nAI presents new risks and challenges that may affect our business. We have made, and expect to continue to make investments to integrate AI and machine learning technology into our solutions, as evidenced by our acquisition of Lacework. AI presents risks, challenges, and potentially unintended consequences that could impact our ability to effectively use of AI successfully in our business. Given the nature of AI technology, we face an evolving regulatory landscape and significant competition from other companies. Our AI efforts may not be successful and our competitors may incorporate AI into their \n64\n\n\n\n\n"}
{"QID":"q_Ri015","Question":"What are the risks faced by P&G related to customer consolidation? How has this risk evolved over the years?","ground_truth_answer":"P&G faces several risks related to customer consolidation:\n\n1. Concentration Risk:\nDependence on Major Customers: Sales to Walmart Inc. and its affiliates accounted for approximately 16% of P&G's total sales in 2024, up from 15% in both 2023 and 2022. This significant concentration in a single customer increases the risk that any adverse changes in Walmart's purchasing behavior, negotiations, or financial health could materially impact P&G's sales and profitability.\n2. Bargaining Power of Customers:\nIncreased Leverage: As the top ten customers accounted for 42% of P&G\u2019s total net sales in 2024, an increase from 40% in 2023 and 39% in 2022, these large customers may have greater bargaining power. This could lead to increased pressure on pricing, terms, and conditions, which might affect P&G's margins and overall financial performance.\nThe risk related to customer consolidation has evolved with an increasing percentage of net sales concentrated among the top ten customers, growing from 39% in 2022 to 42% in 2024. This trend suggests an increasing reliance on fewer, larger customers, which heightens the risks associated with customer consolidation.","question_type":"Risk","page_number":"1","accession_number":"0000080424-24-000083","item":"Item 1. Business.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 1: \nThe Procter & Gamble Company 1\n\n\n\nPART I\n\n\nItem 1. Business.\n\nThe Procter & Gamble Company (the Company) is a world-leading multinational consumer goods company focused on providing trusted, branded products of superior quality, performance and value to improve the lives of consumers around the world - now and for generations to come. Our products are sold in about 180 countries and territories throughout the world. The Company was incorporated in Ohio in 1905, having first been established as a New Jersey corporation in 1890, and was built from a business founded in Cincinnati in 1837 by William Procter and James Gamble. \nAdditional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); and Notes 1 and 2 to our Consolidated Financial Statements. Unless the context indicates otherwise, the terms \"Company,\" \"P&G,\" \"we,\" \"our\" or \"us\" as used herein refer to The Procter & Gamble Company (the registrant) and its subsidiaries. Throughout this Form 10-K, we incorporate by reference information from other documents filed with the Securities and Exchange Commission (SEC).\nThe Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments thereto, are filed electronically with the SEC. The SEC maintains an internet site that contains these reports at: www.sec.gov. Reports can also be accessed and downloaded through links from our website at: www.pginvestor.com. P&G includes the website link solely as a textual reference and the information on our website is not incorporated by reference into this report. Copies of these reports are also available, without charge, by contacting EQ Shareowner Services, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.\n\nFinancial Information about Segments\n\nInformation about our reportable segments can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nNarrative Description of Business\n\nBusiness Model. Our business model is focused on delivering sustainable value creation by driving balanced top- and bottom-line growth. We create, manufacture, market and distribute a diversified portfolio of daily-use products to delight consumers with irresistible superiority across five key vectors - product performance, packaging, brand communication, retail execution and value. We invest in research and development and consumer insights to invent new categories or products and innovate our existing products, ensuring they meet evolving consumer needs and preferences. We leverage marketing strategies including advertising, promotions and endorsements to drive brand awareness and loyalty among consumers. The Company utilizes various distribution channels, including retail stores, e-commerce platforms and direct-to-consumer platforms to deliver our products. Our business model relies on continued productivity improvements to fuel investments in R&D and marketing and deliver value creation. Our objective is to deliver sustainable and balanced top- and bottom-line growth while serving the needs of all stakeholders - consumers, customers, employees, society and shareowners.\n\nKey Product Categories. Information on key product categories can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nKey Customers. Our customers include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to consumers. Sales to Walmart Inc. and its affiliates represent approximately 16% of our total sales in 2024 and 15% in 2023 and 2022. No other customer represents more than 10% of our total sales. Our top ten customers accounted for 42% of our total net sales in 2024, 40% in 2023 and 39% in 2022. \nSources and Availability of Materials. Almost all of the raw and packaging materials used by the Company are purchased from third parties, some of whom are single-source suppliers. We produce certain raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities consumed in our manufacturing processes and in the transportation of input materials and finished products. The prices we pay for materials and other commodities are subject to fluctuation. When prices for these items change, we may or may not pass the change to our customers. The Company purchases a substantial variety of other raw and packaging materials, none of which are material to our business taken as a whole.\nTrademarks and Patents. We own or have rights to patents and trademarks, which are used in connection with our activity in all businesses. Our patents cover a range of product features, including significant product formulation and processes used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. In part, our success can be attributed to the existence and continued protection of these trademarks and patents.\nCompetitive Condition. The markets in which our products are sold are highly competitive. Our products compete against similar products from a broad range of companies, both large and small, both established and new, including well-known global competitors. In many of the markets and industry segments, we compete against other branded products as well as retailers' private-label brands. In this highly competitive setting, we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. Our integrated strategy and our focus on driving superiority across product, packaging, brand communication, retail execution and value are key differentiators in the marketplace.\n\n\n","context_markdown_without_headers":"\nThe Procter & Gamble Company 1\n\n\n\nPART I\n\n\nItem 1. Business.\n\nThe Procter & Gamble Company (the Company) is a world-leading multinational consumer goods company focused on providing trusted, branded products of superior quality, performance and value to improve the lives of consumers around the world - now and for generations to come. Our products are sold in about 180 countries and territories throughout the world. The Company was incorporated in Ohio in 1905, having first been established as a New Jersey corporation in 1890, and was built from a business founded in Cincinnati in 1837 by William Procter and James Gamble. \nAdditional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); and Notes 1 and 2 to our Consolidated Financial Statements. Unless the context indicates otherwise, the terms \"Company,\" \"P&G,\" \"we,\" \"our\" or \"us\" as used herein refer to The Procter & Gamble Company (the registrant) and its subsidiaries. Throughout this Form 10-K, we incorporate by reference information from other documents filed with the Securities and Exchange Commission (SEC).\nThe Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments thereto, are filed electronically with the SEC. The SEC maintains an internet site that contains these reports at: www.sec.gov. Reports can also be accessed and downloaded through links from our website at: www.pginvestor.com. P&G includes the website link solely as a textual reference and the information on our website is not incorporated by reference into this report. Copies of these reports are also available, without charge, by contacting EQ Shareowner Services, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.\n\nFinancial Information about Segments\n\nInformation about our reportable segments can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nNarrative Description of Business\n\nBusiness Model. Our business model is focused on delivering sustainable value creation by driving balanced top- and bottom-line growth. We create, manufacture, market and distribute a diversified portfolio of daily-use products to delight consumers with irresistible superiority across five key vectors - product performance, packaging, brand communication, retail execution and value. We invest in research and development and consumer insights to invent new categories or products and innovate our existing products, ensuring they meet evolving consumer needs and preferences. We leverage marketing strategies including advertising, promotions and endorsements to drive brand awareness and loyalty among consumers. The Company utilizes various distribution channels, including retail stores, e-commerce platforms and direct-to-consumer platforms to deliver our products. Our business model relies on continued productivity improvements to fuel investments in R&D and marketing and deliver value creation. Our objective is to deliver sustainable and balanced top- and bottom-line growth while serving the needs of all stakeholders - consumers, customers, employees, society and shareowners.\n\nKey Product Categories. Information on key product categories can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nKey Customers. Our customers include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to consumers. Sales to Walmart Inc. and its affiliates represent approximately 16% of our total sales in 2024 and 15% in 2023 and 2022. No other customer represents more than 10% of our total sales. Our top ten customers accounted for 42% of our total net sales in 2024, 40% in 2023 and 39% in 2022. \nSources and Availability of Materials. Almost all of the raw and packaging materials used by the Company are purchased from third parties, some of whom are single-source suppliers. We produce certain raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities consumed in our manufacturing processes and in the transportation of input materials and finished products. The prices we pay for materials and other commodities are subject to fluctuation. When prices for these items change, we may or may not pass the change to our customers. The Company purchases a substantial variety of other raw and packaging materials, none of which are material to our business taken as a whole.\nTrademarks and Patents. We own or have rights to patents and trademarks, which are used in connection with our activity in all businesses. Our patents cover a range of product features, including significant product formulation and processes used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. In part, our success can be attributed to the existence and continued protection of these trademarks and patents.\nCompetitive Condition. The markets in which our products are sold are highly competitive. Our products compete against similar products from a broad range of companies, both large and small, both established and new, including well-known global competitors. In many of the markets and industry segments, we compete against other branded products as well as retailers' private-label brands. In this highly competitive setting, we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. Our integrated strategy and our focus on driving superiority across product, packaging, brand communication, retail execution and value are key differentiators in the marketplace.\n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 1: \nThe Procter & Gamble Company 1\n\n\n\nPART I\n\n\nItem 1. Business.\n\nThe Procter & Gamble Company (the Company) is a world-leading multinational consumer goods company focused on providing trusted, branded products of superior quality, performance and value to improve the lives of consumers around the world - now and for generations to come. Our products are sold in about 180 countries and territories throughout the world. The Company was incorporated in Ohio in 1905, having first been established as a New Jersey corporation in 1890, and was built from a business founded in Cincinnati in 1837 by William Procter and James Gamble. \nAdditional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); and Notes 1 and 2 to our Consolidated Financial Statements. Unless the context indicates otherwise, the terms \"Company,\" \"P&G,\" \"we,\" \"our\" or \"us\" as used herein refer to The Procter & Gamble Company (the registrant) and its subsidiaries. Throughout this Form 10-K, we incorporate by reference information from other documents filed with the Securities and Exchange Commission (SEC).\nThe Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments thereto, are filed electronically with the SEC. The SEC maintains an internet site that contains these reports at: www.sec.gov. Reports can also be accessed and downloaded through links from our website at: www.pginvestor.com. P&G includes the website link solely as a textual reference and the information on our website is not incorporated by reference into this report. Copies of these reports are also available, without charge, by contacting EQ Shareowner Services, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.\n\nFinancial Information about Segments\n\nInformation about our reportable segments can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nNarrative Description of Business\n\nBusiness Model. Our business model is focused on delivering sustainable value creation by driving balanced top- and bottom-line growth. We create, manufacture, market and distribute a diversified portfolio of daily-use products to delight consumers with irresistible superiority across five key vectors - product performance, packaging, brand communication, retail execution and value. We invest in research and development and consumer insights to invent new categories or products and innovate our existing products, ensuring they meet evolving consumer needs and preferences. We leverage marketing strategies including advertising, promotions and endorsements to drive brand awareness and loyalty among consumers. The Company utilizes various distribution channels, including retail stores, e-commerce platforms and direct-to-consumer platforms to deliver our products. Our business model relies on continued productivity improvements to fuel investments in R&D and marketing and deliver value creation. Our objective is to deliver sustainable and balanced top- and bottom-line growth while serving the needs of all stakeholders - consumers, customers, employees, society and shareowners.\n\nKey Product Categories. Information on key product categories can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nKey Customers. Our customers include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to consumers. Sales to Walmart Inc. and its affiliates represent approximately 16% of our total sales in 2024 and 15% in 2023 and 2022. No other customer represents more than 10% of our total sales. Our top ten customers accounted for 42% of our total net sales in 2024, 40% in 2023 and 39% in 2022. \nSources and Availability of Materials. Almost all of the raw and packaging materials used by the Company are purchased from third parties, some of whom are single-source suppliers. We produce certain raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities consumed in our manufacturing processes and in the transportation of input materials and finished products. The prices we pay for materials and other commodities are subject to fluctuation. When prices for these items change, we may or may not pass the change to our customers. The Company purchases a substantial variety of other raw and packaging materials, none of which are material to our business taken as a whole.\nTrademarks and Patents. We own or have rights to patents and trademarks, which are used in connection with our activity in all businesses. Our patents cover a range of product features, including significant product formulation and processes used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. In part, our success can be attributed to the existence and continued protection of these trademarks and patents.\nCompetitive Condition. The markets in which our products are sold are highly competitive. Our products compete against similar products from a broad range of companies, both large and small, both established and new, including well-known global competitors. In many of the markets and industry segments, we compete against other branded products as well as retailers' private-label brands. In this highly competitive setting, we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. Our integrated strategy and our focus on driving superiority across product, packaging, brand communication, retail execution and value are key differentiators in the marketplace.\n\n\n","context_html_without_headers":"\nThe Procter & Gamble Company 1\n\n\n\nPART I\n\n\nItem 1. Business.\n\nThe Procter & Gamble Company (the Company) is a world-leading multinational consumer goods company focused on providing trusted, branded products of superior quality, performance and value to improve the lives of consumers around the world - now and for generations to come. Our products are sold in about 180 countries and territories throughout the world. The Company was incorporated in Ohio in 1905, having first been established as a New Jersey corporation in 1890, and was built from a business founded in Cincinnati in 1837 by William Procter and James Gamble. \nAdditional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); and Notes 1 and 2 to our Consolidated Financial Statements. Unless the context indicates otherwise, the terms \"Company,\" \"P&G,\" \"we,\" \"our\" or \"us\" as used herein refer to The Procter & Gamble Company (the registrant) and its subsidiaries. Throughout this Form 10-K, we incorporate by reference information from other documents filed with the Securities and Exchange Commission (SEC).\nThe Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments thereto, are filed electronically with the SEC. The SEC maintains an internet site that contains these reports at: www.sec.gov. Reports can also be accessed and downloaded through links from our website at: www.pginvestor.com. P&G includes the website link solely as a textual reference and the information on our website is not incorporated by reference into this report. Copies of these reports are also available, without charge, by contacting EQ Shareowner Services, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.\n\nFinancial Information about Segments\n\nInformation about our reportable segments can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nNarrative Description of Business\n\nBusiness Model. Our business model is focused on delivering sustainable value creation by driving balanced top- and bottom-line growth. We create, manufacture, market and distribute a diversified portfolio of daily-use products to delight consumers with irresistible superiority across five key vectors - product performance, packaging, brand communication, retail execution and value. We invest in research and development and consumer insights to invent new categories or products and innovate our existing products, ensuring they meet evolving consumer needs and preferences. We leverage marketing strategies including advertising, promotions and endorsements to drive brand awareness and loyalty among consumers. The Company utilizes various distribution channels, including retail stores, e-commerce platforms and direct-to-consumer platforms to deliver our products. Our business model relies on continued productivity improvements to fuel investments in R&D and marketing and deliver value creation. Our objective is to deliver sustainable and balanced top- and bottom-line growth while serving the needs of all stakeholders - consumers, customers, employees, society and shareowners.\n\nKey Product Categories. Information on key product categories can be found in the MD&A and Note 2 to our Consolidated Financial Statements.\n\nKey Customers. Our customers include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to consumers. Sales to Walmart Inc. and its affiliates represent approximately 16% of our total sales in 2024 and 15% in 2023 and 2022. No other customer represents more than 10% of our total sales. Our top ten customers accounted for 42% of our total net sales in 2024, 40% in 2023 and 39% in 2022. \nSources and Availability of Materials. Almost all of the raw and packaging materials used by the Company are purchased from third parties, some of whom are single-source suppliers. We produce certain raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities consumed in our manufacturing processes and in the transportation of input materials and finished products. The prices we pay for materials and other commodities are subject to fluctuation. When prices for these items change, we may or may not pass the change to our customers. The Company purchases a substantial variety of other raw and packaging materials, none of which are material to our business taken as a whole.\nTrademarks and Patents. We own or have rights to patents and trademarks, which are used in connection with our activity in all businesses. Our patents cover a range of product features, including significant product formulation and processes used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. In part, our success can be attributed to the existence and continued protection of these trademarks and patents.\nCompetitive Condition. The markets in which our products are sold are highly competitive. Our products compete against similar products from a broad range of companies, both large and small, both established and new, including well-known global competitors. In many of the markets and industry segments, we compete against other branded products as well as retailers' private-label brands. In this highly competitive setting, we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. Our integrated strategy and our focus on driving superiority across product, packaging, brand communication, retail execution and value are key differentiators in the marketplace.\n\n\n"}
{"QID":"q_Ri016","Question":"What are the impact of risks related to economic conditions and uncertainties on the operations of P&G in FY 2024?","ground_truth_answer":"In fiscal year 2024, Procter & Gamble faced several risks related to economic conditions and uncertainties impacting its operations:\n\nForeign Exchange Risk: Fluctuations in exchange rates led to significant foreign exchange impacts, reducing net earnings by approximately $589 million. The devaluation of foreign currencies against the U.S. dollar and challenges in implementing price increases adversely affected net sales, net earnings, and cash flows.\n\nCommodity and Supply Chain Risks: Variations in commodity and input material prices, particularly oil-derived resins and paper-based materials, influenced costs. Disruptions in manufacturing and supply chain operations, as well as inflationary pressures, contributed to increased costs, potentially impacting net sales and earnings.\n\nEconomic and Political Instability: Exposure to global economic factors, geopolitical tensions, and local instabilities, including the ongoing Russia-Ukraine war, presented risks. Despite accounting for less than 2% of consolidated net sales, these factors still contributed to operational challenges.\n\nGovernment Policy Changes: Changes in legislative and regulatory policies, including tax policy and environmental regulations, posed risks to financial performance, affecting net sales, net earnings, and cash flows.","question_type":"Risk","page_number":"18, 19","accession_number":"0000080424-24-000083","item":"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 18: \n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n|    |                                               |        |        |      |        |                       |        |    |    |    |    |\n|---:|:----------------------------------------------|:-------|:-------|:-----|:-------|:----------------------|:-------|:---|:---|:---|:---|\n|  1 | Amounts in millions, except per share amounts | 2024   |        | 2023 |        | Change vs. Prior Year |        |    |    |    |    |\n|  2 | Net sales                                     | $      | 84,039 |      |        | $                     | 82,006 |    |    | 2  | %  |\n|  3 | Operating income                              | 18,545 |        |      | 18,134 |                       |        | 2  | %  |    |    |\n|  4 | Net earnings                                  | 14,974 |        |      | 14,738 |                       |        | 2  | %  |    |    |\n|  5 | Net earnings attributable to Procter & Gamble | 14,879 |        |      | 14,653 |                       |        | 2  | %  |    |    |\n|  6 | Diluted net earnings per common share         | 6.02   |        |      | 5.90   |                       |        | 2  | %  |    |    |\n|  7 | Core earnings per share                       | 6.59   |        |      | 5.90   |                       |        | 12 | %  |    |    |\n|  8 | Cash flow from operating activities           | 19,846 |        |      | 16,848 |                       |        | 18 | %  |    |    |\n\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 19: \nThe Procter & Gamble Company 19\n\n\n\nECONOMIC CONDITIONS AND UNCERTAINTIES\n\nGlobal Economic Conditions. Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States. Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 20% of our net sales in fiscal 2024. As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies. We are exposed to market risks from operating in challenging environments due to economic, political and social instabilities, natural disasters, debt and credit issues, currency controls, foreign exchange and interest rate changes. These risks can negatively impact our net sales, net earnings and cash flows. For example, we are exposed to risks due to the ongoing war between Russia and Ukraine. Our Russia business accounted for less than 2% of consolidated net sales, net earnings and net assets as of June 30, 2024. \nForeign Exchange. We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures. Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency. We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the US dollar, which have negatively impacted net sales, net earnings and cash flows. In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows.\nCommodities and Supply Chain. Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp. Volatility in the market price of commodities and input materials directly affects our costs. Disruptions in manufacturing, supply and distribution operations can lead to increased costs. Legal or regulatory requirements and sustainability initiatives may result in increased costs. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization. Increased pricing in response to certain inflationary or cost increases may also offset portions of the cost impacts; however, such price increases may negatively impact product consumption. If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows.\nGovernment Policies. We are exposed to changes in U.S. and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows. These include tax policy changes (both U.S. and foreign), including those resulting from the current work being led by the OECD\/G20 Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy\". Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements can also impact our financial performance. \nFor additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2024.\n\nRESULTS OF OPERATIONS\n\nThe key metrics included in the discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative costs (SG&A), operating margin, other non-operating items, income taxes and net earnings. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, competitive activities (the level of initiatives, pricing and other activities by competitors), marketing spending, retail executions (both in-store and online) and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our pricing actions (which can also impact volume), changes in product and geographic mix and foreign exchange impacts on sales outside the U.S.\nFor most of our categories, our cost of products sold and SG&A are variable in nature to some extent. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in North America are generally higher than the Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature). The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we may achieve some level of scale benefit over time due to overall growth and other marketing efficiencies. While overhead costs are variable to some extent, we generally experience more scale-related impacts for these costs due to our ability to leverage our organization and systems' infrastructures to support business growth. The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts.\n\n\n","context_markdown_without_headers":"\n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n|    |                                               |        |        |      |        |                       |        |    |    |    |    |\n|---:|:----------------------------------------------|:-------|:-------|:-----|:-------|:----------------------|:-------|:---|:---|:---|:---|\n|  1 | Amounts in millions, except per share amounts | 2024   |        | 2023 |        | Change vs. Prior Year |        |    |    |    |    |\n|  2 | Net sales                                     | $      | 84,039 |      |        | $                     | 82,006 |    |    | 2  | %  |\n|  3 | Operating income                              | 18,545 |        |      | 18,134 |                       |        | 2  | %  |    |    |\n|  4 | Net earnings                                  | 14,974 |        |      | 14,738 |                       |        | 2  | %  |    |    |\n|  5 | Net earnings attributable to Procter & Gamble | 14,879 |        |      | 14,653 |                       |        | 2  | %  |    |    |\n|  6 | Diluted net earnings per common share         | 6.02   |        |      | 5.90   |                       |        | 2  | %  |    |    |\n|  7 | Core earnings per share                       | 6.59   |        |      | 5.90   |                       |        | 12 | %  |    |    |\n|  8 | Cash flow from operating activities           | 19,846 |        |      | 16,848 |                       |        | 18 | %  |    |    |\n\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, \nThe Procter & Gamble Company 19\n\n\n\nECONOMIC CONDITIONS AND UNCERTAINTIES\n\nGlobal Economic Conditions. Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States. Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 20% of our net sales in fiscal 2024. As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies. We are exposed to market risks from operating in challenging environments due to economic, political and social instabilities, natural disasters, debt and credit issues, currency controls, foreign exchange and interest rate changes. These risks can negatively impact our net sales, net earnings and cash flows. For example, we are exposed to risks due to the ongoing war between Russia and Ukraine. Our Russia business accounted for less than 2% of consolidated net sales, net earnings and net assets as of June 30, 2024. \nForeign Exchange. We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures. Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency. We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the US dollar, which have negatively impacted net sales, net earnings and cash flows. In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows.\nCommodities and Supply Chain. Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp. Volatility in the market price of commodities and input materials directly affects our costs. Disruptions in manufacturing, supply and distribution operations can lead to increased costs. Legal or regulatory requirements and sustainability initiatives may result in increased costs. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization. Increased pricing in response to certain inflationary or cost increases may also offset portions of the cost impacts; however, such price increases may negatively impact product consumption. If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows.\nGovernment Policies. We are exposed to changes in U.S. and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows. These include tax policy changes (both U.S. and foreign), including those resulting from the current work being led by the OECD\/G20 Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy\". Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements can also impact our financial performance. \nFor additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2024.\n\nRESULTS OF OPERATIONS\n\nThe key metrics included in the discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative costs (SG&A), operating margin, other non-operating items, income taxes and net earnings. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, competitive activities (the level of initiatives, pricing and other activities by competitors), marketing spending, retail executions (both in-store and online) and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our pricing actions (which can also impact volume), changes in product and geographic mix and foreign exchange impacts on sales outside the U.S.\nFor most of our categories, our cost of products sold and SG&A are variable in nature to some extent. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in North America are generally higher than the Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature). The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we may achieve some level of scale benefit over time due to overall growth and other marketing efficiencies. While overhead costs are variable to some extent, we generally experience more scale-related impacts for these costs due to our ability to leverage our organization and systems' infrastructures to support business growth. The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts.\n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 18: \n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Amounts in millions, except per share amounts<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change vs. Prior Year<\/td><\/tr><tr><td colspan=\"3\">Net sales<\/td><td>$<\/td><td>84,039 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>82,006 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Operating income<\/td><td colspan=\"2\">18,545 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,134 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings<\/td><td colspan=\"2\">14,974 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,738 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings attributable to Procter &amp; Gamble<\/td><td colspan=\"2\">14,879 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,653 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Diluted net earnings per common share<\/td><td colspan=\"2\">6.02 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Core earnings per share<\/td><td colspan=\"2\">6.59 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Cash flow from operating activities<\/td><td colspan=\"2\">19,846 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,848 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td>%<\/td><\/tr><\/table>\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 19: \nThe Procter & Gamble Company 19\n\n\n\nECONOMIC CONDITIONS AND UNCERTAINTIES\n\nGlobal Economic Conditions. Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States. Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 20% of our net sales in fiscal 2024. As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies. We are exposed to market risks from operating in challenging environments due to economic, political and social instabilities, natural disasters, debt and credit issues, currency controls, foreign exchange and interest rate changes. These risks can negatively impact our net sales, net earnings and cash flows. For example, we are exposed to risks due to the ongoing war between Russia and Ukraine. Our Russia business accounted for less than 2% of consolidated net sales, net earnings and net assets as of June 30, 2024. \nForeign Exchange. We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures. Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency. We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the US dollar, which have negatively impacted net sales, net earnings and cash flows. In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows.\nCommodities and Supply Chain. Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp. Volatility in the market price of commodities and input materials directly affects our costs. Disruptions in manufacturing, supply and distribution operations can lead to increased costs. Legal or regulatory requirements and sustainability initiatives may result in increased costs. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization. Increased pricing in response to certain inflationary or cost increases may also offset portions of the cost impacts; however, such price increases may negatively impact product consumption. If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows.\nGovernment Policies. We are exposed to changes in U.S. and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows. These include tax policy changes (both U.S. and foreign), including those resulting from the current work being led by the OECD\/G20 Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy\". Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements can also impact our financial performance. \nFor additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2024.\n\nRESULTS OF OPERATIONS\n\nThe key metrics included in the discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative costs (SG&A), operating margin, other non-operating items, income taxes and net earnings. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, competitive activities (the level of initiatives, pricing and other activities by competitors), marketing spending, retail executions (both in-store and online) and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our pricing actions (which can also impact volume), changes in product and geographic mix and foreign exchange impacts on sales outside the U.S.\nFor most of our categories, our cost of products sold and SG&A are variable in nature to some extent. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in North America are generally higher than the Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature). The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we may achieve some level of scale benefit over time due to overall growth and other marketing efficiencies. While overhead costs are variable to some extent, we generally experience more scale-related impacts for these costs due to our ability to leverage our organization and systems' infrastructures to support business growth. The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts.\n\n\n","context_html_without_headers":"\n18 The Procter & Gamble Company\n\n\n\nRECENT DEVELOPMENTS\n\n\nLimited Market Portfolio Restructuring\n\nIn December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.\nAs of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income\/(loss). On July 1, 2024, the Company completed the divestiture of its business in Argentina. The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.\n\nIntangible Asset Impairment\n\nDuring the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.\n\nSUMMARY OF 2024 RESULTS\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Amounts in millions, except per share amounts<\/td><td colspan=\"3\">2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change vs. Prior Year<\/td><\/tr><tr><td colspan=\"3\">Net sales<\/td><td>$<\/td><td>84,039 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>82,006 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Operating income<\/td><td colspan=\"2\">18,545 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,134 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings<\/td><td colspan=\"2\">14,974 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,738 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Net earnings attributable to Procter &amp; Gamble<\/td><td colspan=\"2\">14,879 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">14,653 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Diluted net earnings per common share<\/td><td colspan=\"2\">6.02 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Core earnings per share<\/td><td colspan=\"2\">6.59 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5.90 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Cash flow from operating activities<\/td><td colspan=\"2\">19,846 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,848 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td>%<\/td><\/tr><\/table>\n\u2022Net sales increased 2% to $84.0 billion versus the prior year. The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty. Net Sales were unchanged in Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.\n\u2022Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.\n\u2022Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate. Foreign exchange impacts reduced net earnings by approximately $589 million. \n\n\u2022Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.\n\n\u2022Diluted EPS increased 2% to $6.02 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.\n\u2022Cash flow from operating activities was $19.8 billion.\n\u25e6    Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.\n\u25e6    Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.\n\n\n, \nThe Procter & Gamble Company 19\n\n\n\nECONOMIC CONDITIONS AND UNCERTAINTIES\n\nGlobal Economic Conditions. Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States. Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 20% of our net sales in fiscal 2024. As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies. We are exposed to market risks from operating in challenging environments due to economic, political and social instabilities, natural disasters, debt and credit issues, currency controls, foreign exchange and interest rate changes. These risks can negatively impact our net sales, net earnings and cash flows. For example, we are exposed to risks due to the ongoing war between Russia and Ukraine. Our Russia business accounted for less than 2% of consolidated net sales, net earnings and net assets as of June 30, 2024. \nForeign Exchange. We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures. Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency. We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the US dollar, which have negatively impacted net sales, net earnings and cash flows. In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows.\nCommodities and Supply Chain. Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp. Volatility in the market price of commodities and input materials directly affects our costs. Disruptions in manufacturing, supply and distribution operations can lead to increased costs. Legal or regulatory requirements and sustainability initiatives may result in increased costs. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization. Increased pricing in response to certain inflationary or cost increases may also offset portions of the cost impacts; however, such price increases may negatively impact product consumption. If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows.\nGovernment Policies. We are exposed to changes in U.S. and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows. These include tax policy changes (both U.S. and foreign), including those resulting from the current work being led by the OECD\/G20 Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy\". Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements can also impact our financial performance. \nFor additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2024.\n\nRESULTS OF OPERATIONS\n\nThe key metrics included in the discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative costs (SG&A), operating margin, other non-operating items, income taxes and net earnings. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, competitive activities (the level of initiatives, pricing and other activities by competitors), marketing spending, retail executions (both in-store and online) and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our pricing actions (which can also impact volume), changes in product and geographic mix and foreign exchange impacts on sales outside the U.S.\nFor most of our categories, our cost of products sold and SG&A are variable in nature to some extent. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in North America are generally higher than the Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature). The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we may achieve some level of scale benefit over time due to overall growth and other marketing efficiencies. While overhead costs are variable to some extent, we generally experience more scale-related impacts for these costs due to our ability to leverage our organization and systems' infrastructures to support business growth. The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts.\n\n\n"}
{"QID":"q_Ri017","Question":"What is the potential impact of cybersecurity risks on JPMorgan Chase\u2019s financial health?","ground_truth_answer":"Cybersecurity risks pose a significant threat to JPMorgan Chase\u2019s financial health. The potential impacts include financial losses due to fraud, the cost of responding to security breaches, and potential regulatory fines for failing to protect customer data.","question_type":"Risk","page_number":"23","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 23: In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n|    |    |\n|---:|---:|\n|  1 | 23 |\n","context_markdown_without_headers":"In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n|    |    |\n|---:|---:|\n|  1 | 23 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 23: In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">23<\/td><\/tr><\/table>","context_html_without_headers":"In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">23<\/td><\/tr><\/table>"}
{"QID":"q_Ri018","Question":"What strategies does the company employ to mitigate operational risks?","ground_truth_answer":"The company employs several strategies to mitigate operational risks, including robust business continuity planning, regular maintenance of critical infrastructure, employee training programs, and investment in technology.","question_type":"Risk","page_number":"9, 20, 21, 22, 23, 24","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 20: \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n|    |    |\n|---:|---:|\n|  1 | 20 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 21: centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n|    |    |\n|---:|---:|\n|  1 | 21 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 22: \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n|    |    |\n|---:|---:|\n|  1 | 22 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 23: In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n|    |    |\n|---:|---:|\n|  1 | 23 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 24: \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n|    |    |\n|---:|---:|\n|  1 | 24 |\n","context_markdown_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n|    |    |\n|---:|---:|\n|  1 | 20 |\n, centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n|    |    |\n|---:|---:|\n|  1 | 21 |\n, \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n|    |    |\n|---:|---:|\n|  1 | 22 |\n, In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n|    |    |\n|---:|---:|\n|  1 | 23 |\n, \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n|    |    |\n|---:|---:|\n|  1 | 24 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 20: \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">20<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 21: centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">21<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 22: \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">22<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 23: In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">23<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 24: \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">24<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, \nPart I\n\n\nA reduction in JPMorgan Chase's credit ratings could curtail JPMorgan Chase's business activities and reduce its profitability in a number of ways, including:\n\u2022reducing its access to capital markets \n\u2022materially increasing its cost of issuing and servicing securities \n\u2022triggering additional collateral or funding requirements, and \n\u2022decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.\nAny rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.\n\nCapital\n\nMaintaining the required level and composition of capital may impact JPMorgan Chase's ability to support business activities, meet evolving regulatory requirements and distribute capital to shareholders.\nJPMorgan Chase is subject to various regulatory capital requirements, including leverage- and risk-based capital requirements. In addition, as a Global Systemically Important Bank (\"GSIB\"), JPMorgan Chase is required to hold additional capital buffers, including a GSIB surcharge, a Stress Capital Buffer (\"SCB\"), and a countercyclical buffer, each of which is reassessed at least annually. The amount of capital that JPMorgan Chase is required to hold in order to satisfy these leverage- and risk-based requirements could increase at any given time due to factors such as:\n\u2022actions by banking regulators, including changes in laws, rules, and regulations\n\u2022changes in the composition of JPMorgan Chase's balance sheet or developments that could increase RWA, such as increased market risk, customer delinquencies, client credit rating downgrades or other factors, and\n\u2022increases in estimated stress losses as determined by the Federal Reserve under the Comprehensive Capital Analysis and Review, which could increase JPMorgan Chase's SCB.\nAny failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could have an adverse impact on JPMorgan Chase's shareholders, such as:\n\u2022reducing the amount of common stock that JPMorgan Chase is permitted to repurchase\n\u2022requiring the issuance of, or prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase's capital management strategy\n\n\u2022constraining the amount of dividends that may be paid on common stock, or\n\u2022curtailing JPMorgan Chase's business activities or operations.\nBanking regulators have released a proposal to amend the Basel III risk-based capital framework which could significantly revise the risk-based capital requirements for banks with assets of $100 billion or more, including JPMorgan Chase. Uncertainty remains as to the manner in which these requirements will ultimately apply to JPMorgan Chase, however it is possible that these requirements could impact JPMorgan Chase's decisions concerning the business activities in which it will engage and its levels of capital distributions to its shareholders. \n\nOperational\n\nJPMorgan Chase's businesses are dependent on the effectiveness of internal and external operational systems.\nJPMorgan Chase's businesses rely on the ability of JPMorgan Chase's financial, accounting, transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase's operational systems depends on:\n\u2022the quality of the information contained in those systems, as inaccurate, outdated, incomplete or corrupted data can significantly compromise the functionality or reliability of a particular system and other systems to which it transmits or from which it receives information, and\n\u2022JPMorgan Chase's ability to continue to maintain and upgrade its systems on a regular basis in line with technological advancements and evolving security requirements, carefully manage any changes introduced to its systems to maintain security and operational continuity, and adhere to all applicable legal and regulatory requirements, particularly in regions where JPMorgan Chase may face a heightened risk of malicious activity.\nJPMorgan Chase has experienced and expects that it will continue to experience failures and disruptions in the stability of its operational systems, including degraded performance of data processing systems, data quality issues, disruptions of network connectivity and malfunctioning software, as well as disruptions in its ability to access and use the operational systems of third parties. These incidents have resulted in various negative effects for customers, including the inability to access account information or to make transactions through ATM, internet or mobile channels, the exfiltration of customer personal data, the recording of duplicative transactions and extended delays for customers requiring services from call \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">20<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, centers. There can be no assurance that these and other types of operational failures or disruptions will not occur in the future.\nJPMorgan Chase's ability to effectively manage the stability of its operational systems and infrastructure could be hindered by many factors, any of which could have a negative impact on JPMorgan Chase and its clients, customers and counterparties, including:\n\u2022JPMorgan Chase's ability to effectively maintain and upgrade systems and infrastructure can become more challenging as the speed, frequency, volume, interconnectivity and complexity of transactions continue to increase\n\u2022attempts by third parties to defraud JPMorgan Chase or its clients and customers are increasing, evolving and becoming more complex, and during periods of market disruption or economic uncertainty, these attempts can be expected to increase in volume\n\u2022errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, could cause widespread system disruption\n\u2022failure to detect weaknesses or shortcomings in operational systems in a timely manner\n\u2022isolated or seemingly insignificant errors in operational systems could compound, or migrate to other systems over time, to become larger issues\n\u2022disruptions in operational systems or in the ability of systems to communicate with each other could be caused by failures in synchronization or encryption software, or degraded performance of microprocessors, and\n\u2022attempts by third parties to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.\nJPMorgan Chase also depends on its ability to access and use the operational systems of third parties, including its custodians, vendors (such as those that provide data and cloud computing services, and security and technology services) and other market participants (such as clearing and payment systems, CCPs and securities exchanges), and external operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure or cyber attack that may be experienced by a vendor or market infrastructure with which JPMorgan Chase is directly connected, but also to a systems breakdown or cyber attack involving another party to which such a vendor or infrastructure is connected. Similarly, retailers, payment systems and processors, data aggregators and other external parties with which JPMorgan Chase's customers do business can increase JPMorgan Chase's operational risk. This is particularly the case where activities of customers or other parties are beyond JPMorgan Chase's security and control systems, including through the use of the internet, \n\ncloud computing services, and personal smart phones and other mobile devices or services.\nIf an external party obtains access to customer account data on JPMorgan Chase's systems, whether authorized or unauthorized, and that party misappropriates that data, this could result in negative outcomes for JPMorgan Chase and its clients and customers, including a heightened risk of fraudulent transactions using JPMorgan Chase's systems, losses from fraudulent transactions and reputational harm arising from the perception that JPMorgan Chase's systems may not be secure.\nAs JPMorgan Chase's interconnectivity with clients, customers and other external parties continues to expand, JPMorgan Chase increasingly faces the risk of operational failure or cyber attacks with respect to the systems of those parties. Security breaches affecting JPMorgan Chase's clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting other external parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase's operational costs and potentially diminish customer satisfaction and confidence in JPMorgan Chase.\nFurthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payments processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect JPMorgan Chase's ability to conduct business. In addition, the risks associated with the disruption of an operational system of a third party could be exacerbated to the extent that the services provided by that system are used by a significant number or proportion of market participants.\nThe ineffectiveness, failure or other disruption of operational systems upon which JPMorgan Chase depends, including due to a systems malfunction, cyber incident or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:\n\u2022delays or other disruptions in providing services, including the provision of liquidity or information to clients and customers\n\u2022impairment of JPMorgan Chase's ability to execute transactions, including delays or failures in the confirmation or settlement of transactions or in obtaining access to funds or other assets required for settlement\n\u2022the possibility that funds transfers, capital markets trades or other transactions are executed erroneously\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">21<\/td><\/tr><\/table>, \nPart I\n\n\n\u2022financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers\n\u2022higher operational costs associated with replacing services provided by a system that has experienced a failure or other disruption \n\u2022limitations on JPMorgan Chase's ability to collect data needed for its business and operations\n\u2022loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions\n\u2022dissatisfaction among JPMorgan Chase's clients or customers\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and \n\u2022harm to JPMorgan Chase's reputation.\nIf JPMorgan Chase's operational systems, or those of acquired businesses or of external parties on which JPMorgan Chase's businesses depend, are unable to meet the requirements of JPMorgan Chase's businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.\nA successful cyber attack affecting JPMorgan Chase could cause significant harm to JPMorgan Chase and its clients and customers.\nJPMorgan Chase experiences numerous cyber attacks on its computer systems, software, networks and other technology assets on a daily basis from various actors, including groups acting on behalf of hostile countries, cyber-criminals, \"hacktivists\" (i.e., individuals or groups that use technology to promote a political agenda or social change) and others. These cyber attacks can take many forms, including attempts to introduce computer viruses or malicious code, which are commonly referred to as \"malware,\" into JPMorgan Chase's systems. These attacks are often designed to:\n\u2022obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, customers, counterparties or employees\n\u2022manipulate data\n\u2022destroy data or systems with the aim of rendering services unavailable\n\u2022disrupt, sabotage or degrade service on JPMorgan Chase's systems\n\n\u2022steal money, or\n\n\u2022extort money through the use of so-called \"ransomware.\"\nJPMorgan Chase also experiences:\n\n\u2022distributed denial-of-service attacks intended to disrupt JPMorgan Chase's websites, including those that provide online banking and other services,\n\u2022a higher volume and complexity of cyber attacks against the backdrop of heightened geopolitical tensions, and\n\u2022a high volume of disruptions to internet-based services used by JPMorgan Chase that are provided by third parties.\nJPMorgan Chase has experienced security breaches due to cyber attacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.\nA principal reason that JPMorgan Chase cannot provide absolute security against cyber attacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase's systems, or to implement effective preventive measures against all breaches because:\n\u2022the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched or may go undetected for extended periods\n\u2022cyber attacks can originate from a wide variety of sources, including JPMorgan Chase's own employees, cyber-criminals, hacktivists, well-resourced groups linked to terrorist organizations or hostile nation-states that can sustain malicious activities for extended periods, or third parties whose objective is to disrupt the operations of financial institutions more generally\n\u2022JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business, and\n\u2022it is possible that a third party, after establishing a foothold on an internal network without being detected, may gain access to other networks and systems.\nThe risk of a security breach due to a cyber attack could increase in the future due to factors such as: \n\u2022JPMorgan Chase's ongoing expansion of its mobile banking and other internet-based product offerings and its internal use of internet-based products and applications, including those that use cloud computing services\n\u2022advances in artificial intelligence, such as the use of machine learning and generative artificial intelligence by malicious actors to develop more advanced social engineering attacks, including targeted phishing attacks\n\u2022the inability to maintain the security of information transmitted by JPMorgan Chase due to advances in quantum computing that may counteract or nullify existing information protections, and\n\u2022the acquisition and integration of new businesses.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">22<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase's employees.\nThe dynamic nature of the cyber threat landscape necessitates continuous enhancement and adaptation of cybersecurity controls. Failure to discover or address known vulnerabilities or shortcomings in cybersecurity controls, or to prioritize or complete enhancements to address them, in each case in a timely manner, may leave JPMorgan Chase vulnerable to cyber attacks, potentially resulting in data breaches, financial losses, reputational damage and regulatory penalties, including the failure to prioritize or complete enhancements relating to:\n\u2022preventing unauthorized access and protecting against the misuse of access, including the maintenance and enhancement of controls related to secure software development practices and identity and access management, such as those relating to the management of administrative access to systems\n\u2022detecting, escalating and addressing effectively and in a timely manner any vulnerabilities that may be present either in internally-developed software or externally-provided software or services, including vulnerabilities that could allow attackers to exploit unknown security flaws in software and hardware (\"zero-day vulnerabilities\")\n\u2022enhancing early detection of attacks against third-party vendors, including attacks targeting vulnerabilities in third-party open-source software, in support of the secure development and maintenance of internal systems\n\u2022maintaining and enhancing controls related to technology asset management and inventory systems to prevent the risk of undetected vulnerabilities that could undermine JPMorgan Chase's ability to operate an effective control process \n\u2022upgrading the coverage and capabilities of systems and controls to protect JPMorgan Chase and its clients and customers from the impact of distributed denial-of-service attacks, or to recover from outages that could be caused by a malware or ransomware attack\n\u2022strengthening network security and management of outbound connections to reduce the risk of data loss \n\u2022identifying, assessing and mitigating insider threat activities that could lead to the misuse of JPMorgan Chase's systems or client and customer information, and\n\u2022integrating acquired businesses where system integration may be complex or may require extensive and lengthy remediation or enhancement of controls.\nA successful penetration or circumvention of the security of JPMorgan Chase's systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:\n\n\u2022significant disruption of JPMorgan Chase's operations and those of its clients, customers and counterparties, including losing access to operational systems\n\u2022misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or regulators\n\u2022disruption of or damage to JPMorgan Chase's systems and those of its clients, customers and counterparties\n\u2022the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed, or the inability to prevent systems from processing fraudulent transactions\n\u2022demands that JPMorgan Chase pay a ransom to a malicious actor that has perpetrated a cybersecurity breach\n\u2022unintended violations by JPMorgan Chase of applicable privacy and other laws\n\u2022financial loss to JPMorgan Chase or to its clients, customers, counterparties or employees\n\u2022loss of confidence in JPMorgan Chase's cybersecurity and business resiliency measures\n\u2022dissatisfaction among JPMorgan Chase's clients, customers or counterparties\n\u2022significant exposure to litigation and regulatory fines, penalties or other sanctions, and\n\u2022harm to JPMorgan Chase's reputation.\nThe extent of a particular cyber attack, the methods and tools used by various actors, and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase's ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.\nJPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services and delivery platforms or the adoption of new technologies.\nWhen JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business, makes changes to an existing product, service \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">23<\/td><\/tr><\/table>, \nPart I\n\n\nor delivery platform, or adopts a new technology, it may not fully appreciate or identify new operational risks that may arise from those changes, including increased reliance on third party providers, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish JPMorgan Chase's ability to operate one or more of its businesses or result in:\n\u2022potential liability to clients, counterparties and customers\n\u2022higher compliance and operational cost \n\u2022higher litigation costs, including regulatory fines, penalties and other sanctions\n\u2022damage to JPMorgan Chase's reputation\n\u2022impairment of JPMorgan Chase's liquidity\n\n\u2022regulatory intervention, or \n\n\u2022weaker competitive standing.\nAny of the foregoing consequences could materially and adversely affect JPMorgan Chase's businesses and results of operations.\nJPMorgan Chase's business and operations rely on its ability, and the ability of key external parties, to maintain appropriately-staffed workforces, and on the competence, trustworthiness, health and safety of employees.\nJPMorgan Chase's ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, trustworthiness, health and safety of its employees. JPMorgan Chase's businesses and operations similarly rely on the workforces of third parties, including employees of vendors, custodians and financial markets infrastructures, and of businesses that it may seek to acquire. JPMorgan Chase's businesses could be materially and adversely affected by:\n\u2022the ineffective implementation of business decisions\n\u2022any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls\n\u2022staffing shortages, particularly in tight labor markets\n\u2022the possibility that significant portions of JPMorgan Chase's workforce are unable to work effectively, including because of illness, quarantines, shelter-in-place arrangements, government actions or other restrictions in connection with health emergencies, the spread of infectious diseases, epidemics or pandemics, or due to extraordinary events beyond JPMorgan Chase's control such as natural disasters or an outbreak or escalation of hostilities\n\n\u2022a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or\n\u2022other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase's businesses or operations rely.\nJPMorgan Chase's operations could also be impaired if the measures taken by it or by governmental authorities to protect the health and safety of its employees are ineffective, or if any external party on which JPMorgan Chase relies fails to take appropriate and effective actions to protect the health and safety of its employees.\nJPMorgan Chase faces substantial legal and operational risks in the processing and safeguarding of personal information.\nJPMorgan Chase's businesses and operations are subject to complex and evolving laws, rules and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. Governmental authorities around the world have adopted and are considering the adoption of numerous legislative and regulatory initiatives concerning privacy, data protection and security. Litigation or enforcement actions relating to these laws, rules and regulations could result in \nfines or orders requiring that JPMorgan Chase change its data-related practices, which could have an adverse effect on JPMorgan Chase's ability to provide products and otherwise harm its business operations.\nImplementing processes relating to JPMorgan Chase's collection, use, sharing and storage of personal information to comply with all applicable laws, rules and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:\n\u2022increase JPMorgan Chase's compliance and operating costs\n\u2022hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers\n\u2022demand significant oversight by JPMorgan Chase's management, and \n\u2022require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways. \nNot all of JPMorgan Chase's clients, customers, vendors, counterparties and other external parties may have appropriate controls in place to protect the confidentiality, integrity or availability of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">24<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri019","Question":"What is the potential impact of interest rate fluctuations on the company's financial health?","ground_truth_answer":" Interest rate fluctuations can have a significant impact on the company's financial health by affecting the cost of borrowing and the value of interest-bearing assets and liabilities. ","question_type":"Risk","page_number":"9, 14, 15, 16","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 14: \nPart I\n\n\n\u2022provoke retaliatory countermeasures by other countries and otherwise heighten tensions in regulatory, enforcement or diplomatic relations \n\u2022increase concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time\n\n\u2022lead to the withdrawal of government support for agencies and enterprises such as the U.S. Federal National Mortgage Association and the U.S. Federal Home Loan Mortgage Corporation (together, the \"U.S. GSEs\")\n\n\u2022result in periodic shutdowns of the U.S. government or governments in other countries \n\u2022increase investor reliance on actions by the Federal Reserve or other central banks, or influence investor perceptions concerning government support of sectors of the economy or the economy as a whole\n\u2022adversely affect the financial condition or credit ratings of clients and counterparties with which JPMorgan Chase does business, or\n\u2022cause JPMorgan Chase to refrain from engaging in business opportunities that it might otherwise pursue.\nThese factors could lead to:\n\u2022slower growth rates, rising inflation or recession\n\u2022greater market volatility\n\u2022a contraction of available credit and the widening of credit spreads \n\u2022erosion of adequate risk premium on certain financial assets \n\u2022diminished investor and consumer confidence\n\u2022lower investments in a particular country or sector of the economy\n\u2022large-scale sales of government debt and other debt and equity securities in the U.S. and other countries\n\u2022reduced commercial activity among trading partners\n\u2022the potential for a currency redenomination by a particular country\n\u2022the possible departure of a country from, or the dissolution or formation of, a political or economic alliance or treaty\n\u2022potential expropriation or nationalization of assets, including client assets, or \n\u2022other market dislocations, including unfavorable economic conditions that could spread from a particular country or region to other countries or regions.\nAny of these potential outcomes could cause JPMorgan Chase to suffer losses on its market-making positions or in its investment portfolio, reduce its liquidity and capital levels, increase the allowance for credit losses or lead to higher net charge-offs, hamper its ability to deliver \n\nproducts and services to its clients and customers, and weaken its results of operations and financial condition or credit rating.\nJPMorgan Chase's business and results of operations may also be adversely affected by actions or initiatives by national, state or local governmental authorities that:\n\u2022seek to discourage financial institutions from doing business with companies engaged in certain industries, or conversely, to penalize financial institutions that elect not to do business with such companies, or\n\u2022mandate specific business practices that companies operating in the relevant jurisdiction must adopt.\nBecause governmental policies in one jurisdiction may differ or conflict with those in other jurisdictions, JPMorgan Chase may face negative consequences regardless of the course of action it takes or elects not to take, including:\n\u2022restrictions or prohibitions on doing business within a particular jurisdiction, or with governmental entities in a jurisdiction\n\u2022the threat of enforcement actions, including under antitrust or other anti-competition laws, rules and regulations, and\n\u2022harm to its reputation arising from public criticism, including from politicians, activists and other stakeholders.\nJPMorgan Chase has been prohibited from engaging in certain business activities in specific jurisdictions as a result of these types of governmental actions, and there is no assurance that it will not face similar restrictions on its business and operations in the future.\nIn addition, JPMorgan Chase's relationships or ability to transact with clients and customers, and with governmental or regulatory bodies in jurisdictions in which JPMorgan Chase does business, could be adversely affected if its decisions with respect to doing business with companies in certain sensitive industries are perceived to harm those companies or to align with particular political viewpoints. Furthermore, JPMorgan Chase's participation in or association with certain environmental and social industry groups or initiatives could be viewed by activists or governmental authorities as boycotting or other discriminatory business behavior.\n\nMarket\n\nEconomic and market events and conditions can materially affect JPMorgan Chase's businesses and investment and market-making positions.\nJPMorgan Chase's results of operations can be negatively affected by adverse changes in any of the following:\n\u2022investor, consumer and business sentiment\n\u2022events that reduce confidence in the financial markets\n\u2022inflation, deflation or recession\n\n\n|    |    |\n|---:|---:|\n|  1 | 14 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 15: \u2022high unemployment or, conversely, a tightening labor market\n\u2022the availability and cost of capital, liquidity and credit\n\u2022levels and volatility of interest rates, credit spreads and market prices for currencies, equities and commodities, as well as the duration of any such changes\n\u2022the economic effects of an outbreak or escalation of hostilities, terrorism or other geopolitical instabilities, cyber attacks, climate change, natural disasters, severe weather conditions, health emergencies, the spread of infectious diseases, epidemics or pandemics or other extraordinary events beyond JPMorgan Chase's control, and\n\u2022the strength of the U.S. and global economies.\nAll of these are affected by global economic, market and political events and conditions, as well as regulatory restrictions.\nIn addition, JPMorgan Chase's investment portfolio and market-making businesses can suffer losses due to unanticipated market events, including:\n\u2022severe declines in asset values\n\u2022unexpected credit events\n\u2022unforeseen events or conditions that may cause previously uncorrelated factors to become correlated (and vice versa)\n\u2022the inability to effectively hedge risks related to market-making and investment portfolio positions, or\n\u2022other market risks that may not have been appropriately taken into account in the development, structuring or pricing of a financial instrument.\nIf JPMorgan Chase experiences significant losses in its investment portfolio or from market-making activities, this could reduce JPMorgan Chase's profitability and its liquidity and capital levels, and thereby constrain the growth of its businesses.\nJPMorgan Chase's consumer businesses can be negatively affected by adverse economic conditions and governmental policies.\nJPMorgan Chase's consumer businesses are particularly affected by U.S. and global economic conditions, including:\n\u2022personal and household income distribution\n\u2022unemployment or underemployment\n\u2022prolonged periods of exceptionally high or low interest rates\n\u2022changes in the value of collateral such as residential real estate and vehicles\n\u2022changes in housing prices\n\n\u2022the level of inflation and its effect on prices for goods and services\n\u2022consumer and small business confidence levels, and\n\u2022changes in consumer spending or in the level of consumer debt.\nHeightened levels of unemployment or underemployment that result in reduced personal and household income could negatively affect consumer credit performance to the extent that consumers are less able to service their debts. In addition, sustained low growth, low or negative interest rates, inflationary pressures or recessionary conditions could diminish customer demand for the products and services offered by JPMorgan Chase's consumer businesses. \nAdverse economic conditions could also lead to an increase in delinquencies, additions to the allowance for credit losses and higher net charge-offs, which can reduce JPMorgan Chase's earnings. These consequences could be significantly worse in certain geographies, including where declining industrial or manufacturing activity has resulted in or could result in higher levels of unemployment, or where high levels of consumer debt, such as outstanding student loans, could impair the ability of customers to pay their other consumer loan obligations.\nJPMorgan Chase's earnings from its consumer businesses could also be adversely affected by governmental policies and actions that affect consumers, including:\n\u2022policies and initiatives relating to medical insurance, education, immigration, employment status and housing\n\u2022laws, rules and regulations relating specifically to the financial services industry, such as limitations on late payment, overdraft and interchange fees, and\n\u2022policies aimed at the economy more broadly, such as higher taxes and increased regulation which could result in reductions in consumer disposable income.\nUnfavorable market and economic conditions can have an adverse effect on JPMorgan Chase's wholesale businesses.\nIn JPMorgan Chase's wholesale businesses, market and economic factors can affect the volume of transactions that JPMorgan Chase executes for its clients or for which it advises clients, and, therefore, the revenue that JPMorgan Chase receives from those transactions. These factors can also influence the willingness of other financial institutions and investors to participate in capital markets transactions that JPMorgan Chase manages, such as loan syndications or securities underwriting. Furthermore, if a significant and sustained deterioration in market conditions were to occur, the profitability of JPMorgan Chase's businesses engaged in capital markets activities, including loan syndication, securities underwriting and leveraged lending activities, could be reduced to the extent that those businesses:\n\u2022earn less fee revenue due to lower transaction volumes, including when clients are unwilling or unable to \n\n\n|    |    |\n|---:|---:|\n|  1 | 15 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 16: \nPart I\n\n\nrefinance their outstanding debt obligations in unfavorable market conditions, or\n\u2022dispose of portions of credit commitments at a loss, or hold larger residual positions in credit commitments that cannot be sold at favorable prices.\nThe fees that JPMorgan Chase earns from managing client assets or holding assets under custody for clients could be diminished by declining asset values or other adverse macroeconomic conditions. For example, higher interest rates or a downturn in financial markets could affect the valuation of client assets that JPMorgan Chase manages or holds under custody, which, in turn, could affect JPMorgan Chase's revenue from fees that are based on the amount of assets under management or custody. Similarly, adverse macroeconomic or market conditions could prompt outflows from JPMorgan Chase funds or accounts, or cause clients to invest in products that generate lower revenue. Substantial and unexpected withdrawals from a JPMorgan Chase fund can also hamper the investment performance of the fund, particularly if the outflows create the need for the fund to dispose of fund assets at disadvantageous times or prices, and could lead to further withdrawals based on the weaker investment performance.\nAn adverse change in market conditions in particular segments of the economy, such as a sudden and severe downturn in oil and gas prices or an increase in commodity prices, severe declines in commercial real estate values, or sustained changes in consumer behavior that affect specific economic sectors, could have a material adverse effect on clients of JPMorgan Chase whose operations or financial condition are directly or indirectly dependent on the health or stability of those market segments or economic sectors, as well as clients that are engaged in related businesses. JPMorgan Chase could incur credit losses on its loans and other commitments to clients that operate in, or are dependent on, any sector of the economy that is or comes under stress.\nAn economic downturn or sustained changes in consumer behavior that results in shifts in consumer and business spending could also have a negative impact on certain of JPMorgan Chase's wholesale clients, and thereby diminish JPMorgan Chase's earnings from its wholesale operations. For example, the businesses of certain of JPMorgan Chase's wholesale clients are dependent on consistent streams of rental income from commercial real estate properties, including offices, which are owned or being built by those clients. Sustained adverse economic conditions or hybrid work models could result in reductions in the rental cash flows that owners or developers receive from their tenants which, in turn, could depress the values of the properties, impair the ability of borrowers to service or refinance their commercial real estate loans and lead to an increase in foreclosures. These consequences could result in JPMorgan Chase experiencing increases in the allowance for credit losses, higher delinquencies, defaults and charge-offs within its commercial real estate loan portfolio and \n\nincurring higher costs for servicing a larger volume of delinquent loans in that portfolio. An increase in foreclosures could result in higher operational risk associated with JPMorgan Chase owning and managing real property, and any inadequacy in governance or control over the foreclosed properties could result in regulatory scrutiny and reputational harm.\nChanges in interest rates and credit spreads can adversely affect JPMorgan Chase's earnings, its liquidity or its capital levels. \nWhen interest rates are high or increasing, JPMorgan Chase can generally be expected to earn higher net interest income. However, higher interest rates can also lead to:\n\u2022fewer originations of commercial and residential real estate loans \n\u2022losses on underwriting exposures or incremental client-specific downgrades, or increases in the allowance for credit losses and net charge-offs due to higher financing costs for clients\n\u2022the loss of deposits, particularly if customers withdraw deposits because they believe that interest rates offered by JPMorgan Chase are lower than those of competitors or if JPMorgan Chase makes incorrect assumptions about depositor behavior\n\u2022losses on available-for-sale (\"AFS\") securities held in the investment securities portfolio\n\u2022lower net interest income if central banks introduce interest rate increases more quickly than anticipated and this results in a misalignment in the pricing of short-term and long-term borrowings\n\u2022less liquidity in the financial markets, and\n\u2022higher funding costs.\nAll of these outcomes could adversely affect JPMorgan Chase's earnings or its liquidity and capital levels, and any negative outcomes could be more severe in a prolonged period of high interest rates. Higher interest rates can also negatively affect the payment performance on loans within JPMorgan Chase's consumer and wholesale loan portfolios that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may reduce or stop making payments, thereby causing JPMorgan Chase to incur losses and increased operational costs related to servicing a higher volume of delinquent loans. \nOn the other hand, a low or negative interest rate environment may cause:\n\u2022net interest margins to be compressed, which could reduce the amounts that JPMorgan Chase earns on its investment securities portfolio to the extent that it is unable to reinvest contemporaneously in higher-yielding instruments\n\n\n|    |    |\n|---:|---:|\n|  1 | 16 |\n","context_markdown_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, \nPart I\n\n\n\u2022provoke retaliatory countermeasures by other countries and otherwise heighten tensions in regulatory, enforcement or diplomatic relations \n\u2022increase concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time\n\n\u2022lead to the withdrawal of government support for agencies and enterprises such as the U.S. Federal National Mortgage Association and the U.S. Federal Home Loan Mortgage Corporation (together, the \"U.S. GSEs\")\n\n\u2022result in periodic shutdowns of the U.S. government or governments in other countries \n\u2022increase investor reliance on actions by the Federal Reserve or other central banks, or influence investor perceptions concerning government support of sectors of the economy or the economy as a whole\n\u2022adversely affect the financial condition or credit ratings of clients and counterparties with which JPMorgan Chase does business, or\n\u2022cause JPMorgan Chase to refrain from engaging in business opportunities that it might otherwise pursue.\nThese factors could lead to:\n\u2022slower growth rates, rising inflation or recession\n\u2022greater market volatility\n\u2022a contraction of available credit and the widening of credit spreads \n\u2022erosion of adequate risk premium on certain financial assets \n\u2022diminished investor and consumer confidence\n\u2022lower investments in a particular country or sector of the economy\n\u2022large-scale sales of government debt and other debt and equity securities in the U.S. and other countries\n\u2022reduced commercial activity among trading partners\n\u2022the potential for a currency redenomination by a particular country\n\u2022the possible departure of a country from, or the dissolution or formation of, a political or economic alliance or treaty\n\u2022potential expropriation or nationalization of assets, including client assets, or \n\u2022other market dislocations, including unfavorable economic conditions that could spread from a particular country or region to other countries or regions.\nAny of these potential outcomes could cause JPMorgan Chase to suffer losses on its market-making positions or in its investment portfolio, reduce its liquidity and capital levels, increase the allowance for credit losses or lead to higher net charge-offs, hamper its ability to deliver \n\nproducts and services to its clients and customers, and weaken its results of operations and financial condition or credit rating.\nJPMorgan Chase's business and results of operations may also be adversely affected by actions or initiatives by national, state or local governmental authorities that:\n\u2022seek to discourage financial institutions from doing business with companies engaged in certain industries, or conversely, to penalize financial institutions that elect not to do business with such companies, or\n\u2022mandate specific business practices that companies operating in the relevant jurisdiction must adopt.\nBecause governmental policies in one jurisdiction may differ or conflict with those in other jurisdictions, JPMorgan Chase may face negative consequences regardless of the course of action it takes or elects not to take, including:\n\u2022restrictions or prohibitions on doing business within a particular jurisdiction, or with governmental entities in a jurisdiction\n\u2022the threat of enforcement actions, including under antitrust or other anti-competition laws, rules and regulations, and\n\u2022harm to its reputation arising from public criticism, including from politicians, activists and other stakeholders.\nJPMorgan Chase has been prohibited from engaging in certain business activities in specific jurisdictions as a result of these types of governmental actions, and there is no assurance that it will not face similar restrictions on its business and operations in the future.\nIn addition, JPMorgan Chase's relationships or ability to transact with clients and customers, and with governmental or regulatory bodies in jurisdictions in which JPMorgan Chase does business, could be adversely affected if its decisions with respect to doing business with companies in certain sensitive industries are perceived to harm those companies or to align with particular political viewpoints. Furthermore, JPMorgan Chase's participation in or association with certain environmental and social industry groups or initiatives could be viewed by activists or governmental authorities as boycotting or other discriminatory business behavior.\n\nMarket\n\nEconomic and market events and conditions can materially affect JPMorgan Chase's businesses and investment and market-making positions.\nJPMorgan Chase's results of operations can be negatively affected by adverse changes in any of the following:\n\u2022investor, consumer and business sentiment\n\u2022events that reduce confidence in the financial markets\n\u2022inflation, deflation or recession\n\n\n|    |    |\n|---:|---:|\n|  1 | 14 |\n, \u2022high unemployment or, conversely, a tightening labor market\n\u2022the availability and cost of capital, liquidity and credit\n\u2022levels and volatility of interest rates, credit spreads and market prices for currencies, equities and commodities, as well as the duration of any such changes\n\u2022the economic effects of an outbreak or escalation of hostilities, terrorism or other geopolitical instabilities, cyber attacks, climate change, natural disasters, severe weather conditions, health emergencies, the spread of infectious diseases, epidemics or pandemics or other extraordinary events beyond JPMorgan Chase's control, and\n\u2022the strength of the U.S. and global economies.\nAll of these are affected by global economic, market and political events and conditions, as well as regulatory restrictions.\nIn addition, JPMorgan Chase's investment portfolio and market-making businesses can suffer losses due to unanticipated market events, including:\n\u2022severe declines in asset values\n\u2022unexpected credit events\n\u2022unforeseen events or conditions that may cause previously uncorrelated factors to become correlated (and vice versa)\n\u2022the inability to effectively hedge risks related to market-making and investment portfolio positions, or\n\u2022other market risks that may not have been appropriately taken into account in the development, structuring or pricing of a financial instrument.\nIf JPMorgan Chase experiences significant losses in its investment portfolio or from market-making activities, this could reduce JPMorgan Chase's profitability and its liquidity and capital levels, and thereby constrain the growth of its businesses.\nJPMorgan Chase's consumer businesses can be negatively affected by adverse economic conditions and governmental policies.\nJPMorgan Chase's consumer businesses are particularly affected by U.S. and global economic conditions, including:\n\u2022personal and household income distribution\n\u2022unemployment or underemployment\n\u2022prolonged periods of exceptionally high or low interest rates\n\u2022changes in the value of collateral such as residential real estate and vehicles\n\u2022changes in housing prices\n\n\u2022the level of inflation and its effect on prices for goods and services\n\u2022consumer and small business confidence levels, and\n\u2022changes in consumer spending or in the level of consumer debt.\nHeightened levels of unemployment or underemployment that result in reduced personal and household income could negatively affect consumer credit performance to the extent that consumers are less able to service their debts. In addition, sustained low growth, low or negative interest rates, inflationary pressures or recessionary conditions could diminish customer demand for the products and services offered by JPMorgan Chase's consumer businesses. \nAdverse economic conditions could also lead to an increase in delinquencies, additions to the allowance for credit losses and higher net charge-offs, which can reduce JPMorgan Chase's earnings. These consequences could be significantly worse in certain geographies, including where declining industrial or manufacturing activity has resulted in or could result in higher levels of unemployment, or where high levels of consumer debt, such as outstanding student loans, could impair the ability of customers to pay their other consumer loan obligations.\nJPMorgan Chase's earnings from its consumer businesses could also be adversely affected by governmental policies and actions that affect consumers, including:\n\u2022policies and initiatives relating to medical insurance, education, immigration, employment status and housing\n\u2022laws, rules and regulations relating specifically to the financial services industry, such as limitations on late payment, overdraft and interchange fees, and\n\u2022policies aimed at the economy more broadly, such as higher taxes and increased regulation which could result in reductions in consumer disposable income.\nUnfavorable market and economic conditions can have an adverse effect on JPMorgan Chase's wholesale businesses.\nIn JPMorgan Chase's wholesale businesses, market and economic factors can affect the volume of transactions that JPMorgan Chase executes for its clients or for which it advises clients, and, therefore, the revenue that JPMorgan Chase receives from those transactions. These factors can also influence the willingness of other financial institutions and investors to participate in capital markets transactions that JPMorgan Chase manages, such as loan syndications or securities underwriting. Furthermore, if a significant and sustained deterioration in market conditions were to occur, the profitability of JPMorgan Chase's businesses engaged in capital markets activities, including loan syndication, securities underwriting and leveraged lending activities, could be reduced to the extent that those businesses:\n\u2022earn less fee revenue due to lower transaction volumes, including when clients are unwilling or unable to \n\n\n|    |    |\n|---:|---:|\n|  1 | 15 |\n, \nPart I\n\n\nrefinance their outstanding debt obligations in unfavorable market conditions, or\n\u2022dispose of portions of credit commitments at a loss, or hold larger residual positions in credit commitments that cannot be sold at favorable prices.\nThe fees that JPMorgan Chase earns from managing client assets or holding assets under custody for clients could be diminished by declining asset values or other adverse macroeconomic conditions. For example, higher interest rates or a downturn in financial markets could affect the valuation of client assets that JPMorgan Chase manages or holds under custody, which, in turn, could affect JPMorgan Chase's revenue from fees that are based on the amount of assets under management or custody. Similarly, adverse macroeconomic or market conditions could prompt outflows from JPMorgan Chase funds or accounts, or cause clients to invest in products that generate lower revenue. Substantial and unexpected withdrawals from a JPMorgan Chase fund can also hamper the investment performance of the fund, particularly if the outflows create the need for the fund to dispose of fund assets at disadvantageous times or prices, and could lead to further withdrawals based on the weaker investment performance.\nAn adverse change in market conditions in particular segments of the economy, such as a sudden and severe downturn in oil and gas prices or an increase in commodity prices, severe declines in commercial real estate values, or sustained changes in consumer behavior that affect specific economic sectors, could have a material adverse effect on clients of JPMorgan Chase whose operations or financial condition are directly or indirectly dependent on the health or stability of those market segments or economic sectors, as well as clients that are engaged in related businesses. JPMorgan Chase could incur credit losses on its loans and other commitments to clients that operate in, or are dependent on, any sector of the economy that is or comes under stress.\nAn economic downturn or sustained changes in consumer behavior that results in shifts in consumer and business spending could also have a negative impact on certain of JPMorgan Chase's wholesale clients, and thereby diminish JPMorgan Chase's earnings from its wholesale operations. For example, the businesses of certain of JPMorgan Chase's wholesale clients are dependent on consistent streams of rental income from commercial real estate properties, including offices, which are owned or being built by those clients. Sustained adverse economic conditions or hybrid work models could result in reductions in the rental cash flows that owners or developers receive from their tenants which, in turn, could depress the values of the properties, impair the ability of borrowers to service or refinance their commercial real estate loans and lead to an increase in foreclosures. These consequences could result in JPMorgan Chase experiencing increases in the allowance for credit losses, higher delinquencies, defaults and charge-offs within its commercial real estate loan portfolio and \n\nincurring higher costs for servicing a larger volume of delinquent loans in that portfolio. An increase in foreclosures could result in higher operational risk associated with JPMorgan Chase owning and managing real property, and any inadequacy in governance or control over the foreclosed properties could result in regulatory scrutiny and reputational harm.\nChanges in interest rates and credit spreads can adversely affect JPMorgan Chase's earnings, its liquidity or its capital levels. \nWhen interest rates are high or increasing, JPMorgan Chase can generally be expected to earn higher net interest income. However, higher interest rates can also lead to:\n\u2022fewer originations of commercial and residential real estate loans \n\u2022losses on underwriting exposures or incremental client-specific downgrades, or increases in the allowance for credit losses and net charge-offs due to higher financing costs for clients\n\u2022the loss of deposits, particularly if customers withdraw deposits because they believe that interest rates offered by JPMorgan Chase are lower than those of competitors or if JPMorgan Chase makes incorrect assumptions about depositor behavior\n\u2022losses on available-for-sale (\"AFS\") securities held in the investment securities portfolio\n\u2022lower net interest income if central banks introduce interest rate increases more quickly than anticipated and this results in a misalignment in the pricing of short-term and long-term borrowings\n\u2022less liquidity in the financial markets, and\n\u2022higher funding costs.\nAll of these outcomes could adversely affect JPMorgan Chase's earnings or its liquidity and capital levels, and any negative outcomes could be more severe in a prolonged period of high interest rates. Higher interest rates can also negatively affect the payment performance on loans within JPMorgan Chase's consumer and wholesale loan portfolios that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may reduce or stop making payments, thereby causing JPMorgan Chase to incur losses and increased operational costs related to servicing a higher volume of delinquent loans. \nOn the other hand, a low or negative interest rate environment may cause:\n\u2022net interest margins to be compressed, which could reduce the amounts that JPMorgan Chase earns on its investment securities portfolio to the extent that it is unable to reinvest contemporaneously in higher-yielding instruments\n\n\n|    |    |\n|---:|---:|\n|  1 | 16 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 14: \nPart I\n\n\n\u2022provoke retaliatory countermeasures by other countries and otherwise heighten tensions in regulatory, enforcement or diplomatic relations \n\u2022increase concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time\n\n\u2022lead to the withdrawal of government support for agencies and enterprises such as the U.S. Federal National Mortgage Association and the U.S. Federal Home Loan Mortgage Corporation (together, the \"U.S. GSEs\")\n\n\u2022result in periodic shutdowns of the U.S. government or governments in other countries \n\u2022increase investor reliance on actions by the Federal Reserve or other central banks, or influence investor perceptions concerning government support of sectors of the economy or the economy as a whole\n\u2022adversely affect the financial condition or credit ratings of clients and counterparties with which JPMorgan Chase does business, or\n\u2022cause JPMorgan Chase to refrain from engaging in business opportunities that it might otherwise pursue.\nThese factors could lead to:\n\u2022slower growth rates, rising inflation or recession\n\u2022greater market volatility\n\u2022a contraction of available credit and the widening of credit spreads \n\u2022erosion of adequate risk premium on certain financial assets \n\u2022diminished investor and consumer confidence\n\u2022lower investments in a particular country or sector of the economy\n\u2022large-scale sales of government debt and other debt and equity securities in the U.S. and other countries\n\u2022reduced commercial activity among trading partners\n\u2022the potential for a currency redenomination by a particular country\n\u2022the possible departure of a country from, or the dissolution or formation of, a political or economic alliance or treaty\n\u2022potential expropriation or nationalization of assets, including client assets, or \n\u2022other market dislocations, including unfavorable economic conditions that could spread from a particular country or region to other countries or regions.\nAny of these potential outcomes could cause JPMorgan Chase to suffer losses on its market-making positions or in its investment portfolio, reduce its liquidity and capital levels, increase the allowance for credit losses or lead to higher net charge-offs, hamper its ability to deliver \n\nproducts and services to its clients and customers, and weaken its results of operations and financial condition or credit rating.\nJPMorgan Chase's business and results of operations may also be adversely affected by actions or initiatives by national, state or local governmental authorities that:\n\u2022seek to discourage financial institutions from doing business with companies engaged in certain industries, or conversely, to penalize financial institutions that elect not to do business with such companies, or\n\u2022mandate specific business practices that companies operating in the relevant jurisdiction must adopt.\nBecause governmental policies in one jurisdiction may differ or conflict with those in other jurisdictions, JPMorgan Chase may face negative consequences regardless of the course of action it takes or elects not to take, including:\n\u2022restrictions or prohibitions on doing business within a particular jurisdiction, or with governmental entities in a jurisdiction\n\u2022the threat of enforcement actions, including under antitrust or other anti-competition laws, rules and regulations, and\n\u2022harm to its reputation arising from public criticism, including from politicians, activists and other stakeholders.\nJPMorgan Chase has been prohibited from engaging in certain business activities in specific jurisdictions as a result of these types of governmental actions, and there is no assurance that it will not face similar restrictions on its business and operations in the future.\nIn addition, JPMorgan Chase's relationships or ability to transact with clients and customers, and with governmental or regulatory bodies in jurisdictions in which JPMorgan Chase does business, could be adversely affected if its decisions with respect to doing business with companies in certain sensitive industries are perceived to harm those companies or to align with particular political viewpoints. Furthermore, JPMorgan Chase's participation in or association with certain environmental and social industry groups or initiatives could be viewed by activists or governmental authorities as boycotting or other discriminatory business behavior.\n\nMarket\n\nEconomic and market events and conditions can materially affect JPMorgan Chase's businesses and investment and market-making positions.\nJPMorgan Chase's results of operations can be negatively affected by adverse changes in any of the following:\n\u2022investor, consumer and business sentiment\n\u2022events that reduce confidence in the financial markets\n\u2022inflation, deflation or recession\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 15: \u2022high unemployment or, conversely, a tightening labor market\n\u2022the availability and cost of capital, liquidity and credit\n\u2022levels and volatility of interest rates, credit spreads and market prices for currencies, equities and commodities, as well as the duration of any such changes\n\u2022the economic effects of an outbreak or escalation of hostilities, terrorism or other geopolitical instabilities, cyber attacks, climate change, natural disasters, severe weather conditions, health emergencies, the spread of infectious diseases, epidemics or pandemics or other extraordinary events beyond JPMorgan Chase's control, and\n\u2022the strength of the U.S. and global economies.\nAll of these are affected by global economic, market and political events and conditions, as well as regulatory restrictions.\nIn addition, JPMorgan Chase's investment portfolio and market-making businesses can suffer losses due to unanticipated market events, including:\n\u2022severe declines in asset values\n\u2022unexpected credit events\n\u2022unforeseen events or conditions that may cause previously uncorrelated factors to become correlated (and vice versa)\n\u2022the inability to effectively hedge risks related to market-making and investment portfolio positions, or\n\u2022other market risks that may not have been appropriately taken into account in the development, structuring or pricing of a financial instrument.\nIf JPMorgan Chase experiences significant losses in its investment portfolio or from market-making activities, this could reduce JPMorgan Chase's profitability and its liquidity and capital levels, and thereby constrain the growth of its businesses.\nJPMorgan Chase's consumer businesses can be negatively affected by adverse economic conditions and governmental policies.\nJPMorgan Chase's consumer businesses are particularly affected by U.S. and global economic conditions, including:\n\u2022personal and household income distribution\n\u2022unemployment or underemployment\n\u2022prolonged periods of exceptionally high or low interest rates\n\u2022changes in the value of collateral such as residential real estate and vehicles\n\u2022changes in housing prices\n\n\u2022the level of inflation and its effect on prices for goods and services\n\u2022consumer and small business confidence levels, and\n\u2022changes in consumer spending or in the level of consumer debt.\nHeightened levels of unemployment or underemployment that result in reduced personal and household income could negatively affect consumer credit performance to the extent that consumers are less able to service their debts. In addition, sustained low growth, low or negative interest rates, inflationary pressures or recessionary conditions could diminish customer demand for the products and services offered by JPMorgan Chase's consumer businesses. \nAdverse economic conditions could also lead to an increase in delinquencies, additions to the allowance for credit losses and higher net charge-offs, which can reduce JPMorgan Chase's earnings. These consequences could be significantly worse in certain geographies, including where declining industrial or manufacturing activity has resulted in or could result in higher levels of unemployment, or where high levels of consumer debt, such as outstanding student loans, could impair the ability of customers to pay their other consumer loan obligations.\nJPMorgan Chase's earnings from its consumer businesses could also be adversely affected by governmental policies and actions that affect consumers, including:\n\u2022policies and initiatives relating to medical insurance, education, immigration, employment status and housing\n\u2022laws, rules and regulations relating specifically to the financial services industry, such as limitations on late payment, overdraft and interchange fees, and\n\u2022policies aimed at the economy more broadly, such as higher taxes and increased regulation which could result in reductions in consumer disposable income.\nUnfavorable market and economic conditions can have an adverse effect on JPMorgan Chase's wholesale businesses.\nIn JPMorgan Chase's wholesale businesses, market and economic factors can affect the volume of transactions that JPMorgan Chase executes for its clients or for which it advises clients, and, therefore, the revenue that JPMorgan Chase receives from those transactions. These factors can also influence the willingness of other financial institutions and investors to participate in capital markets transactions that JPMorgan Chase manages, such as loan syndications or securities underwriting. Furthermore, if a significant and sustained deterioration in market conditions were to occur, the profitability of JPMorgan Chase's businesses engaged in capital markets activities, including loan syndication, securities underwriting and leveraged lending activities, could be reduced to the extent that those businesses:\n\u2022earn less fee revenue due to lower transaction volumes, including when clients are unwilling or unable to \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">15<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 16: \nPart I\n\n\nrefinance their outstanding debt obligations in unfavorable market conditions, or\n\u2022dispose of portions of credit commitments at a loss, or hold larger residual positions in credit commitments that cannot be sold at favorable prices.\nThe fees that JPMorgan Chase earns from managing client assets or holding assets under custody for clients could be diminished by declining asset values or other adverse macroeconomic conditions. For example, higher interest rates or a downturn in financial markets could affect the valuation of client assets that JPMorgan Chase manages or holds under custody, which, in turn, could affect JPMorgan Chase's revenue from fees that are based on the amount of assets under management or custody. Similarly, adverse macroeconomic or market conditions could prompt outflows from JPMorgan Chase funds or accounts, or cause clients to invest in products that generate lower revenue. Substantial and unexpected withdrawals from a JPMorgan Chase fund can also hamper the investment performance of the fund, particularly if the outflows create the need for the fund to dispose of fund assets at disadvantageous times or prices, and could lead to further withdrawals based on the weaker investment performance.\nAn adverse change in market conditions in particular segments of the economy, such as a sudden and severe downturn in oil and gas prices or an increase in commodity prices, severe declines in commercial real estate values, or sustained changes in consumer behavior that affect specific economic sectors, could have a material adverse effect on clients of JPMorgan Chase whose operations or financial condition are directly or indirectly dependent on the health or stability of those market segments or economic sectors, as well as clients that are engaged in related businesses. JPMorgan Chase could incur credit losses on its loans and other commitments to clients that operate in, or are dependent on, any sector of the economy that is or comes under stress.\nAn economic downturn or sustained changes in consumer behavior that results in shifts in consumer and business spending could also have a negative impact on certain of JPMorgan Chase's wholesale clients, and thereby diminish JPMorgan Chase's earnings from its wholesale operations. For example, the businesses of certain of JPMorgan Chase's wholesale clients are dependent on consistent streams of rental income from commercial real estate properties, including offices, which are owned or being built by those clients. Sustained adverse economic conditions or hybrid work models could result in reductions in the rental cash flows that owners or developers receive from their tenants which, in turn, could depress the values of the properties, impair the ability of borrowers to service or refinance their commercial real estate loans and lead to an increase in foreclosures. These consequences could result in JPMorgan Chase experiencing increases in the allowance for credit losses, higher delinquencies, defaults and charge-offs within its commercial real estate loan portfolio and \n\nincurring higher costs for servicing a larger volume of delinquent loans in that portfolio. An increase in foreclosures could result in higher operational risk associated with JPMorgan Chase owning and managing real property, and any inadequacy in governance or control over the foreclosed properties could result in regulatory scrutiny and reputational harm.\nChanges in interest rates and credit spreads can adversely affect JPMorgan Chase's earnings, its liquidity or its capital levels. \nWhen interest rates are high or increasing, JPMorgan Chase can generally be expected to earn higher net interest income. However, higher interest rates can also lead to:\n\u2022fewer originations of commercial and residential real estate loans \n\u2022losses on underwriting exposures or incremental client-specific downgrades, or increases in the allowance for credit losses and net charge-offs due to higher financing costs for clients\n\u2022the loss of deposits, particularly if customers withdraw deposits because they believe that interest rates offered by JPMorgan Chase are lower than those of competitors or if JPMorgan Chase makes incorrect assumptions about depositor behavior\n\u2022losses on available-for-sale (\"AFS\") securities held in the investment securities portfolio\n\u2022lower net interest income if central banks introduce interest rate increases more quickly than anticipated and this results in a misalignment in the pricing of short-term and long-term borrowings\n\u2022less liquidity in the financial markets, and\n\u2022higher funding costs.\nAll of these outcomes could adversely affect JPMorgan Chase's earnings or its liquidity and capital levels, and any negative outcomes could be more severe in a prolonged period of high interest rates. Higher interest rates can also negatively affect the payment performance on loans within JPMorgan Chase's consumer and wholesale loan portfolios that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may reduce or stop making payments, thereby causing JPMorgan Chase to incur losses and increased operational costs related to servicing a higher volume of delinquent loans. \nOn the other hand, a low or negative interest rate environment may cause:\n\u2022net interest margins to be compressed, which could reduce the amounts that JPMorgan Chase earns on its investment securities portfolio to the extent that it is unable to reinvest contemporaneously in higher-yielding instruments\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">16<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, \nPart I\n\n\n\u2022provoke retaliatory countermeasures by other countries and otherwise heighten tensions in regulatory, enforcement or diplomatic relations \n\u2022increase concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time\n\n\u2022lead to the withdrawal of government support for agencies and enterprises such as the U.S. Federal National Mortgage Association and the U.S. Federal Home Loan Mortgage Corporation (together, the \"U.S. GSEs\")\n\n\u2022result in periodic shutdowns of the U.S. government or governments in other countries \n\u2022increase investor reliance on actions by the Federal Reserve or other central banks, or influence investor perceptions concerning government support of sectors of the economy or the economy as a whole\n\u2022adversely affect the financial condition or credit ratings of clients and counterparties with which JPMorgan Chase does business, or\n\u2022cause JPMorgan Chase to refrain from engaging in business opportunities that it might otherwise pursue.\nThese factors could lead to:\n\u2022slower growth rates, rising inflation or recession\n\u2022greater market volatility\n\u2022a contraction of available credit and the widening of credit spreads \n\u2022erosion of adequate risk premium on certain financial assets \n\u2022diminished investor and consumer confidence\n\u2022lower investments in a particular country or sector of the economy\n\u2022large-scale sales of government debt and other debt and equity securities in the U.S. and other countries\n\u2022reduced commercial activity among trading partners\n\u2022the potential for a currency redenomination by a particular country\n\u2022the possible departure of a country from, or the dissolution or formation of, a political or economic alliance or treaty\n\u2022potential expropriation or nationalization of assets, including client assets, or \n\u2022other market dislocations, including unfavorable economic conditions that could spread from a particular country or region to other countries or regions.\nAny of these potential outcomes could cause JPMorgan Chase to suffer losses on its market-making positions or in its investment portfolio, reduce its liquidity and capital levels, increase the allowance for credit losses or lead to higher net charge-offs, hamper its ability to deliver \n\nproducts and services to its clients and customers, and weaken its results of operations and financial condition or credit rating.\nJPMorgan Chase's business and results of operations may also be adversely affected by actions or initiatives by national, state or local governmental authorities that:\n\u2022seek to discourage financial institutions from doing business with companies engaged in certain industries, or conversely, to penalize financial institutions that elect not to do business with such companies, or\n\u2022mandate specific business practices that companies operating in the relevant jurisdiction must adopt.\nBecause governmental policies in one jurisdiction may differ or conflict with those in other jurisdictions, JPMorgan Chase may face negative consequences regardless of the course of action it takes or elects not to take, including:\n\u2022restrictions or prohibitions on doing business within a particular jurisdiction, or with governmental entities in a jurisdiction\n\u2022the threat of enforcement actions, including under antitrust or other anti-competition laws, rules and regulations, and\n\u2022harm to its reputation arising from public criticism, including from politicians, activists and other stakeholders.\nJPMorgan Chase has been prohibited from engaging in certain business activities in specific jurisdictions as a result of these types of governmental actions, and there is no assurance that it will not face similar restrictions on its business and operations in the future.\nIn addition, JPMorgan Chase's relationships or ability to transact with clients and customers, and with governmental or regulatory bodies in jurisdictions in which JPMorgan Chase does business, could be adversely affected if its decisions with respect to doing business with companies in certain sensitive industries are perceived to harm those companies or to align with particular political viewpoints. Furthermore, JPMorgan Chase's participation in or association with certain environmental and social industry groups or initiatives could be viewed by activists or governmental authorities as boycotting or other discriminatory business behavior.\n\nMarket\n\nEconomic and market events and conditions can materially affect JPMorgan Chase's businesses and investment and market-making positions.\nJPMorgan Chase's results of operations can be negatively affected by adverse changes in any of the following:\n\u2022investor, consumer and business sentiment\n\u2022events that reduce confidence in the financial markets\n\u2022inflation, deflation or recession\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, \u2022high unemployment or, conversely, a tightening labor market\n\u2022the availability and cost of capital, liquidity and credit\n\u2022levels and volatility of interest rates, credit spreads and market prices for currencies, equities and commodities, as well as the duration of any such changes\n\u2022the economic effects of an outbreak or escalation of hostilities, terrorism or other geopolitical instabilities, cyber attacks, climate change, natural disasters, severe weather conditions, health emergencies, the spread of infectious diseases, epidemics or pandemics or other extraordinary events beyond JPMorgan Chase's control, and\n\u2022the strength of the U.S. and global economies.\nAll of these are affected by global economic, market and political events and conditions, as well as regulatory restrictions.\nIn addition, JPMorgan Chase's investment portfolio and market-making businesses can suffer losses due to unanticipated market events, including:\n\u2022severe declines in asset values\n\u2022unexpected credit events\n\u2022unforeseen events or conditions that may cause previously uncorrelated factors to become correlated (and vice versa)\n\u2022the inability to effectively hedge risks related to market-making and investment portfolio positions, or\n\u2022other market risks that may not have been appropriately taken into account in the development, structuring or pricing of a financial instrument.\nIf JPMorgan Chase experiences significant losses in its investment portfolio or from market-making activities, this could reduce JPMorgan Chase's profitability and its liquidity and capital levels, and thereby constrain the growth of its businesses.\nJPMorgan Chase's consumer businesses can be negatively affected by adverse economic conditions and governmental policies.\nJPMorgan Chase's consumer businesses are particularly affected by U.S. and global economic conditions, including:\n\u2022personal and household income distribution\n\u2022unemployment or underemployment\n\u2022prolonged periods of exceptionally high or low interest rates\n\u2022changes in the value of collateral such as residential real estate and vehicles\n\u2022changes in housing prices\n\n\u2022the level of inflation and its effect on prices for goods and services\n\u2022consumer and small business confidence levels, and\n\u2022changes in consumer spending or in the level of consumer debt.\nHeightened levels of unemployment or underemployment that result in reduced personal and household income could negatively affect consumer credit performance to the extent that consumers are less able to service their debts. In addition, sustained low growth, low or negative interest rates, inflationary pressures or recessionary conditions could diminish customer demand for the products and services offered by JPMorgan Chase's consumer businesses. \nAdverse economic conditions could also lead to an increase in delinquencies, additions to the allowance for credit losses and higher net charge-offs, which can reduce JPMorgan Chase's earnings. These consequences could be significantly worse in certain geographies, including where declining industrial or manufacturing activity has resulted in or could result in higher levels of unemployment, or where high levels of consumer debt, such as outstanding student loans, could impair the ability of customers to pay their other consumer loan obligations.\nJPMorgan Chase's earnings from its consumer businesses could also be adversely affected by governmental policies and actions that affect consumers, including:\n\u2022policies and initiatives relating to medical insurance, education, immigration, employment status and housing\n\u2022laws, rules and regulations relating specifically to the financial services industry, such as limitations on late payment, overdraft and interchange fees, and\n\u2022policies aimed at the economy more broadly, such as higher taxes and increased regulation which could result in reductions in consumer disposable income.\nUnfavorable market and economic conditions can have an adverse effect on JPMorgan Chase's wholesale businesses.\nIn JPMorgan Chase's wholesale businesses, market and economic factors can affect the volume of transactions that JPMorgan Chase executes for its clients or for which it advises clients, and, therefore, the revenue that JPMorgan Chase receives from those transactions. These factors can also influence the willingness of other financial institutions and investors to participate in capital markets transactions that JPMorgan Chase manages, such as loan syndications or securities underwriting. Furthermore, if a significant and sustained deterioration in market conditions were to occur, the profitability of JPMorgan Chase's businesses engaged in capital markets activities, including loan syndication, securities underwriting and leveraged lending activities, could be reduced to the extent that those businesses:\n\u2022earn less fee revenue due to lower transaction volumes, including when clients are unwilling or unable to \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">15<\/td><\/tr><\/table>, \nPart I\n\n\nrefinance their outstanding debt obligations in unfavorable market conditions, or\n\u2022dispose of portions of credit commitments at a loss, or hold larger residual positions in credit commitments that cannot be sold at favorable prices.\nThe fees that JPMorgan Chase earns from managing client assets or holding assets under custody for clients could be diminished by declining asset values or other adverse macroeconomic conditions. For example, higher interest rates or a downturn in financial markets could affect the valuation of client assets that JPMorgan Chase manages or holds under custody, which, in turn, could affect JPMorgan Chase's revenue from fees that are based on the amount of assets under management or custody. Similarly, adverse macroeconomic or market conditions could prompt outflows from JPMorgan Chase funds or accounts, or cause clients to invest in products that generate lower revenue. Substantial and unexpected withdrawals from a JPMorgan Chase fund can also hamper the investment performance of the fund, particularly if the outflows create the need for the fund to dispose of fund assets at disadvantageous times or prices, and could lead to further withdrawals based on the weaker investment performance.\nAn adverse change in market conditions in particular segments of the economy, such as a sudden and severe downturn in oil and gas prices or an increase in commodity prices, severe declines in commercial real estate values, or sustained changes in consumer behavior that affect specific economic sectors, could have a material adverse effect on clients of JPMorgan Chase whose operations or financial condition are directly or indirectly dependent on the health or stability of those market segments or economic sectors, as well as clients that are engaged in related businesses. JPMorgan Chase could incur credit losses on its loans and other commitments to clients that operate in, or are dependent on, any sector of the economy that is or comes under stress.\nAn economic downturn or sustained changes in consumer behavior that results in shifts in consumer and business spending could also have a negative impact on certain of JPMorgan Chase's wholesale clients, and thereby diminish JPMorgan Chase's earnings from its wholesale operations. For example, the businesses of certain of JPMorgan Chase's wholesale clients are dependent on consistent streams of rental income from commercial real estate properties, including offices, which are owned or being built by those clients. Sustained adverse economic conditions or hybrid work models could result in reductions in the rental cash flows that owners or developers receive from their tenants which, in turn, could depress the values of the properties, impair the ability of borrowers to service or refinance their commercial real estate loans and lead to an increase in foreclosures. These consequences could result in JPMorgan Chase experiencing increases in the allowance for credit losses, higher delinquencies, defaults and charge-offs within its commercial real estate loan portfolio and \n\nincurring higher costs for servicing a larger volume of delinquent loans in that portfolio. An increase in foreclosures could result in higher operational risk associated with JPMorgan Chase owning and managing real property, and any inadequacy in governance or control over the foreclosed properties could result in regulatory scrutiny and reputational harm.\nChanges in interest rates and credit spreads can adversely affect JPMorgan Chase's earnings, its liquidity or its capital levels. \nWhen interest rates are high or increasing, JPMorgan Chase can generally be expected to earn higher net interest income. However, higher interest rates can also lead to:\n\u2022fewer originations of commercial and residential real estate loans \n\u2022losses on underwriting exposures or incremental client-specific downgrades, or increases in the allowance for credit losses and net charge-offs due to higher financing costs for clients\n\u2022the loss of deposits, particularly if customers withdraw deposits because they believe that interest rates offered by JPMorgan Chase are lower than those of competitors or if JPMorgan Chase makes incorrect assumptions about depositor behavior\n\u2022losses on available-for-sale (\"AFS\") securities held in the investment securities portfolio\n\u2022lower net interest income if central banks introduce interest rate increases more quickly than anticipated and this results in a misalignment in the pricing of short-term and long-term borrowings\n\u2022less liquidity in the financial markets, and\n\u2022higher funding costs.\nAll of these outcomes could adversely affect JPMorgan Chase's earnings or its liquidity and capital levels, and any negative outcomes could be more severe in a prolonged period of high interest rates. Higher interest rates can also negatively affect the payment performance on loans within JPMorgan Chase's consumer and wholesale loan portfolios that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may reduce or stop making payments, thereby causing JPMorgan Chase to incur losses and increased operational costs related to servicing a higher volume of delinquent loans. \nOn the other hand, a low or negative interest rate environment may cause:\n\u2022net interest margins to be compressed, which could reduce the amounts that JPMorgan Chase earns on its investment securities portfolio to the extent that it is unable to reinvest contemporaneously in higher-yielding instruments\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">16<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri020","Question":"How could changes in regulatory policies affect the company's strategic goals?","ground_truth_answer":"Changes in regulatory policies could affect the company's strategic goals by imposing new compliance requirements, increasing operational costs, or restricting market access.","question_type":"Risk","page_number":"9, 10, 12","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_markdown_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n|    |    |\n|---:|---:|\n|  1 |  9 |\n, \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk Factors.\n\nThe following discussion sets forth the material risk factors that could affect JPMorgan Chase's financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.\n\nSummary\n\nThe principal risk factors that could adversely affect JPMorgan Chase's business, results of operations, financial condition, capital position, liquidity, competitive position or reputation include:\n\u2022Regulatory risks, including the impact that applicable laws, rules and regulations in the highly-regulated and supervised financial services industry, as well as changes to or in the application, interpretation or enforcement of those laws, rules and regulations, can have on JPMorgan Chase's business and operations, including JPMorgan Chase incurring additional costs associated with assessments, levies or other governmental charges; the ways in which differences in financial services regulation and supervision in different jurisdictions or with respect to certain competitors can negatively impact JPMorgan Chase's business; the penalties and collateral consequences, and higher compliance and operational costs, that JPMorgan Chase may incur when resolving a regulatory investigation; the ways in which less predictable legal and regulatory frameworks in certain jurisdictions can negatively impact JPMorgan Chase's operations and financial results; and the losses that security holders will absorb if JPMorgan Chase were to enter into a resolution.\n\u2022Political risks, including the potential negative effects on JPMorgan Chase's businesses due to economic uncertainty or instability caused by political developments.\n\u2022Market risks, including the effects that economic and market events and conditions, governmental policies, changes in interest rates and credit spreads, and market fluctuations can have on JPMorgan Chase's consumer and wholesale businesses and its investment and market-making positions and on JPMorgan Chase's earnings and its liquidity and capital levels.\n\u2022Credit risks, including potential negative effects from adverse changes in the financial condition of clients, customers, counterparties, custodians and central counterparties; the potential for losses due to declines in the value of collateral in stressed market conditions; and potential negative impacts from concentrations of credit risk with respect to clients, customers, counterparties and other market participants.\n\n\u2022Liquidity risks, including the risk that JPMorgan Chase's liquidity could be impaired by market-wide illiquidity or disruption, unforeseen liquidity or capital requirements, the inability to sell assets, default by a significant market participant, unanticipated outflows of cash or collateral, or lack of market or customer confidence in JPMorgan Chase; the dependence of JPMorgan Chase & Co. on the cash flows of its subsidiaries; and the potential adverse effects that any downgrade in any of JPMorgan Chase's credit ratings may have on its liquidity and cost of funding.\n\u2022Capital risks, including the risk that any failure by or inability of JPMorgan Chase to maintain the required level and composition of capital, or unfavorable changes in applicable capital requirements, could limit JPMorgan Chase's ability to distribute capital to shareholders or to support its business activities.\n\u2022Operational risks, including risks associated with JPMorgan Chase's dependence on its operational systems, its ability to maintain appropriately-staffed workforces and the competence, integrity, health and safety of its employees, as well as the systems and employees of third parties, market participants and service providers; the potential negative effects of failing to identify and address operational risks related to the failure of internal or external operational systems, the introduction of or changes to products, services and delivery platforms or the adoption of new technologies; legal and regulatory risks related to safeguarding personal information; the harm that could be caused by a successful cyber attack affecting JPMorgan Chase or by other extraordinary events; risks related to acquisitions, including the acquisition of certain assets and liabilities of First Republic Bank; risks associated with JPMorgan Chase's risk management framework and control environment, its models and estimations and associated judgments used in its stress testing and financial statements, and controls over disclosure and financial reporting; and potential adverse effects of failing to comply with heightened regulatory and other standards for the oversight of vendors and other service providers.\n\u2022Strategic risks, including the damage to JPMorgan Chase's competitive standing and results that could occur if management fails to develop and execute effective business strategies; risks associated with the significant and increasing competition that JPMorgan Chase faces; and the potential adverse impacts of climate change on JPMorgan Chase's business operations, clients and customers.\n\u2022Conduct risks, including the negative impact that can result from the actions or misconduct of employees, including any failure of employees to conduct themselves in accordance with JPMorgan Chase's expectations, policies and practices.\n\u2022Reputation risks, including the potential adverse effects on JPMorgan Chase's relationships with its clients, \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">9<\/td><\/tr><\/table>, \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri021","Question":"What is the likelihood and severity of the company facing credit risk from its counterparties?","ground_truth_answer":"The likelihood of facing credit risk from counterparties is moderate, given the company's stringent credit assessment processes. However, the severity could be high if a major counterparty defaults, leading to significant financial losses.","question_type":"Risk","page_number":"17, 18","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 17: \u2022unanticipated or adverse changes in depositor behavior, which could negatively affect JPMorgan Chase's broader asset and liability management strategy, and\n\u2022a reduction in the value of JPMorgan Chase's mortgage servicing rights (\"MSRs\") asset, decreasing revenues.\nWhen credit spreads widen, it becomes more expensive for JPMorgan Chase to borrow. JPMorgan Chase's credit spreads may widen or narrow not only in response to events and circumstances that are specific to JPMorgan Chase but also as a result of general economic and geopolitical events and conditions. Changes in JPMorgan Chase's credit spreads will affect, positively or negatively, JPMorgan Chase's earnings on certain liabilities, such as derivatives, that are recorded at fair value. \nJPMorgan Chase's results may be materially affected by market fluctuations and significant changes in the value of financial instruments.\nThe value of securities, derivatives and other financial instruments which JPMorgan Chase owns or in which it makes markets can be materially affected by market fluctuations. Market volatility, illiquid market conditions and other disruptions in the financial markets may make it extremely difficult to value certain financial instruments. Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments. In addition, at the time of any disposition of these financial instruments, the price that JPMorgan Chase ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of financial instruments that JPMorgan Chase owns or in which it makes markets, which may have an adverse effect on JPMorgan Chase's results of operations.\nJPMorgan Chase's risk management and monitoring processes, including its stress testing framework, seek to quantify and manage JPMorgan Chase's exposure to more extreme market moves. However, JPMorgan Chase's hedging and other risk management strategies may not be effective, and it could incur significant losses, if extreme market events were to occur.\n\nCredit\n\nJPMorgan Chase can be negatively affected by adverse changes in the financial condition of clients, counterparties, custodians and CCPs.\nJPMorgan Chase routinely executes transactions with clients and counterparties such as corporations, financial institutions, asset managers, hedge funds, securities exchanges and government entities within and outside the U.S. Many of these transactions expose JPMorgan Chase to the credit risk of its clients and counterparties, and can involve JPMorgan Chase in disputes and litigation if a client or counterparty defaults. JPMorgan Chase can also be subject to losses or liability where a financial institution that \n\nit has appointed to provide custodial services for client assets or funds becomes insolvent as a result of fraud or the failure to abide by existing laws and obligations, or where clients are unable to access assets held by JPMorgan Chase as custodian due to governmental actions or other factors.\nA default by, or the financial or operational failure of, a CCP through which JPMorgan Chase executes contracts would require JPMorgan Chase to replace those contracts, thereby increasing its operational costs and potentially resulting in losses. In addition, JPMorgan Chase can be exposed to losses if a member of a CCP in which JPMorgan Chase is also a member defaults on its obligations to the CCP because of requirements that each member of the CCP absorb a portion of those losses. Furthermore, JPMorgan Chase can be subject to bearing its share of non-default losses incurred by a CCP, including losses from custodial, settlement or investment activities or due to cyber or other security breaches.\nAs part of its clearing services activities, JPMorgan Chase is exposed to the risk of nonperformance by its clients, which it seeks to mitigate by requiring clients to provide adequate collateral. JPMorgan Chase is also exposed to intra-day credit risk of its clients in connection with providing cash management, clearing, custodial and other transaction services to those clients. If a client for which JPMorgan Chase provides these services becomes bankrupt or insolvent, JPMorgan Chase may incur losses, become involved in disputes and litigation with one or more CCPs, the client's bankruptcy estate and other creditors, or be subject to regulatory investigations. All of the foregoing events can increase JPMorgan Chase's operational and litigation costs, and JPMorgan Chase may suffer losses to the extent that any collateral that it has received is insufficient to cover those losses.\nTransactions with government entities, including national, state, provincial, municipal and local authorities, can expose JPMorgan Chase to enhanced sovereign, credit, operational and reputation risks. Government entities may, among other things, claim that actions taken by government officials were beyond the legal authority of those officials or repudiate transactions authorized by a previous incumbent government. These types of actions have in the past caused, and could in the future cause, JPMorgan Chase to suffer losses or hamper its ability to conduct business in the relevant jurisdiction.\nIn addition, local laws, rules and regulations could limit JPMorgan Chase's ability to resolve disputes and litigation in the event of a counterparty default or unwillingness to make previously agreed-upon payments, which could subject JPMorgan Chase to losses.\nDisputes may arise with counterparties to derivatives contracts with regard to the terms, the settlement procedures or the value of underlying collateral. The disposition of those disputes could cause JPMorgan Chase to incur unexpected transaction, operational and legal costs, or result in credit losses. These consequences can \n\n\n|    |    |\n|---:|---:|\n|  1 | 17 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 18: \nPart I\n\n\nalso impair JPMorgan Chase's ability to effectively manage its credit risk exposure from its market activities, or cause harm to JPMorgan Chase's reputation.\nThe financial or operational failure of a significant market participant, such as a major financial institution or a CCP, or concerns about the creditworthiness of such a market participant or its ability to fulfill its obligations, can cause substantial and cascading disruption within the financial markets, including in circumstances where coordinated action by multiple other market participants is required to address the failure or disruption. JPMorgan Chase's businesses could be significantly disrupted by such an event, particularly if it leads to other market participants incurring significant losses, experiencing liquidity issues or defaulting, and JPMorgan Chase is likely to have significant interrelationships with, and credit exposure to, such a significant market participant.\nJPMorgan Chase may suffer losses if the value of collateral declines in stressed market conditions.\nDuring periods of market stress or illiquidity, JPMorgan Chase's credit risk may be further increased when:\n\u2022JPMorgan Chase fails to realize the estimated value of the collateral it holds\n\u2022collateral is liquidated at prices that are not sufficient to recover the full amount owed to it, or\n\u2022counterparties are unable to post collateral, whether for operational or other reasons.\nFurthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility or illiquidity, and JPMorgan Chase could suffer losses during these periods if it is unable to realize the fair value of collateral or to manage declines in the value of collateral.\nJPMorgan Chase could incur significant losses arising from concentrations of credit and market risk.\nJPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties, or obligors on securities and other financial instruments:\n\u2022engage in similar or related businesses, or in businesses in related industries\n\u2022do business in the same geographic region, or\n\u2022have business profiles, models or strategies that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions. \nFor example, a significant deterioration in the credit quality of a counterparty, borrower or other obligor could lead to concerns about the creditworthiness of other counterparties, borrowers or obligors in similar, related or dependent industries. This type of interrelationship could exacerbate JPMorgan Chase's credit, liquidity and market risk exposure and potentially cause it to incur losses, \n\nincluding fair value losses in its market-making businesses and investment portfolios. In addition, JPMorgan Chase may be required to increase the allowance for credit losses or establish other reserves with respect to certain clients, industries or country exposures in order to align with directives or expectations of its banking regulators. \nSimilarly, challenging economic conditions that affect a particular industry or geographic area could lead to concerns about the credit quality of counterparties, borrowers or other obligors not only in that particular industry or geography but in related or dependent industries, wherever located. These conditions could also heighten concerns about the ability of customers of JPMorgan Chase's consumer businesses who live in those areas or work in those affected industries or related or dependent industries to meet their obligations to JPMorgan Chase. JPMorgan Chase regularly monitors various segments of its credit and market risk exposures to assess the potential risks of concentration or contagion, but its ability to diversify or hedge its exposure against those risks may be limited.\nJPMorgan Chase's consumer businesses can also be harmed by an excessive expansion of consumer credit by bank or non-bank competitors. Heightened competition for certain types of consumer loans could prompt industry-wide reactions such as significant reductions in the pricing or margins of those loans or the making of loans to less-creditworthy borrowers. If large numbers of consumers subsequently default on their loans, whether due to weak credit profiles, an economic downturn or other factors, this could impair their ability to repay obligations owed to JPMorgan Chase and result in higher charge-offs and other credit-related losses. More broadly, widespread defaults on consumer debt could lead to recessionary conditions in the U.S. economy, and JPMorgan Chase's consumer businesses may earn lower revenues in such an environment.\nIf JPMorgan Chase is unable to reduce positions effectively during a market dislocation, this can increase both the market and credit risks associated with those positions and the level of risk-weighted-assets (\"RWA\") that JPMorgan Chase holds on its balance sheet. These factors could adversely affect JPMorgan Chase's capital position, funding costs and the profitability of its businesses.\n\nLiquidity\n\nJPMorgan Chase's ability to operate its businesses could be impaired if its liquidity is constrained. \nJPMorgan Chase's liquidity can be impacted at any given time as a result of factors such as:\n\u2022market-wide illiquidity or disruption\n\u2022changes in liquidity or capital requirements resulting from changes in laws, rules and regulations, including those in response to economic effects of systemic events\n\u2022actions taken by the U.S. government or by the Federal Reserve to reduce its balance sheet, which may reduce \n\n\n|    |    |\n|---:|---:|\n|  1 | 18 |\n","context_markdown_without_headers":"\u2022unanticipated or adverse changes in depositor behavior, which could negatively affect JPMorgan Chase's broader asset and liability management strategy, and\n\u2022a reduction in the value of JPMorgan Chase's mortgage servicing rights (\"MSRs\") asset, decreasing revenues.\nWhen credit spreads widen, it becomes more expensive for JPMorgan Chase to borrow. JPMorgan Chase's credit spreads may widen or narrow not only in response to events and circumstances that are specific to JPMorgan Chase but also as a result of general economic and geopolitical events and conditions. Changes in JPMorgan Chase's credit spreads will affect, positively or negatively, JPMorgan Chase's earnings on certain liabilities, such as derivatives, that are recorded at fair value. \nJPMorgan Chase's results may be materially affected by market fluctuations and significant changes in the value of financial instruments.\nThe value of securities, derivatives and other financial instruments which JPMorgan Chase owns or in which it makes markets can be materially affected by market fluctuations. Market volatility, illiquid market conditions and other disruptions in the financial markets may make it extremely difficult to value certain financial instruments. Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments. In addition, at the time of any disposition of these financial instruments, the price that JPMorgan Chase ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of financial instruments that JPMorgan Chase owns or in which it makes markets, which may have an adverse effect on JPMorgan Chase's results of operations.\nJPMorgan Chase's risk management and monitoring processes, including its stress testing framework, seek to quantify and manage JPMorgan Chase's exposure to more extreme market moves. However, JPMorgan Chase's hedging and other risk management strategies may not be effective, and it could incur significant losses, if extreme market events were to occur.\n\nCredit\n\nJPMorgan Chase can be negatively affected by adverse changes in the financial condition of clients, counterparties, custodians and CCPs.\nJPMorgan Chase routinely executes transactions with clients and counterparties such as corporations, financial institutions, asset managers, hedge funds, securities exchanges and government entities within and outside the U.S. Many of these transactions expose JPMorgan Chase to the credit risk of its clients and counterparties, and can involve JPMorgan Chase in disputes and litigation if a client or counterparty defaults. JPMorgan Chase can also be subject to losses or liability where a financial institution that \n\nit has appointed to provide custodial services for client assets or funds becomes insolvent as a result of fraud or the failure to abide by existing laws and obligations, or where clients are unable to access assets held by JPMorgan Chase as custodian due to governmental actions or other factors.\nA default by, or the financial or operational failure of, a CCP through which JPMorgan Chase executes contracts would require JPMorgan Chase to replace those contracts, thereby increasing its operational costs and potentially resulting in losses. In addition, JPMorgan Chase can be exposed to losses if a member of a CCP in which JPMorgan Chase is also a member defaults on its obligations to the CCP because of requirements that each member of the CCP absorb a portion of those losses. Furthermore, JPMorgan Chase can be subject to bearing its share of non-default losses incurred by a CCP, including losses from custodial, settlement or investment activities or due to cyber or other security breaches.\nAs part of its clearing services activities, JPMorgan Chase is exposed to the risk of nonperformance by its clients, which it seeks to mitigate by requiring clients to provide adequate collateral. JPMorgan Chase is also exposed to intra-day credit risk of its clients in connection with providing cash management, clearing, custodial and other transaction services to those clients. If a client for which JPMorgan Chase provides these services becomes bankrupt or insolvent, JPMorgan Chase may incur losses, become involved in disputes and litigation with one or more CCPs, the client's bankruptcy estate and other creditors, or be subject to regulatory investigations. All of the foregoing events can increase JPMorgan Chase's operational and litigation costs, and JPMorgan Chase may suffer losses to the extent that any collateral that it has received is insufficient to cover those losses.\nTransactions with government entities, including national, state, provincial, municipal and local authorities, can expose JPMorgan Chase to enhanced sovereign, credit, operational and reputation risks. Government entities may, among other things, claim that actions taken by government officials were beyond the legal authority of those officials or repudiate transactions authorized by a previous incumbent government. These types of actions have in the past caused, and could in the future cause, JPMorgan Chase to suffer losses or hamper its ability to conduct business in the relevant jurisdiction.\nIn addition, local laws, rules and regulations could limit JPMorgan Chase's ability to resolve disputes and litigation in the event of a counterparty default or unwillingness to make previously agreed-upon payments, which could subject JPMorgan Chase to losses.\nDisputes may arise with counterparties to derivatives contracts with regard to the terms, the settlement procedures or the value of underlying collateral. The disposition of those disputes could cause JPMorgan Chase to incur unexpected transaction, operational and legal costs, or result in credit losses. These consequences can \n\n\n|    |    |\n|---:|---:|\n|  1 | 17 |\n, \nPart I\n\n\nalso impair JPMorgan Chase's ability to effectively manage its credit risk exposure from its market activities, or cause harm to JPMorgan Chase's reputation.\nThe financial or operational failure of a significant market participant, such as a major financial institution or a CCP, or concerns about the creditworthiness of such a market participant or its ability to fulfill its obligations, can cause substantial and cascading disruption within the financial markets, including in circumstances where coordinated action by multiple other market participants is required to address the failure or disruption. JPMorgan Chase's businesses could be significantly disrupted by such an event, particularly if it leads to other market participants incurring significant losses, experiencing liquidity issues or defaulting, and JPMorgan Chase is likely to have significant interrelationships with, and credit exposure to, such a significant market participant.\nJPMorgan Chase may suffer losses if the value of collateral declines in stressed market conditions.\nDuring periods of market stress or illiquidity, JPMorgan Chase's credit risk may be further increased when:\n\u2022JPMorgan Chase fails to realize the estimated value of the collateral it holds\n\u2022collateral is liquidated at prices that are not sufficient to recover the full amount owed to it, or\n\u2022counterparties are unable to post collateral, whether for operational or other reasons.\nFurthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility or illiquidity, and JPMorgan Chase could suffer losses during these periods if it is unable to realize the fair value of collateral or to manage declines in the value of collateral.\nJPMorgan Chase could incur significant losses arising from concentrations of credit and market risk.\nJPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties, or obligors on securities and other financial instruments:\n\u2022engage in similar or related businesses, or in businesses in related industries\n\u2022do business in the same geographic region, or\n\u2022have business profiles, models or strategies that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions. \nFor example, a significant deterioration in the credit quality of a counterparty, borrower or other obligor could lead to concerns about the creditworthiness of other counterparties, borrowers or obligors in similar, related or dependent industries. This type of interrelationship could exacerbate JPMorgan Chase's credit, liquidity and market risk exposure and potentially cause it to incur losses, \n\nincluding fair value losses in its market-making businesses and investment portfolios. In addition, JPMorgan Chase may be required to increase the allowance for credit losses or establish other reserves with respect to certain clients, industries or country exposures in order to align with directives or expectations of its banking regulators. \nSimilarly, challenging economic conditions that affect a particular industry or geographic area could lead to concerns about the credit quality of counterparties, borrowers or other obligors not only in that particular industry or geography but in related or dependent industries, wherever located. These conditions could also heighten concerns about the ability of customers of JPMorgan Chase's consumer businesses who live in those areas or work in those affected industries or related or dependent industries to meet their obligations to JPMorgan Chase. JPMorgan Chase regularly monitors various segments of its credit and market risk exposures to assess the potential risks of concentration or contagion, but its ability to diversify or hedge its exposure against those risks may be limited.\nJPMorgan Chase's consumer businesses can also be harmed by an excessive expansion of consumer credit by bank or non-bank competitors. Heightened competition for certain types of consumer loans could prompt industry-wide reactions such as significant reductions in the pricing or margins of those loans or the making of loans to less-creditworthy borrowers. If large numbers of consumers subsequently default on their loans, whether due to weak credit profiles, an economic downturn or other factors, this could impair their ability to repay obligations owed to JPMorgan Chase and result in higher charge-offs and other credit-related losses. More broadly, widespread defaults on consumer debt could lead to recessionary conditions in the U.S. economy, and JPMorgan Chase's consumer businesses may earn lower revenues in such an environment.\nIf JPMorgan Chase is unable to reduce positions effectively during a market dislocation, this can increase both the market and credit risks associated with those positions and the level of risk-weighted-assets (\"RWA\") that JPMorgan Chase holds on its balance sheet. These factors could adversely affect JPMorgan Chase's capital position, funding costs and the profitability of its businesses.\n\nLiquidity\n\nJPMorgan Chase's ability to operate its businesses could be impaired if its liquidity is constrained. \nJPMorgan Chase's liquidity can be impacted at any given time as a result of factors such as:\n\u2022market-wide illiquidity or disruption\n\u2022changes in liquidity or capital requirements resulting from changes in laws, rules and regulations, including those in response to economic effects of systemic events\n\u2022actions taken by the U.S. government or by the Federal Reserve to reduce its balance sheet, which may reduce \n\n\n|    |    |\n|---:|---:|\n|  1 | 18 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 17: \u2022unanticipated or adverse changes in depositor behavior, which could negatively affect JPMorgan Chase's broader asset and liability management strategy, and\n\u2022a reduction in the value of JPMorgan Chase's mortgage servicing rights (\"MSRs\") asset, decreasing revenues.\nWhen credit spreads widen, it becomes more expensive for JPMorgan Chase to borrow. JPMorgan Chase's credit spreads may widen or narrow not only in response to events and circumstances that are specific to JPMorgan Chase but also as a result of general economic and geopolitical events and conditions. Changes in JPMorgan Chase's credit spreads will affect, positively or negatively, JPMorgan Chase's earnings on certain liabilities, such as derivatives, that are recorded at fair value. \nJPMorgan Chase's results may be materially affected by market fluctuations and significant changes in the value of financial instruments.\nThe value of securities, derivatives and other financial instruments which JPMorgan Chase owns or in which it makes markets can be materially affected by market fluctuations. Market volatility, illiquid market conditions and other disruptions in the financial markets may make it extremely difficult to value certain financial instruments. Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments. In addition, at the time of any disposition of these financial instruments, the price that JPMorgan Chase ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of financial instruments that JPMorgan Chase owns or in which it makes markets, which may have an adverse effect on JPMorgan Chase's results of operations.\nJPMorgan Chase's risk management and monitoring processes, including its stress testing framework, seek to quantify and manage JPMorgan Chase's exposure to more extreme market moves. However, JPMorgan Chase's hedging and other risk management strategies may not be effective, and it could incur significant losses, if extreme market events were to occur.\n\nCredit\n\nJPMorgan Chase can be negatively affected by adverse changes in the financial condition of clients, counterparties, custodians and CCPs.\nJPMorgan Chase routinely executes transactions with clients and counterparties such as corporations, financial institutions, asset managers, hedge funds, securities exchanges and government entities within and outside the U.S. Many of these transactions expose JPMorgan Chase to the credit risk of its clients and counterparties, and can involve JPMorgan Chase in disputes and litigation if a client or counterparty defaults. JPMorgan Chase can also be subject to losses or liability where a financial institution that \n\nit has appointed to provide custodial services for client assets or funds becomes insolvent as a result of fraud or the failure to abide by existing laws and obligations, or where clients are unable to access assets held by JPMorgan Chase as custodian due to governmental actions or other factors.\nA default by, or the financial or operational failure of, a CCP through which JPMorgan Chase executes contracts would require JPMorgan Chase to replace those contracts, thereby increasing its operational costs and potentially resulting in losses. In addition, JPMorgan Chase can be exposed to losses if a member of a CCP in which JPMorgan Chase is also a member defaults on its obligations to the CCP because of requirements that each member of the CCP absorb a portion of those losses. Furthermore, JPMorgan Chase can be subject to bearing its share of non-default losses incurred by a CCP, including losses from custodial, settlement or investment activities or due to cyber or other security breaches.\nAs part of its clearing services activities, JPMorgan Chase is exposed to the risk of nonperformance by its clients, which it seeks to mitigate by requiring clients to provide adequate collateral. JPMorgan Chase is also exposed to intra-day credit risk of its clients in connection with providing cash management, clearing, custodial and other transaction services to those clients. If a client for which JPMorgan Chase provides these services becomes bankrupt or insolvent, JPMorgan Chase may incur losses, become involved in disputes and litigation with one or more CCPs, the client's bankruptcy estate and other creditors, or be subject to regulatory investigations. All of the foregoing events can increase JPMorgan Chase's operational and litigation costs, and JPMorgan Chase may suffer losses to the extent that any collateral that it has received is insufficient to cover those losses.\nTransactions with government entities, including national, state, provincial, municipal and local authorities, can expose JPMorgan Chase to enhanced sovereign, credit, operational and reputation risks. Government entities may, among other things, claim that actions taken by government officials were beyond the legal authority of those officials or repudiate transactions authorized by a previous incumbent government. These types of actions have in the past caused, and could in the future cause, JPMorgan Chase to suffer losses or hamper its ability to conduct business in the relevant jurisdiction.\nIn addition, local laws, rules and regulations could limit JPMorgan Chase's ability to resolve disputes and litigation in the event of a counterparty default or unwillingness to make previously agreed-upon payments, which could subject JPMorgan Chase to losses.\nDisputes may arise with counterparties to derivatives contracts with regard to the terms, the settlement procedures or the value of underlying collateral. The disposition of those disputes could cause JPMorgan Chase to incur unexpected transaction, operational and legal costs, or result in credit losses. These consequences can \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">17<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 18: \nPart I\n\n\nalso impair JPMorgan Chase's ability to effectively manage its credit risk exposure from its market activities, or cause harm to JPMorgan Chase's reputation.\nThe financial or operational failure of a significant market participant, such as a major financial institution or a CCP, or concerns about the creditworthiness of such a market participant or its ability to fulfill its obligations, can cause substantial and cascading disruption within the financial markets, including in circumstances where coordinated action by multiple other market participants is required to address the failure or disruption. JPMorgan Chase's businesses could be significantly disrupted by such an event, particularly if it leads to other market participants incurring significant losses, experiencing liquidity issues or defaulting, and JPMorgan Chase is likely to have significant interrelationships with, and credit exposure to, such a significant market participant.\nJPMorgan Chase may suffer losses if the value of collateral declines in stressed market conditions.\nDuring periods of market stress or illiquidity, JPMorgan Chase's credit risk may be further increased when:\n\u2022JPMorgan Chase fails to realize the estimated value of the collateral it holds\n\u2022collateral is liquidated at prices that are not sufficient to recover the full amount owed to it, or\n\u2022counterparties are unable to post collateral, whether for operational or other reasons.\nFurthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility or illiquidity, and JPMorgan Chase could suffer losses during these periods if it is unable to realize the fair value of collateral or to manage declines in the value of collateral.\nJPMorgan Chase could incur significant losses arising from concentrations of credit and market risk.\nJPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties, or obligors on securities and other financial instruments:\n\u2022engage in similar or related businesses, or in businesses in related industries\n\u2022do business in the same geographic region, or\n\u2022have business profiles, models or strategies that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions. \nFor example, a significant deterioration in the credit quality of a counterparty, borrower or other obligor could lead to concerns about the creditworthiness of other counterparties, borrowers or obligors in similar, related or dependent industries. This type of interrelationship could exacerbate JPMorgan Chase's credit, liquidity and market risk exposure and potentially cause it to incur losses, \n\nincluding fair value losses in its market-making businesses and investment portfolios. In addition, JPMorgan Chase may be required to increase the allowance for credit losses or establish other reserves with respect to certain clients, industries or country exposures in order to align with directives or expectations of its banking regulators. \nSimilarly, challenging economic conditions that affect a particular industry or geographic area could lead to concerns about the credit quality of counterparties, borrowers or other obligors not only in that particular industry or geography but in related or dependent industries, wherever located. These conditions could also heighten concerns about the ability of customers of JPMorgan Chase's consumer businesses who live in those areas or work in those affected industries or related or dependent industries to meet their obligations to JPMorgan Chase. JPMorgan Chase regularly monitors various segments of its credit and market risk exposures to assess the potential risks of concentration or contagion, but its ability to diversify or hedge its exposure against those risks may be limited.\nJPMorgan Chase's consumer businesses can also be harmed by an excessive expansion of consumer credit by bank or non-bank competitors. Heightened competition for certain types of consumer loans could prompt industry-wide reactions such as significant reductions in the pricing or margins of those loans or the making of loans to less-creditworthy borrowers. If large numbers of consumers subsequently default on their loans, whether due to weak credit profiles, an economic downturn or other factors, this could impair their ability to repay obligations owed to JPMorgan Chase and result in higher charge-offs and other credit-related losses. More broadly, widespread defaults on consumer debt could lead to recessionary conditions in the U.S. economy, and JPMorgan Chase's consumer businesses may earn lower revenues in such an environment.\nIf JPMorgan Chase is unable to reduce positions effectively during a market dislocation, this can increase both the market and credit risks associated with those positions and the level of risk-weighted-assets (\"RWA\") that JPMorgan Chase holds on its balance sheet. These factors could adversely affect JPMorgan Chase's capital position, funding costs and the profitability of its businesses.\n\nLiquidity\n\nJPMorgan Chase's ability to operate its businesses could be impaired if its liquidity is constrained. \nJPMorgan Chase's liquidity can be impacted at any given time as a result of factors such as:\n\u2022market-wide illiquidity or disruption\n\u2022changes in liquidity or capital requirements resulting from changes in laws, rules and regulations, including those in response to economic effects of systemic events\n\u2022actions taken by the U.S. government or by the Federal Reserve to reduce its balance sheet, which may reduce \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">18<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\u2022unanticipated or adverse changes in depositor behavior, which could negatively affect JPMorgan Chase's broader asset and liability management strategy, and\n\u2022a reduction in the value of JPMorgan Chase's mortgage servicing rights (\"MSRs\") asset, decreasing revenues.\nWhen credit spreads widen, it becomes more expensive for JPMorgan Chase to borrow. JPMorgan Chase's credit spreads may widen or narrow not only in response to events and circumstances that are specific to JPMorgan Chase but also as a result of general economic and geopolitical events and conditions. Changes in JPMorgan Chase's credit spreads will affect, positively or negatively, JPMorgan Chase's earnings on certain liabilities, such as derivatives, that are recorded at fair value. \nJPMorgan Chase's results may be materially affected by market fluctuations and significant changes in the value of financial instruments.\nThe value of securities, derivatives and other financial instruments which JPMorgan Chase owns or in which it makes markets can be materially affected by market fluctuations. Market volatility, illiquid market conditions and other disruptions in the financial markets may make it extremely difficult to value certain financial instruments. Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments. In addition, at the time of any disposition of these financial instruments, the price that JPMorgan Chase ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of financial instruments that JPMorgan Chase owns or in which it makes markets, which may have an adverse effect on JPMorgan Chase's results of operations.\nJPMorgan Chase's risk management and monitoring processes, including its stress testing framework, seek to quantify and manage JPMorgan Chase's exposure to more extreme market moves. However, JPMorgan Chase's hedging and other risk management strategies may not be effective, and it could incur significant losses, if extreme market events were to occur.\n\nCredit\n\nJPMorgan Chase can be negatively affected by adverse changes in the financial condition of clients, counterparties, custodians and CCPs.\nJPMorgan Chase routinely executes transactions with clients and counterparties such as corporations, financial institutions, asset managers, hedge funds, securities exchanges and government entities within and outside the U.S. Many of these transactions expose JPMorgan Chase to the credit risk of its clients and counterparties, and can involve JPMorgan Chase in disputes and litigation if a client or counterparty defaults. JPMorgan Chase can also be subject to losses or liability where a financial institution that \n\nit has appointed to provide custodial services for client assets or funds becomes insolvent as a result of fraud or the failure to abide by existing laws and obligations, or where clients are unable to access assets held by JPMorgan Chase as custodian due to governmental actions or other factors.\nA default by, or the financial or operational failure of, a CCP through which JPMorgan Chase executes contracts would require JPMorgan Chase to replace those contracts, thereby increasing its operational costs and potentially resulting in losses. In addition, JPMorgan Chase can be exposed to losses if a member of a CCP in which JPMorgan Chase is also a member defaults on its obligations to the CCP because of requirements that each member of the CCP absorb a portion of those losses. Furthermore, JPMorgan Chase can be subject to bearing its share of non-default losses incurred by a CCP, including losses from custodial, settlement or investment activities or due to cyber or other security breaches.\nAs part of its clearing services activities, JPMorgan Chase is exposed to the risk of nonperformance by its clients, which it seeks to mitigate by requiring clients to provide adequate collateral. JPMorgan Chase is also exposed to intra-day credit risk of its clients in connection with providing cash management, clearing, custodial and other transaction services to those clients. If a client for which JPMorgan Chase provides these services becomes bankrupt or insolvent, JPMorgan Chase may incur losses, become involved in disputes and litigation with one or more CCPs, the client's bankruptcy estate and other creditors, or be subject to regulatory investigations. All of the foregoing events can increase JPMorgan Chase's operational and litigation costs, and JPMorgan Chase may suffer losses to the extent that any collateral that it has received is insufficient to cover those losses.\nTransactions with government entities, including national, state, provincial, municipal and local authorities, can expose JPMorgan Chase to enhanced sovereign, credit, operational and reputation risks. Government entities may, among other things, claim that actions taken by government officials were beyond the legal authority of those officials or repudiate transactions authorized by a previous incumbent government. These types of actions have in the past caused, and could in the future cause, JPMorgan Chase to suffer losses or hamper its ability to conduct business in the relevant jurisdiction.\nIn addition, local laws, rules and regulations could limit JPMorgan Chase's ability to resolve disputes and litigation in the event of a counterparty default or unwillingness to make previously agreed-upon payments, which could subject JPMorgan Chase to losses.\nDisputes may arise with counterparties to derivatives contracts with regard to the terms, the settlement procedures or the value of underlying collateral. The disposition of those disputes could cause JPMorgan Chase to incur unexpected transaction, operational and legal costs, or result in credit losses. These consequences can \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">17<\/td><\/tr><\/table>, \nPart I\n\n\nalso impair JPMorgan Chase's ability to effectively manage its credit risk exposure from its market activities, or cause harm to JPMorgan Chase's reputation.\nThe financial or operational failure of a significant market participant, such as a major financial institution or a CCP, or concerns about the creditworthiness of such a market participant or its ability to fulfill its obligations, can cause substantial and cascading disruption within the financial markets, including in circumstances where coordinated action by multiple other market participants is required to address the failure or disruption. JPMorgan Chase's businesses could be significantly disrupted by such an event, particularly if it leads to other market participants incurring significant losses, experiencing liquidity issues or defaulting, and JPMorgan Chase is likely to have significant interrelationships with, and credit exposure to, such a significant market participant.\nJPMorgan Chase may suffer losses if the value of collateral declines in stressed market conditions.\nDuring periods of market stress or illiquidity, JPMorgan Chase's credit risk may be further increased when:\n\u2022JPMorgan Chase fails to realize the estimated value of the collateral it holds\n\u2022collateral is liquidated at prices that are not sufficient to recover the full amount owed to it, or\n\u2022counterparties are unable to post collateral, whether for operational or other reasons.\nFurthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility or illiquidity, and JPMorgan Chase could suffer losses during these periods if it is unable to realize the fair value of collateral or to manage declines in the value of collateral.\nJPMorgan Chase could incur significant losses arising from concentrations of credit and market risk.\nJPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties, or obligors on securities and other financial instruments:\n\u2022engage in similar or related businesses, or in businesses in related industries\n\u2022do business in the same geographic region, or\n\u2022have business profiles, models or strategies that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions. \nFor example, a significant deterioration in the credit quality of a counterparty, borrower or other obligor could lead to concerns about the creditworthiness of other counterparties, borrowers or obligors in similar, related or dependent industries. This type of interrelationship could exacerbate JPMorgan Chase's credit, liquidity and market risk exposure and potentially cause it to incur losses, \n\nincluding fair value losses in its market-making businesses and investment portfolios. In addition, JPMorgan Chase may be required to increase the allowance for credit losses or establish other reserves with respect to certain clients, industries or country exposures in order to align with directives or expectations of its banking regulators. \nSimilarly, challenging economic conditions that affect a particular industry or geographic area could lead to concerns about the credit quality of counterparties, borrowers or other obligors not only in that particular industry or geography but in related or dependent industries, wherever located. These conditions could also heighten concerns about the ability of customers of JPMorgan Chase's consumer businesses who live in those areas or work in those affected industries or related or dependent industries to meet their obligations to JPMorgan Chase. JPMorgan Chase regularly monitors various segments of its credit and market risk exposures to assess the potential risks of concentration or contagion, but its ability to diversify or hedge its exposure against those risks may be limited.\nJPMorgan Chase's consumer businesses can also be harmed by an excessive expansion of consumer credit by bank or non-bank competitors. Heightened competition for certain types of consumer loans could prompt industry-wide reactions such as significant reductions in the pricing or margins of those loans or the making of loans to less-creditworthy borrowers. If large numbers of consumers subsequently default on their loans, whether due to weak credit profiles, an economic downturn or other factors, this could impair their ability to repay obligations owed to JPMorgan Chase and result in higher charge-offs and other credit-related losses. More broadly, widespread defaults on consumer debt could lead to recessionary conditions in the U.S. economy, and JPMorgan Chase's consumer businesses may earn lower revenues in such an environment.\nIf JPMorgan Chase is unable to reduce positions effectively during a market dislocation, this can increase both the market and credit risks associated with those positions and the level of risk-weighted-assets (\"RWA\") that JPMorgan Chase holds on its balance sheet. These factors could adversely affect JPMorgan Chase's capital position, funding costs and the profitability of its businesses.\n\nLiquidity\n\nJPMorgan Chase's ability to operate its businesses could be impaired if its liquidity is constrained. \nJPMorgan Chase's liquidity can be impacted at any given time as a result of factors such as:\n\u2022market-wide illiquidity or disruption\n\u2022changes in liquidity or capital requirements resulting from changes in laws, rules and regulations, including those in response to economic effects of systemic events\n\u2022actions taken by the U.S. government or by the Federal Reserve to reduce its balance sheet, which may reduce \n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">18<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri022","Question":"What are the current compliance challenges faced by IBM based on its disclosures?","ground_truth_answer":"IBM has identified several key compliance challenges in its 10-K report. These include adhering to complex regulatory requirements in different jurisdictions, managing data privacy in light of global privacy laws (like GDPR), and ensuring that its financial reporting meets SEC regulations.","question_type":"Risk","page_number":"7, 8","accession_number":"0000051143-24-000012","item":"Item 1A. Risk Factors:","context_markdown_with_headers":"INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 7: While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 8: expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n","context_markdown_without_headers":"While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n","context_html_with_headers":"INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 7: While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 8: expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n","context_html_without_headers":"While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n"}
{"QID":"q_Ri023","Question":"How does IBM\u2019s compliance status align with its regulatory obligations according to the latest 10-K report?","ground_truth_answer":"IBM\u2019s compliance status, as disclosed in the 10-K, indicates a strong alignment with its regulatory obligations. The company has robust internal controls and compliance frameworks in place, which are regularly reviewed and updated.","question_type":"Risk","page_number":"7, 8","accession_number":"0000051143-24-000012","item":"Item 1A. Risk Factors:","context_markdown_with_headers":"INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 7: While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 8: expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n","context_markdown_without_headers":"While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n","context_html_with_headers":"INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 7: While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, INTERNATIONAL BUSINESS MACHINES CORP 10-K form for the fiscal year ended 2023-12-31, page 8: expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n","context_html_without_headers":"While the company continues to monitor for, identify, investigate, respond to and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on the company, though there is no assurance that there will not be cybersecurity incidents or vulnerabilities that will have a material adverse effect in the future.\n The company regularly addresses cybersecurity attacks and vulnerabilities. Cybersecurity attacks or other security incidents, including industry-wide incidents such as MOVEit, have or could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft or import or export of sensitive, regulated, or confidential data including personal information and intellectual property, including key innovations in AI, quantum, or other disruptive technologies; the loss of access to critical data or systems through ransomware, crypto mining, destructive attacks or other means; and business delays, service or system disruptions or denials of service. \nIn the event of such actions, the company, its customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, including debarment, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss. In addition, the cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In the company's industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for the company and its customers. In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of the business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on the company or its customers. \nCybersecurity risk to the company and its customers also depends on factors such as the actions, practices and investments of customers, contractors, business partners, vendors, the open source community and other third parties, including, for example, providing and implementing patches to address vulnerabilities. Cybersecurity attacks or other catastrophic events resulting in disruptions to or failures in power, information technology, communication systems or other critical infrastructure could result in interruptions or delays to company, customer, or other third-party operations or services, financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although the company continuously takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. \nAs a global enterprise, the regulatory environment with regard to cybersecurity, privacy, AI and data protection issues is increasingly complex and will continue to impact the company's business, including through increased risk, increased costs, and expanded or otherwise altered compliance obligations, including with respect to the increased regulatory activity around the security of critical infrastructure, IoT devices, customer industries (e.g., financial services) and various customer and government supply chain security programs. As the reliance on data grows for the company and our clients, the potential impact of regulations on the company's business, risks, and reputation will grow accordingly. The enactment and expansion of cybersecurity, AI, data protection and privacy laws, regulations and standards around the globe will continue to result in increased compliance costs, including due to an increased focus on international data transfer mechanisms and data location; increased cybersecurity requirements and reporting obligations; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity by governments and private parties; the potential for damages, fines and penalties and debarment; and the potential regulation of new and emerging technologies. Any additional costs and penalties associated with increased compliance, enforcement, and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market or maintaining certain offerings.\n\nRisks Related to Laws and Regulations\n\nThe Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters: IBM, like other companies, is subject to potential climate-related risks and costs such as those resulting from increased severe weather events, prolonged changes in temperature, new regulations affecting hardware products and data centers, carbon taxes, and increased environmental disclosures requested or required by clients, regulators and others. The company is also subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection, including the U.S. Superfund law. The company could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if it were to violate or become liable under environmental laws and regulations. We do not \n7\n\n\n\n\n, expect climate change or compliance with environmental laws and regulations focused on climate change to have a disproportionate effect on the company or its financial position, results of operations and competitive position.\nTax Matters Could Impact the Company's Results of Operations and Financial Condition: The company is subject to income taxes in both the United States and numerous foreign jurisdictions. IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact the company's results of operations and financial condition in future periods. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact the company's income taxes. Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government. In addition, IBM is subject to the continuous examination of its income tax returns by the United States Internal Revenue Service (IRS) and other tax authorities around the world. The company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on the company's provision for income taxes and cash tax liability.\nThe Company Is Subject to Legal Proceedings and Investigatory Risks: As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and\/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business. The risks associated with such legal proceedings are described in more detail in note R, \"Commitments & Contingencies,\" in IBM's 2023 Annual Report to Stockholders. The company believes it has adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time.\n\nRisks Related to Financing and Capital Markets Activities\n\nThe Company's Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans: Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, the company could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact the company's financial flexibility. Further, the company's results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. IBM's 2023 Annual Report to Stockholders includes information about potential impacts from pension funding and the use of certain assumptions regarding pension matters.\nThe Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business: The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity. Further, inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values. The company employs a number of strategies to manage these risks, including the use of derivative financial instruments, which involve the risk of non-performance by the counterparty. In addition, there can be no assurance that the company's efforts to manage its currency and financing risks will be successful.\nThe Company's Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables: The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions. IBM's 2023 Annual Report to Stockholders includes information about the company's liquidity position. The company's client base includes many enterprises worldwide, from small and medium businesses to the world's largest organizations and governments, with a significant portion of the company's revenue coming from global clients across many sectors. Most of \n8\n\n\n\n\n"}
{"QID":"q_Ri024","Question":"What regulatory compliance requirements must the company adhere to in its operations?","ground_truth_answer":"The company must adhere to a variety of regulatory compliance requirements, including financial reporting standards, environmental regulations, labor laws, and data protection laws.","question_type":"Risk","page_number":"10, 11, 12","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 11: There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n|    |    |\n|---:|---:|\n|  1 | 11 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_markdown_without_headers":"\nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n|    |    |\n|---:|---:|\n|  1 | 11 |\n, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 11: There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">11<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">11<\/td><\/tr><\/table>, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri025","Question":"How does the company ensure compliance with international regulations?","ground_truth_answer":"The company ensures compliance with international regulations by maintaining a global compliance team that monitors regulatory changes in different jurisdictions, provides guidance to local operations, and implements standardized compliance procedures across all international offices.","question_type":"Risk","page_number":"10, 11, 12","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 11: There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n|    |    |\n|---:|---:|\n|  1 | 11 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_markdown_without_headers":"\nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n|    |    |\n|---:|---:|\n|  1 | 11 |\n, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 11: There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">11<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">11<\/td><\/tr><\/table>, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri026","Question":"What are the consequences of non-compliance for the company?","ground_truth_answer":"Non-compliance can result in severe consequences for the company, including financial penalties, legal action, reputational damage, and loss of market access.","question_type":"Risk","page_number":"10, 11, 12","accession_number":"0000019617-24-000225","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 11: There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n|    |    |\n|---:|---:|\n|  1 | 11 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_markdown_without_headers":"\nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n|    |    |\n|---:|---:|\n|  1 | 10 |\n, There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n|    |    |\n|---:|---:|\n|  1 | 11 |\n, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 10: \nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 11: There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">11<\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>","context_html_without_headers":"\nPart I\n\n\ncustomers, shareholders, regulators and other stakeholders that could arise from employee misconduct, security breaches, inadequate risk management, compliance or operational failures, litigation and regulatory investigations, failure to satisfy expectations concerning environmental, social and governance concerns, failure to effectively manage conflicts of interest or to satisfy fiduciary obligations, or other factors that could damage JPMorgan Chase's reputation.\n\u2022Country risks, including potential impacts on JPMorgan Chase's businesses from an outbreak or escalation of hostilities between countries or within a country or region; and the potential adverse effects of local economic, political, regulatory and social factors on JPMorgan Chase's business and revenues in certain countries in which it operates.\n\u2022People risks, including the criticality of attracting and retaining qualified and diverse employees; and the potential adverse effects of unfavorable changes in immigration or travel policies on JPMorgan Chase's workforce.\n\u2022Legal risks, including those relating to litigation and regulatory and government investigations.\nThe above summary is subject in its entirety to the discussion of the risk factors set forth below.\n\nRegulatory\n\nJPMorgan Chase's businesses are highly regulated, and the laws, rules and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.\nJPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business, and financial services firms such as JPMorgan Chase are subject to extensive and constantly-evolving regulation and supervision.\nThe regulation and supervision of JPMorgan Chase significantly affects the way that it conducts its business and structures its operations, and JPMorgan Chase could be required to make changes to its business and operations in response to supervisory expectations or decisions or to new or changed laws, rules and regulations. These types of developments could result in JPMorgan Chase incurring additional costs or experiencing a reduction in revenues to comply with applicable laws, rules and regulations, which could reduce its profitability. Furthermore, JPMorgan Chase's entry into or acquisition of a new business or an increase in its principal investments may require JPMorgan Chase to comply with additional laws, rules, and regulations.\nIn response to new and existing laws, rules and regulations and expanded supervision, JPMorgan Chase has in the past been and could in the future be, required to:\n\n\u2022limit the products and services that it offers\n\u2022reduce the liquidity that it can provide through its market-making activities\n\u2022refrain from engaging in business opportunities that it might otherwise pursue\n\u2022pay higher taxes (including as part of any minimum global tax regime), assessments, levies or other governmental charges, including in connection with the resolution of tax examinations\n\u2022incur losses, including with respect to fraudulent transactions perpetrated against its customers\n\u2022dispose of certain assets, and do so at times or prices that are disadvantageous\n\u2022impose restrictions on certain business activities, or\n\u2022increase the prices that it charges for products and services, which could reduce the demand for them.\nAny failure by JPMorgan Chase to comply with the laws, rules and regulations to which it is subject could result in:\n\u2022increased regulatory and supervisory scrutiny\n\u2022regulatory and governmental enforcement actions\n\u2022the imposition of fines, penalties or other sanctions\n\n\u2022increased exposure to litigation, or\n\n\u2022harm to its reputation.\nDifferences and inconsistencies in financial services regulation and supervision can negatively impact JPMorgan Chase's businesses, operations and financial results.\nThe content and application of laws, rules and regulations affecting financial services firms can vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. For example:\n\u2022larger firms such as JPMorgan Chase are often subject to more stringent supervision, regulation and regulatory scrutiny\n\u2022financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or \n\u2022the financial services regulatory and supervisory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction.\nThese types of differences in the regulatory and supervisory framework can result in JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in other countries and regions in which JPMorgan Chase does business. For example, when adopting rules that are intended to implement a global regulatory or supervisory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.\nIn addition, certain national and multi-national bodies and governmental agencies outside the U.S. have adopted laws, rules or regulations that may conflict with or prohibit JPMorgan Chase from complying with laws, rules and regulations to which it is otherwise subject, creating conflict of law issues that also increase its risk of non-compliance in those jurisdictions.\nLegislative and regulatory initiatives outside the U.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in the relevant countries or regions in order to comply with those requirements. These include laws, rules and regulations that have been adopted or proposed, as well as regulatory expectations, relating to:\n\u2022the establishment of locally-based intermediate holding companies or operating subsidiaries\n\u2022requirements to maintain minimum amounts of capital or liquidity in locally-based subsidiaries\n\u2022the implementation of processes within locally-based subsidiaries to comply with local regulatory requirements or expectations\n\u2022the separation (or \"ring fencing\") of core banking products and services from markets activities\n\u2022requirements for the orderly resolution of financial institutions\n\u2022requirements for executing or settling transactions on exchanges or through central counterparties (\"CCPs\"), or for depositing funds with other financial institutions or clearing and settlement systems\n\u2022position limits and reporting rules for derivatives\n\u2022governance and accountability regimes\n\u2022conduct of business and control requirements, and\n\n\u2022restrictions on compensation.\n\nThese types of differences, inconsistencies and conflicts in financial services regulation have required and could in the future require JPMorgan Chase to:\n\u2022divest assets or restructure its operations\n\u2022maintain higher levels of capital and liquidity, or absorb increased capital and liquidity costs \n\u2022incur higher operational and compliance costs \n\n\u2022change the prices that it charges for its products and services \n\u2022curtail the products and services that it offers to its customers and clients\n\u2022curtail other business opportunities, including acquisitions or principal investments, that it otherwise would have pursued\n\u2022become subject to regulatory fines, penalties or other sanctions, or\n\u2022incur higher costs for complying with different legal and regulatory frameworks. \nAny or all of these factors could harm JPMorgan Chase's ability to compete against other firms that are not subject to the same laws, rules and regulations or supervisory oversight, or harm JPMorgan Chase's businesses, results of operations and profitability.\nResolving regulatory investigations can subject JPMorgan Chase to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on its operations.\nJPMorgan Chase is subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions. JPMorgan Chase has paid significant fines, provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory or governmental resolutions or other actions in the future, and addressing the requirements of any such resolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs, including devoting substantial resources to the required remediation or needing to comply with other restrictions. \nIn connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the resolution. These types of admissions can lead to:\n\u2022greater exposure in litigation\n\u2022damage to JPMorgan Chase's reputation\n\u2022disqualification from doing business with certain clients or customers, or in specific jurisdictions, or\n\u2022other direct and indirect adverse effects.\nFurthermore, government officials in the U.S. and other countries have demonstrated a willingness to bring criminal actions against financial institutions and have required that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. Resolutions of this type can have significant collateral consequences for the subject financial institution, including:\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\">11<\/td><\/tr><\/table>, \nPart I\n\n\n\u2022loss of clients, customers and business\n\u2022restrictions on offering certain products or services, and \n\u2022losing permission to operate certain businesses, either temporarily or permanently.\nJPMorgan Chase expects that: \n\u2022it and other financial services firms will continue to be subject to heightened regulatory scrutiny and governmental investigations and enforcement actions\n\u2022governmental authorities will continue to require that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions; and \n\u2022governmental authorities will be more likely to pursue formal enforcement actions and resolutions against JPMorgan Chase to the extent that it has previously been subject to other governmental investigations or enforcement actions.\nIf JPMorgan Chase fails to meet the requirements of any resolution of a governmental investigation or enforcement action, or to maintain risk and control processes that meet the heightened standards and expectations of its regulators, it could be required to, among other things:\n\u2022enter into further resolutions of investigations or enforcement actions\n\u2022pay additional regulatory penalties or enter into judgments, or\n\u2022accept material regulatory restrictions on, or changes in the management of, its businesses.\nIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action. In addition, JPMorgan Chase can be subject to higher costs or requests for additional capital in connection with the resolution of governmental investigations and enforcement actions involving newly-acquired businesses, companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors with which JPMorgan Chase does business.\nJPMorgan Chase's operations and financial results can be negatively impacted in jurisdictions with less predictable legal and regulatory frameworks.\nJPMorgan Chase conducts existing and new business in certain countries, states, municipalities, territories and other jurisdictions in which the application of the rule of law is inconsistent or less predictable, including with respect to:\n\u2022the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions\n\n\u2022conflicting or ambiguous laws, rules and regulations, or the inconsistent application or interpretation of existing laws, rules and regulations\n\u2022uncertainty concerning the enforceability of intellectual property rights or contractual or other obligations\n\u2022difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive \n\u2022the threat of regulatory investigations, civil litigations or criminal prosecutions that are arbitrary or otherwise contrary to established legal principles in other parts of the world, and \n\u2022the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.\nIf the application of the laws, rules and regulations in any jurisdiction is susceptible to producing inconsistent or unexpected outcomes, this can create a more difficult environment in which JPMorgan Chase conducts its business and could negatively affect JPMorgan Chase's operations and reduce its earnings with respect to that jurisdiction. For example, conducting business could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws, rules and regulations, as well as structuring its operations to comply with local laws, rules and regulations and implementing and administering related internal policies and procedures.\nThere can be no assurance that JPMorgan Chase will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws, rules and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in jurisdictions that have less predictable legal and regulatory frameworks.\nRequirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses and could increase its funding or operational costs or curtail its businesses.\nJPMorgan Chase is required under Federal Reserve and FDIC rules to prepare and submit periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The evaluation of JPMorgan Chase's resolution plan by these agencies may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase needing to make changes to its legal entity structure or to certain internal or external activities, which could increase its funding or operational costs, or hamper its ability to serve clients and customers.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>"}
{"QID":"q_Ri027","Question":"In the context of the JPMorgan Chase 2024 10-K report, what were the main legal challenges faced by the firm in its international operations?","ground_truth_answer":"JPMorgan Chase faced compliance challenges related to differing financial regulations across countries, particularly in emerging markets where regulations are rapidly changing. The firm addressed these challenges by establishing local compliance teams that work closely with global counterparts to ensure consistency and adherence to both local and international standards.","question_type":"Risk","page_number":"36; 298, 299, 300, 301","accession_number":"0000019617-24-000225;0000019617-24-000225","item":"Item 9A. Controls and Procedures.;Item 15. Exhibits, Financial Statement Schedules.","context_markdown_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 36: \nItem 9A. Controls and Procedures.\n\nThe internal control framework promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (\"COSO\"), \"Internal Control - Integrated Framework\" (\"COSO 2013\"), provides guidance for designing, implementing and conducting internal control and assessing its effectiveness. The Firm used the COSO 2013 framework to assess the effectiveness of the Firm's internal control over financial reporting as of December 31, 2023. Refer to \"Management's report on internal control over financial reporting\" on page 162.\n\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Firm's management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective. Refer to Exhibits 31.1 and 31.2 for the Certifications furnished by the Chairman and Chief Executive Officer and Chief Financial Officer, respectively.\n\nThe Firm is committed to maintaining high standards of internal control over financial reporting. Nevertheless, because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Deficiencies or lapses in internal controls may occur from time to time, and there can be no assurance that any such deficiencies will not result in significant deficiencies or material weaknesses in internal control in the future and collateral consequences therefrom. Refer to \"Management's report on internal control over financial reporting\" on page 162 for further information. \nOn May 1, 2023, the Firm acquired certain assets and assumed certain liabilities of First Republic Bank from the FDIC. The Firm has included internal controls over these acquired assets and assumed liabilities in its evaluation of \n\nthe effectiveness of disclosure controls and procedures. Otherwise, there was no change in the Firm's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the three months ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Firm's internal control over financial reporting.\n\n\n|    |    |\n|---:|---:|\n|  1 | 36 |\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 298: Notes to consolidated financial statements\n\n\nNote 30 \u2013 Litigation\n\n\nContingencies \n\nAs of December 31, 2023, the Firm and its subsidiaries and affiliates are defendants or respondents in numerous evolving legal proceedings, including private proceedings, public proceedings, government investigations, regulatory enforcement matters, and the matters described below. The litigations range from individual actions involving a single plaintiff to class action lawsuits with potentially millions of class members. Investigations and regulatory enforcement matters involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations. These legal proceedings are at varying stages of adjudication, arbitration or investigation, and involve each of the Firm's lines of business and several geographies and a wide variety of claims (including common law tort and contract claims and statutory antitrust, securities and consumer protection claims), some of which present novel legal theories.\nThe Firm believes the estimate of the aggregate range of reasonably possible losses, in excess of reserves established, for its legal proceedings is from $0 to approximately $1.3 billion at December 31, 2023. This estimated aggregate range of reasonably possible losses was based upon information available as of that date for those proceedings in which the Firm believes that an estimate of reasonably possible loss can be made. For certain matters, the Firm does not believe that such an estimate can be made, as of that date. The Firm's estimate of the aggregate range of reasonably possible losses involves significant judgment, given:\n\u2022the number, variety and varying stages of the proceedings, including the fact that many are in preliminary stages, \n\u2022the existence in many such proceedings of multiple defendants, including the Firm, whose share of liability (if any) has yet to be determined, \n\u2022the numerous yet-unresolved issues in many of the proceedings, including issues regarding class certification and the scope of many of the claims, and \n\u2022the uncertainty of the various potential outcomes of such proceedings, including where the Firm has made assumptions concerning future rulings by the court or other adjudicator, or about the behavior or incentives of adverse parties or regulatory authorities, and those assumptions prove to be incorrect.\nIn addition, the outcome of a particular proceeding may be a result which the Firm did not take into account in its estimate because the Firm had deemed the likelihood of that outcome to be remote. Accordingly, the Firm's estimate of the aggregate range of reasonably possible losses will change from time to time, and actual losses may vary significantly.\n\nSet forth below are descriptions of the Firm's material legal proceedings.\n1MDB Litigation. J.P. Morgan (Suisse) SA was named as a defendant in a civil litigation filed in May 2021 in Malaysia by 1Malaysia Development Berhad (\"1MDB\"), a Malaysian state-owned and controlled investment fund. The claim alleges \"dishonest assistance\" against J.P. Morgan (Suisse) SA in relation to payments of $300 million and $500 million, from 2009 and 2010, respectively, received from 1MDB and paid into an account at J.P. Morgan (Suisse) SA held by 1MDB PetroSaudi Limited, a joint venture company between 1MDB and PetroSaudi Holdings (Cayman) Limited. The Firm is challenging the validity of service and the Malaysian Court's jurisdiction to hear the claim. In August 2023 the Court denied an application by 1MDB to discontinue its claim with permission to re-file a new claim in the future. An appeals court is scheduled in August 2024 to hear separate appeals filed by 1MDB and the Firm against that August 2023 decision. In its appeal, the Firm seeks to prevent any claim from continuing. \nIn addition, in November 2023, the Federal Office of the Attorney General (OAG) in Switzerland notified J.P. Morgan (Suisse) SA that it is conducting an investigation into possible criminal liability in connection with transactions arising from J.P. Morgan (Suisse) SA's relationship with the 1MDB PetroSaudi joint venture and its related persons for the period September 2009 through August 2015. The OAG investigation is ongoing. \nAmrapali. India's Enforcement Directorate (\"ED\") is investigating J.P. Morgan India Private Limited in connection with investments made in 2010 and 2012 by two offshore funds formerly managed by JPMorgan Chase entities into residential housing projects developed by the Amrapali Group (\"Amrapali\") relating to delays in delivering or failure to deliver residential units. In August 2021, the ED issued an order fining J.P. Morgan India Private Limited approximately $31.5 million, and the Firm is appealing that order. Relatedly, in July 2019, the Supreme Court of India issued an order making preliminary findings that Amrapali and other parties, including unspecified JPMorgan Chase entities and the offshore funds that had invested in the projects, violated certain criminal currency control and money laundering provisions, and ordered the ED to conduct a further inquiry. The Firm is responding to and cooperating with the inquiry. \nForeign Exchange Investigations and Litigation. The Firm previously reported settlements with certain government authorities relating to its foreign exchange (\"FX\") sales and trading activities and controls related to those activities. Among those resolutions, in May 2015, the Firm pleaded guilty to a single violation of federal antitrust law. The Department of Labor (\"DOL\") granted the Firm exemptions that permit the Firm and its affiliates to continue to rely on the Qualified Professional Asset Manager exemption under \n\n\n\n|    |     |                                     |\n|---:|----:|:------------------------------------|\n|  1 | 298 | JPMorgan Chase & Co.\/2023 Form 10-K |\n\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 299: the Employee Retirement Income Security Act (\"ERISA\") through the ten-year disqualification period following the antitrust plea. The only remaining FX-related governmental inquiry is a South Africa Competition Commission matter which is currently pending before the South Africa Competition Tribunal.\nWith respect to civil litigation matters, in a putative class action filed against the Firm and other foreign exchange dealers on behalf of certain parties who purchased foreign currencies at allegedly inflated rates, the District Court denied certification of a class and granted summary judgment against the named plaintiffs in March 2023. An appeal by those plaintiffs of the District Court's decision is pending. In addition, some FX-related individual and putative class actions based on similar alleged underlying conduct have been filed outside the U.S., including in the U.K., Israel, the Netherlands, Brazil and Australia. An agreement to resolve one of the U.K. actions was reached in December 2022. In July 2023, the U.K. Court of Appeal overturned the Competition Appeal Tribunal's earlier denial of a request for class certification on an opt-out basis. In Israel, a settlement in principle has been reached on the putative class action, which remains subject to court approval. \nGovernment Inquiries Related to the Zelle Network. The Firm is responding to inquiries from civil government authorities regarding the handling of disputes related to transfers of funds through the Zelle Network. The Firm is cooperating with these inquiries and responding to requests for information.\nInterchange Litigation. Groups of merchants and retail associations filed a series of class action complaints alleging that Visa and Mastercard, as well as certain banks, conspired to set the price of credit and debit card interchange fees and enacted related rules in violation of antitrust laws.\nIn September 2018, the parties settled the class action seeking monetary relief, with the defendants collectively contributing approximately $6.2 billion. The settlement has been approved by the District Court and affirmed on appeal. Based on the percentage of merchants that opted out of the settlement, $700 million has been returned to the defendants from the settlement escrow. A separate class action seeking injunctive relief continues, and in September 2021, the District Court granted plaintiffs' motion for class certification in part, and denied the motion in part.\nOf the merchants who opted out of the damages class settlement, certain merchants filed individual actions raising similar allegations against Visa and Mastercard, as well as against the Firm and other banks. While some of those actions remain pending, the defendants have reached settlements with the merchants who opted out representing approximately 70% of the combined Mastercard-branded and Visa-branded payment card sales volume. \n\nJeffrey Epstein Litigation. JPMorgan Chase Bank, N.A. was named as a defendant in lawsuits filed in the United States \n\n\nDistrict Court for the Southern District of New York alleging that JPMorgan Chase Bank, N.A. knowingly facilitated Jeffrey Epstein's sex trafficking and other unlawful conduct by providing banking services to Epstein until 2013. In June 2023, the Court granted preliminary approval of a settlement between the victim class and JPMorgan Chase Bank, N.A., pursuant to which JPMorgan Chase Bank, N.A. paid $290 million to a fund for Epstein survivors. In November 2023, the Court granted final approval of the settlement, rejecting objections, including those of certain state Attorneys General, regarding the victims' releases. \n\nLIBOR and Other Benchmark Rate Investigations and Litigation. JPMorgan Chase has responded to inquiries from various governmental agencies and entities around the world relating primarily to the British Bankers Association's (\"BBA\") London Interbank Offered Rate (\"LIBOR\") for various currencies and the European Banking Federation's Euro Interbank Offered Rate (\"EURIBOR\"). The Swiss Competition Commission's investigation relating to EURIBOR, to which the Firm and one other bank remain subject, continues. The Firm appealed a December 2016 decision by the European Commission against the Firm and other banks finding an infringement of European antitrust rules relating to EURIBOR. In December 2023, the European General Court annulled the fine imposed by the European Commission, but exercised its discretion to re-impose a fine in an identical amount. The Firm is considering its options. \n\nIn addition, the Firm has been named as a defendant along with other banks in various individual and putative class actions related to benchmark rates, including U.S. dollar LIBOR. In actions related to U.S. dollar LIBOR during the period that it was administered by the BBA, the Firm has obtained dismissal of certain actions and resolved certain other actions, and others are in various stages of litigation. The United States District Court for the Southern District of New York has granted class certification of antitrust claims related to bonds and interest rate swaps sold directly by the defendants, including the Firm. In addition, a lawsuit filed by a group of individual plaintiffs asserting antitrust claims, alleging that the Firm and other defendants were engaged in an unlawful agreement to set U.S. dollar LIBOR and conspired to monopolize the market for LIBOR-based consumer loans and credit cards was dismissed in October 2023. Plaintiff filed an appeal of the dismissal to the United States Court of Appeals for the Ninth Circuit in November 2023. The Firm has resolved all non-U.S. dollar LIBOR actions.\nRussian Litigation. The Firm is obligated to comply with international sanctions laws, which mandate the freezing or restriction of certain assets. These laws apply when assets associated with individuals, companies, products or services are within the scope of the sanctions. The Firm has faced actual and threatened litigation in Russia seeking payments on transactions that the Firm cannot make, and is contractually excused from paying, under relevant sanctions laws, with judgment entered against the Firm in one claim in February 2024. The Russian court may \n\n\n\n|    |                                     |     |\n|---:|:------------------------------------|----:|\n|  1 | JPMorgan Chase & Co.\/2023 Form 10-K | 299 |\n\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 300: Notes to consolidated financial statements\n\ndisregard the parties' contractual agreement on forum selection, and may not recognize foreign sanctions laws as a basis for not making payment. The Firm holds assets in Russia, which could be seized if the claims are granted and enforced.\nSEC Inquiries. The Firm is responding to requests from the SEC regarding aspects of certain advisory programs within J.P. Morgan Securities LLC, including aggregation of accounts for billing, discounting advisory fees, and selecting portfolio managers. Separately, the Firm is responding to requests from the SEC in connection with the timing of the Firm's liquidation of shares distributed in-kind to certain investment vehicles that invest in third-party managed private funds. The Firm is cooperating with the SEC in regard to both inquires.\nSecurities Lending Antitrust Litigation. JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, J.P. Morgan Prime, Inc., and J.P. Morgan Strategic Securities Lending Corp. are named as defendants in a putative class action filed in the United States District Court for the Southern District of New York. The complaint asserts violations of federal antitrust law and New York State common law in connection with an alleged conspiracy to prevent the emergence of anonymous exchange trading for securities lending transactions. The settlement of this action by the parties has been preliminarily approved, and is subject to final court approval.\nShareholder Litigation. Several shareholder putative class actions, as well as shareholder derivative actions purporting to act on behalf of the Firm, have been filed against the Firm, its Board of Directors and certain of its current and former officers. \nCertain of these shareholder suits relate to historical trading practices by former employees in the precious metals and U.S. treasuries markets and related conduct which were the subject of the Firm's resolutions with the DOJ, CFTC and SEC in September 2020, and fiduciary activities that were separately the subject of a resolution between JPMorgan Chase Bank, N.A. and the OCC in November 2020. One of these shareholder derivative suits was filed in the Supreme Court of the State of New York in May 2022, asserting breach of fiduciary duty and unjust enrichment claims relating to the historical trading practices and related conduct and fiduciary activities which were the subject of the resolutions described above. In December 2022, the court granted defendants' motion to dismiss this action in full, and in July 2023, the plaintiff filed an appeal, which remains pending. A second shareholder derivative action was filed in the United States District Court for the Eastern District of New York in December 2022 relating to the historical trading practices and related conduct, which asserts breach of fiduciary duty and contribution claims and alleges that the shareholder is excused from making a demand to commence litigation because such a demand would have been futile. Defendants have moved to dismiss the complaint. In addition, a consolidated putative class action is pending in the United \n\nStates District Court for the Eastern District of New York on behalf of shareholders who acquired shares of JPMorgan Chase common stock during the putative class period, alleging that certain SEC filings of the Firm were materially false or misleading because they did not disclose certain information relating to the historical trading practices and conduct. In December 2023, the court granted Defendants' motion to dismiss the amended complaint.\nA shareholder derivative suit was filed in May 2023 in the United States District Court for the Southern District of New York against various officers and directors of the Firm asserting breaches of fiduciary duty and unjust enrichment based upon allegations that the defendants caused the Firm to retain Jeffrey Epstein as a client of the bank after defendants knew, or should have known, that Epstein was using the Firm's financial services to facilitate his alleged sex trafficking activities. In December 2023, the Court dismissed the derivative action.\nA separate shareholder derivative suit was filed in March 2022 in the United States District Court for the Eastern District of New York asserting breaches of fiduciary duty and violations of federal securities laws based on the alleged failure of the Board of Directors to exercise adequate oversight over the Firm's compliance with records preservation requirements which were the subject of resolutions between certain of the Firm's subsidiaries and the SEC and the CFTC. Defendants' motion to dismiss the amended complaint is pending.\nTrading Venues Investigations. The Firm has been responding to government inquiries regarding its processes to inventory trading venues and confirm the completeness of certain data fed to trade surveillance platforms. The Firm self-identified that certain trading and order data through the CIB was not feeding into its trade surveillance platforms. The Firm has completed enhancements to the CIB's venue inventory and data completeness controls, and other remediation is underway. The Firm has also performed a review of the data not originally surveilled, which is nearly complete, and has not identified any employee misconduct, harm to clients or the market. While the identified gaps represent a fraction of the overall activity across the CIB, the data gap on one venue, which largely consisted of sponsored client access activity, was significant. The Firm is dedicated to maintaining rigorous controls and continuously enhancing the reliability of its trade infrastructure. The Firm expects to enter into resolutions with two U.S. regulators that will require the Firm to, among other things, complete its remediation, engage an independent consultant, and pay aggregate civil penalties of approximately $350 million. The Firm is also in advanced negotiations with a third U.S. regulator, but there is no assurance that such discussions will result in a resolution. The Firm does not expect any disruption of service to clients as a result of these resolutions.\n* * *\n\n\n\n|    |     |                                     |\n|---:|----:|:------------------------------------|\n|  1 | 300 | JPMorgan Chase & Co.\/2023 Form 10-K |\n\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 301: In addition to the various legal proceedings discussed above, JPMorgan Chase and its subsidiaries are named as defendants or are otherwise involved in a substantial number of other legal proceedings. The Firm believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and it intends to defend itself vigorously. Additional legal proceedings may be initiated from time to time in the future.\nThe Firm has established reserves for several hundred of its currently outstanding legal proceedings. In accordance with the provisions of U.S. GAAP for contingencies, the Firm accrues for a litigation-related liability when it is probable that such a liability has been incurred and the amount of the loss can be reasonably estimated. The Firm evaluates its outstanding legal proceedings each quarter to assess its litigation reserves, and makes adjustments in such reserves, upward or downward, as appropriate, based on management's best judgment after consultation with counsel. The Firm's legal expense was $1.4 billion, $266 million and $426 million for the years ended December 31, 2023, 2022 and 2021, respectively. There is no assurance that the Firm's litigation reserves will not need to be adjusted in the future. \nIn view of the inherent difficulty of predicting the outcome of legal proceedings, particularly where the claimants seek very large or indeterminate damages, or where the matters present novel legal theories, involve a large number of parties or are in early stages of discovery, the Firm cannot state with confidence what will be the eventual outcomes of the currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or consequences related to those matters. JPMorgan Chase believes, based upon its current knowledge and after consultation with counsel, consideration of the material legal proceedings described above and after taking into account its current litigation reserves and its estimated aggregate range of possible losses, that the other legal proceedings currently pending against it should not have a material adverse effect on the Firm's consolidated financial condition. The Firm notes, however, that in light of the uncertainties involved in such proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves it has currently accrued or that a matter will not have material reputational consequences. As a result, the outcome of a particular matter may be material to JPMorgan Chase's operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of JPMorgan Chase's income for that period.\n\n\n\n|    |                                     |     |\n|---:|:------------------------------------|----:|\n|  1 | JPMorgan Chase & Co.\/2023 Form 10-K | 301 |\n\n","context_markdown_without_headers":"\nItem 9A. Controls and Procedures.\n\nThe internal control framework promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (\"COSO\"), \"Internal Control - Integrated Framework\" (\"COSO 2013\"), provides guidance for designing, implementing and conducting internal control and assessing its effectiveness. The Firm used the COSO 2013 framework to assess the effectiveness of the Firm's internal control over financial reporting as of December 31, 2023. Refer to \"Management's report on internal control over financial reporting\" on page 162.\n\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Firm's management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective. Refer to Exhibits 31.1 and 31.2 for the Certifications furnished by the Chairman and Chief Executive Officer and Chief Financial Officer, respectively.\n\nThe Firm is committed to maintaining high standards of internal control over financial reporting. Nevertheless, because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Deficiencies or lapses in internal controls may occur from time to time, and there can be no assurance that any such deficiencies will not result in significant deficiencies or material weaknesses in internal control in the future and collateral consequences therefrom. Refer to \"Management's report on internal control over financial reporting\" on page 162 for further information. \nOn May 1, 2023, the Firm acquired certain assets and assumed certain liabilities of First Republic Bank from the FDIC. The Firm has included internal controls over these acquired assets and assumed liabilities in its evaluation of \n\nthe effectiveness of disclosure controls and procedures. Otherwise, there was no change in the Firm's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the three months ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Firm's internal control over financial reporting.\n\n\n|    |    |\n|---:|---:|\n|  1 | 36 |\n, Notes to consolidated financial statements\n\n\nNote 30 \u2013 Litigation\n\n\nContingencies \n\nAs of December 31, 2023, the Firm and its subsidiaries and affiliates are defendants or respondents in numerous evolving legal proceedings, including private proceedings, public proceedings, government investigations, regulatory enforcement matters, and the matters described below. The litigations range from individual actions involving a single plaintiff to class action lawsuits with potentially millions of class members. Investigations and regulatory enforcement matters involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations. These legal proceedings are at varying stages of adjudication, arbitration or investigation, and involve each of the Firm's lines of business and several geographies and a wide variety of claims (including common law tort and contract claims and statutory antitrust, securities and consumer protection claims), some of which present novel legal theories.\nThe Firm believes the estimate of the aggregate range of reasonably possible losses, in excess of reserves established, for its legal proceedings is from $0 to approximately $1.3 billion at December 31, 2023. This estimated aggregate range of reasonably possible losses was based upon information available as of that date for those proceedings in which the Firm believes that an estimate of reasonably possible loss can be made. For certain matters, the Firm does not believe that such an estimate can be made, as of that date. The Firm's estimate of the aggregate range of reasonably possible losses involves significant judgment, given:\n\u2022the number, variety and varying stages of the proceedings, including the fact that many are in preliminary stages, \n\u2022the existence in many such proceedings of multiple defendants, including the Firm, whose share of liability (if any) has yet to be determined, \n\u2022the numerous yet-unresolved issues in many of the proceedings, including issues regarding class certification and the scope of many of the claims, and \n\u2022the uncertainty of the various potential outcomes of such proceedings, including where the Firm has made assumptions concerning future rulings by the court or other adjudicator, or about the behavior or incentives of adverse parties or regulatory authorities, and those assumptions prove to be incorrect.\nIn addition, the outcome of a particular proceeding may be a result which the Firm did not take into account in its estimate because the Firm had deemed the likelihood of that outcome to be remote. Accordingly, the Firm's estimate of the aggregate range of reasonably possible losses will change from time to time, and actual losses may vary significantly.\n\nSet forth below are descriptions of the Firm's material legal proceedings.\n1MDB Litigation. J.P. Morgan (Suisse) SA was named as a defendant in a civil litigation filed in May 2021 in Malaysia by 1Malaysia Development Berhad (\"1MDB\"), a Malaysian state-owned and controlled investment fund. The claim alleges \"dishonest assistance\" against J.P. Morgan (Suisse) SA in relation to payments of $300 million and $500 million, from 2009 and 2010, respectively, received from 1MDB and paid into an account at J.P. Morgan (Suisse) SA held by 1MDB PetroSaudi Limited, a joint venture company between 1MDB and PetroSaudi Holdings (Cayman) Limited. The Firm is challenging the validity of service and the Malaysian Court's jurisdiction to hear the claim. In August 2023 the Court denied an application by 1MDB to discontinue its claim with permission to re-file a new claim in the future. An appeals court is scheduled in August 2024 to hear separate appeals filed by 1MDB and the Firm against that August 2023 decision. In its appeal, the Firm seeks to prevent any claim from continuing. \nIn addition, in November 2023, the Federal Office of the Attorney General (OAG) in Switzerland notified J.P. Morgan (Suisse) SA that it is conducting an investigation into possible criminal liability in connection with transactions arising from J.P. Morgan (Suisse) SA's relationship with the 1MDB PetroSaudi joint venture and its related persons for the period September 2009 through August 2015. The OAG investigation is ongoing. \nAmrapali. India's Enforcement Directorate (\"ED\") is investigating J.P. Morgan India Private Limited in connection with investments made in 2010 and 2012 by two offshore funds formerly managed by JPMorgan Chase entities into residential housing projects developed by the Amrapali Group (\"Amrapali\") relating to delays in delivering or failure to deliver residential units. In August 2021, the ED issued an order fining J.P. Morgan India Private Limited approximately $31.5 million, and the Firm is appealing that order. Relatedly, in July 2019, the Supreme Court of India issued an order making preliminary findings that Amrapali and other parties, including unspecified JPMorgan Chase entities and the offshore funds that had invested in the projects, violated certain criminal currency control and money laundering provisions, and ordered the ED to conduct a further inquiry. The Firm is responding to and cooperating with the inquiry. \nForeign Exchange Investigations and Litigation. The Firm previously reported settlements with certain government authorities relating to its foreign exchange (\"FX\") sales and trading activities and controls related to those activities. Among those resolutions, in May 2015, the Firm pleaded guilty to a single violation of federal antitrust law. The Department of Labor (\"DOL\") granted the Firm exemptions that permit the Firm and its affiliates to continue to rely on the Qualified Professional Asset Manager exemption under \n\n\n\n|    |     |                                     |\n|---:|----:|:------------------------------------|\n|  1 | 298 | JPMorgan Chase & Co.\/2023 Form 10-K |\n\n, the Employee Retirement Income Security Act (\"ERISA\") through the ten-year disqualification period following the antitrust plea. The only remaining FX-related governmental inquiry is a South Africa Competition Commission matter which is currently pending before the South Africa Competition Tribunal.\nWith respect to civil litigation matters, in a putative class action filed against the Firm and other foreign exchange dealers on behalf of certain parties who purchased foreign currencies at allegedly inflated rates, the District Court denied certification of a class and granted summary judgment against the named plaintiffs in March 2023. An appeal by those plaintiffs of the District Court's decision is pending. In addition, some FX-related individual and putative class actions based on similar alleged underlying conduct have been filed outside the U.S., including in the U.K., Israel, the Netherlands, Brazil and Australia. An agreement to resolve one of the U.K. actions was reached in December 2022. In July 2023, the U.K. Court of Appeal overturned the Competition Appeal Tribunal's earlier denial of a request for class certification on an opt-out basis. In Israel, a settlement in principle has been reached on the putative class action, which remains subject to court approval. \nGovernment Inquiries Related to the Zelle Network. The Firm is responding to inquiries from civil government authorities regarding the handling of disputes related to transfers of funds through the Zelle Network. The Firm is cooperating with these inquiries and responding to requests for information.\nInterchange Litigation. Groups of merchants and retail associations filed a series of class action complaints alleging that Visa and Mastercard, as well as certain banks, conspired to set the price of credit and debit card interchange fees and enacted related rules in violation of antitrust laws.\nIn September 2018, the parties settled the class action seeking monetary relief, with the defendants collectively contributing approximately $6.2 billion. The settlement has been approved by the District Court and affirmed on appeal. Based on the percentage of merchants that opted out of the settlement, $700 million has been returned to the defendants from the settlement escrow. A separate class action seeking injunctive relief continues, and in September 2021, the District Court granted plaintiffs' motion for class certification in part, and denied the motion in part.\nOf the merchants who opted out of the damages class settlement, certain merchants filed individual actions raising similar allegations against Visa and Mastercard, as well as against the Firm and other banks. While some of those actions remain pending, the defendants have reached settlements with the merchants who opted out representing approximately 70% of the combined Mastercard-branded and Visa-branded payment card sales volume. \n\nJeffrey Epstein Litigation. JPMorgan Chase Bank, N.A. was named as a defendant in lawsuits filed in the United States \n\n\nDistrict Court for the Southern District of New York alleging that JPMorgan Chase Bank, N.A. knowingly facilitated Jeffrey Epstein's sex trafficking and other unlawful conduct by providing banking services to Epstein until 2013. In June 2023, the Court granted preliminary approval of a settlement between the victim class and JPMorgan Chase Bank, N.A., pursuant to which JPMorgan Chase Bank, N.A. paid $290 million to a fund for Epstein survivors. In November 2023, the Court granted final approval of the settlement, rejecting objections, including those of certain state Attorneys General, regarding the victims' releases. \n\nLIBOR and Other Benchmark Rate Investigations and Litigation. JPMorgan Chase has responded to inquiries from various governmental agencies and entities around the world relating primarily to the British Bankers Association's (\"BBA\") London Interbank Offered Rate (\"LIBOR\") for various currencies and the European Banking Federation's Euro Interbank Offered Rate (\"EURIBOR\"). The Swiss Competition Commission's investigation relating to EURIBOR, to which the Firm and one other bank remain subject, continues. The Firm appealed a December 2016 decision by the European Commission against the Firm and other banks finding an infringement of European antitrust rules relating to EURIBOR. In December 2023, the European General Court annulled the fine imposed by the European Commission, but exercised its discretion to re-impose a fine in an identical amount. The Firm is considering its options. \n\nIn addition, the Firm has been named as a defendant along with other banks in various individual and putative class actions related to benchmark rates, including U.S. dollar LIBOR. In actions related to U.S. dollar LIBOR during the period that it was administered by the BBA, the Firm has obtained dismissal of certain actions and resolved certain other actions, and others are in various stages of litigation. The United States District Court for the Southern District of New York has granted class certification of antitrust claims related to bonds and interest rate swaps sold directly by the defendants, including the Firm. In addition, a lawsuit filed by a group of individual plaintiffs asserting antitrust claims, alleging that the Firm and other defendants were engaged in an unlawful agreement to set U.S. dollar LIBOR and conspired to monopolize the market for LIBOR-based consumer loans and credit cards was dismissed in October 2023. Plaintiff filed an appeal of the dismissal to the United States Court of Appeals for the Ninth Circuit in November 2023. The Firm has resolved all non-U.S. dollar LIBOR actions.\nRussian Litigation. The Firm is obligated to comply with international sanctions laws, which mandate the freezing or restriction of certain assets. These laws apply when assets associated with individuals, companies, products or services are within the scope of the sanctions. The Firm has faced actual and threatened litigation in Russia seeking payments on transactions that the Firm cannot make, and is contractually excused from paying, under relevant sanctions laws, with judgment entered against the Firm in one claim in February 2024. The Russian court may \n\n\n\n|    |                                     |     |\n|---:|:------------------------------------|----:|\n|  1 | JPMorgan Chase & Co.\/2023 Form 10-K | 299 |\n\n, Notes to consolidated financial statements\n\ndisregard the parties' contractual agreement on forum selection, and may not recognize foreign sanctions laws as a basis for not making payment. The Firm holds assets in Russia, which could be seized if the claims are granted and enforced.\nSEC Inquiries. The Firm is responding to requests from the SEC regarding aspects of certain advisory programs within J.P. Morgan Securities LLC, including aggregation of accounts for billing, discounting advisory fees, and selecting portfolio managers. Separately, the Firm is responding to requests from the SEC in connection with the timing of the Firm's liquidation of shares distributed in-kind to certain investment vehicles that invest in third-party managed private funds. The Firm is cooperating with the SEC in regard to both inquires.\nSecurities Lending Antitrust Litigation. JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, J.P. Morgan Prime, Inc., and J.P. Morgan Strategic Securities Lending Corp. are named as defendants in a putative class action filed in the United States District Court for the Southern District of New York. The complaint asserts violations of federal antitrust law and New York State common law in connection with an alleged conspiracy to prevent the emergence of anonymous exchange trading for securities lending transactions. The settlement of this action by the parties has been preliminarily approved, and is subject to final court approval.\nShareholder Litigation. Several shareholder putative class actions, as well as shareholder derivative actions purporting to act on behalf of the Firm, have been filed against the Firm, its Board of Directors and certain of its current and former officers. \nCertain of these shareholder suits relate to historical trading practices by former employees in the precious metals and U.S. treasuries markets and related conduct which were the subject of the Firm's resolutions with the DOJ, CFTC and SEC in September 2020, and fiduciary activities that were separately the subject of a resolution between JPMorgan Chase Bank, N.A. and the OCC in November 2020. One of these shareholder derivative suits was filed in the Supreme Court of the State of New York in May 2022, asserting breach of fiduciary duty and unjust enrichment claims relating to the historical trading practices and related conduct and fiduciary activities which were the subject of the resolutions described above. In December 2022, the court granted defendants' motion to dismiss this action in full, and in July 2023, the plaintiff filed an appeal, which remains pending. A second shareholder derivative action was filed in the United States District Court for the Eastern District of New York in December 2022 relating to the historical trading practices and related conduct, which asserts breach of fiduciary duty and contribution claims and alleges that the shareholder is excused from making a demand to commence litigation because such a demand would have been futile. Defendants have moved to dismiss the complaint. In addition, a consolidated putative class action is pending in the United \n\nStates District Court for the Eastern District of New York on behalf of shareholders who acquired shares of JPMorgan Chase common stock during the putative class period, alleging that certain SEC filings of the Firm were materially false or misleading because they did not disclose certain information relating to the historical trading practices and conduct. In December 2023, the court granted Defendants' motion to dismiss the amended complaint.\nA shareholder derivative suit was filed in May 2023 in the United States District Court for the Southern District of New York against various officers and directors of the Firm asserting breaches of fiduciary duty and unjust enrichment based upon allegations that the defendants caused the Firm to retain Jeffrey Epstein as a client of the bank after defendants knew, or should have known, that Epstein was using the Firm's financial services to facilitate his alleged sex trafficking activities. In December 2023, the Court dismissed the derivative action.\nA separate shareholder derivative suit was filed in March 2022 in the United States District Court for the Eastern District of New York asserting breaches of fiduciary duty and violations of federal securities laws based on the alleged failure of the Board of Directors to exercise adequate oversight over the Firm's compliance with records preservation requirements which were the subject of resolutions between certain of the Firm's subsidiaries and the SEC and the CFTC. Defendants' motion to dismiss the amended complaint is pending.\nTrading Venues Investigations. The Firm has been responding to government inquiries regarding its processes to inventory trading venues and confirm the completeness of certain data fed to trade surveillance platforms. The Firm self-identified that certain trading and order data through the CIB was not feeding into its trade surveillance platforms. The Firm has completed enhancements to the CIB's venue inventory and data completeness controls, and other remediation is underway. The Firm has also performed a review of the data not originally surveilled, which is nearly complete, and has not identified any employee misconduct, harm to clients or the market. While the identified gaps represent a fraction of the overall activity across the CIB, the data gap on one venue, which largely consisted of sponsored client access activity, was significant. The Firm is dedicated to maintaining rigorous controls and continuously enhancing the reliability of its trade infrastructure. The Firm expects to enter into resolutions with two U.S. regulators that will require the Firm to, among other things, complete its remediation, engage an independent consultant, and pay aggregate civil penalties of approximately $350 million. The Firm is also in advanced negotiations with a third U.S. regulator, but there is no assurance that such discussions will result in a resolution. The Firm does not expect any disruption of service to clients as a result of these resolutions.\n* * *\n\n\n\n|    |     |                                     |\n|---:|----:|:------------------------------------|\n|  1 | 300 | JPMorgan Chase & Co.\/2023 Form 10-K |\n\n, In addition to the various legal proceedings discussed above, JPMorgan Chase and its subsidiaries are named as defendants or are otherwise involved in a substantial number of other legal proceedings. The Firm believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and it intends to defend itself vigorously. Additional legal proceedings may be initiated from time to time in the future.\nThe Firm has established reserves for several hundred of its currently outstanding legal proceedings. In accordance with the provisions of U.S. GAAP for contingencies, the Firm accrues for a litigation-related liability when it is probable that such a liability has been incurred and the amount of the loss can be reasonably estimated. The Firm evaluates its outstanding legal proceedings each quarter to assess its litigation reserves, and makes adjustments in such reserves, upward or downward, as appropriate, based on management's best judgment after consultation with counsel. The Firm's legal expense was $1.4 billion, $266 million and $426 million for the years ended December 31, 2023, 2022 and 2021, respectively. There is no assurance that the Firm's litigation reserves will not need to be adjusted in the future. \nIn view of the inherent difficulty of predicting the outcome of legal proceedings, particularly where the claimants seek very large or indeterminate damages, or where the matters present novel legal theories, involve a large number of parties or are in early stages of discovery, the Firm cannot state with confidence what will be the eventual outcomes of the currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or consequences related to those matters. JPMorgan Chase believes, based upon its current knowledge and after consultation with counsel, consideration of the material legal proceedings described above and after taking into account its current litigation reserves and its estimated aggregate range of possible losses, that the other legal proceedings currently pending against it should not have a material adverse effect on the Firm's consolidated financial condition. The Firm notes, however, that in light of the uncertainties involved in such proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves it has currently accrued or that a matter will not have material reputational consequences. As a result, the outcome of a particular matter may be material to JPMorgan Chase's operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of JPMorgan Chase's income for that period.\n\n\n\n|    |                                     |     |\n|---:|:------------------------------------|----:|\n|  1 | JPMorgan Chase & Co.\/2023 Form 10-K | 301 |\n\n","context_html_with_headers":"JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 36: \nItem 9A. Controls and Procedures.\n\nThe internal control framework promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (\"COSO\"), \"Internal Control - Integrated Framework\" (\"COSO 2013\"), provides guidance for designing, implementing and conducting internal control and assessing its effectiveness. The Firm used the COSO 2013 framework to assess the effectiveness of the Firm's internal control over financial reporting as of December 31, 2023. Refer to \"Management's report on internal control over financial reporting\" on page 162.\n\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Firm's management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective. Refer to Exhibits 31.1 and 31.2 for the Certifications furnished by the Chairman and Chief Executive Officer and Chief Financial Officer, respectively.\n\nThe Firm is committed to maintaining high standards of internal control over financial reporting. Nevertheless, because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Deficiencies or lapses in internal controls may occur from time to time, and there can be no assurance that any such deficiencies will not result in significant deficiencies or material weaknesses in internal control in the future and collateral consequences therefrom. Refer to \"Management's report on internal control over financial reporting\" on page 162 for further information. \nOn May 1, 2023, the Firm acquired certain assets and assumed certain liabilities of First Republic Bank from the FDIC. The Firm has included internal controls over these acquired assets and assumed liabilities in its evaluation of \n\nthe effectiveness of disclosure controls and procedures. Otherwise, there was no change in the Firm's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the three months ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Firm's internal control over financial reporting.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">36<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 298: Notes to consolidated financial statements\n\n\nNote 30 \u2013 Litigation\n\n\nContingencies \n\nAs of December 31, 2023, the Firm and its subsidiaries and affiliates are defendants or respondents in numerous evolving legal proceedings, including private proceedings, public proceedings, government investigations, regulatory enforcement matters, and the matters described below. The litigations range from individual actions involving a single plaintiff to class action lawsuits with potentially millions of class members. Investigations and regulatory enforcement matters involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations. These legal proceedings are at varying stages of adjudication, arbitration or investigation, and involve each of the Firm's lines of business and several geographies and a wide variety of claims (including common law tort and contract claims and statutory antitrust, securities and consumer protection claims), some of which present novel legal theories.\nThe Firm believes the estimate of the aggregate range of reasonably possible losses, in excess of reserves established, for its legal proceedings is from $0 to approximately $1.3 billion at December 31, 2023. This estimated aggregate range of reasonably possible losses was based upon information available as of that date for those proceedings in which the Firm believes that an estimate of reasonably possible loss can be made. For certain matters, the Firm does not believe that such an estimate can be made, as of that date. The Firm's estimate of the aggregate range of reasonably possible losses involves significant judgment, given:\n\u2022the number, variety and varying stages of the proceedings, including the fact that many are in preliminary stages, \n\u2022the existence in many such proceedings of multiple defendants, including the Firm, whose share of liability (if any) has yet to be determined, \n\u2022the numerous yet-unresolved issues in many of the proceedings, including issues regarding class certification and the scope of many of the claims, and \n\u2022the uncertainty of the various potential outcomes of such proceedings, including where the Firm has made assumptions concerning future rulings by the court or other adjudicator, or about the behavior or incentives of adverse parties or regulatory authorities, and those assumptions prove to be incorrect.\nIn addition, the outcome of a particular proceeding may be a result which the Firm did not take into account in its estimate because the Firm had deemed the likelihood of that outcome to be remote. Accordingly, the Firm's estimate of the aggregate range of reasonably possible losses will change from time to time, and actual losses may vary significantly.\n\nSet forth below are descriptions of the Firm's material legal proceedings.\n1MDB Litigation. J.P. Morgan (Suisse) SA was named as a defendant in a civil litigation filed in May 2021 in Malaysia by 1Malaysia Development Berhad (\"1MDB\"), a Malaysian state-owned and controlled investment fund. The claim alleges \"dishonest assistance\" against J.P. Morgan (Suisse) SA in relation to payments of $300 million and $500 million, from 2009 and 2010, respectively, received from 1MDB and paid into an account at J.P. Morgan (Suisse) SA held by 1MDB PetroSaudi Limited, a joint venture company between 1MDB and PetroSaudi Holdings (Cayman) Limited. The Firm is challenging the validity of service and the Malaysian Court's jurisdiction to hear the claim. In August 2023 the Court denied an application by 1MDB to discontinue its claim with permission to re-file a new claim in the future. An appeals court is scheduled in August 2024 to hear separate appeals filed by 1MDB and the Firm against that August 2023 decision. In its appeal, the Firm seeks to prevent any claim from continuing. \nIn addition, in November 2023, the Federal Office of the Attorney General (OAG) in Switzerland notified J.P. Morgan (Suisse) SA that it is conducting an investigation into possible criminal liability in connection with transactions arising from J.P. Morgan (Suisse) SA's relationship with the 1MDB PetroSaudi joint venture and its related persons for the period September 2009 through August 2015. The OAG investigation is ongoing. \nAmrapali. India's Enforcement Directorate (\"ED\") is investigating J.P. Morgan India Private Limited in connection with investments made in 2010 and 2012 by two offshore funds formerly managed by JPMorgan Chase entities into residential housing projects developed by the Amrapali Group (\"Amrapali\") relating to delays in delivering or failure to deliver residential units. In August 2021, the ED issued an order fining J.P. Morgan India Private Limited approximately $31.5 million, and the Firm is appealing that order. Relatedly, in July 2019, the Supreme Court of India issued an order making preliminary findings that Amrapali and other parties, including unspecified JPMorgan Chase entities and the offshore funds that had invested in the projects, violated certain criminal currency control and money laundering provisions, and ordered the ED to conduct a further inquiry. The Firm is responding to and cooperating with the inquiry. \nForeign Exchange Investigations and Litigation. The Firm previously reported settlements with certain government authorities relating to its foreign exchange (\"FX\") sales and trading activities and controls related to those activities. Among those resolutions, in May 2015, the Firm pleaded guilty to a single violation of federal antitrust law. The Department of Labor (\"DOL\") granted the Firm exemptions that permit the Firm and its affiliates to continue to rely on the Qualified Professional Asset Manager exemption under \n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">298<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><\/tr><\/table>\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 299: the Employee Retirement Income Security Act (\"ERISA\") through the ten-year disqualification period following the antitrust plea. The only remaining FX-related governmental inquiry is a South Africa Competition Commission matter which is currently pending before the South Africa Competition Tribunal.\nWith respect to civil litigation matters, in a putative class action filed against the Firm and other foreign exchange dealers on behalf of certain parties who purchased foreign currencies at allegedly inflated rates, the District Court denied certification of a class and granted summary judgment against the named plaintiffs in March 2023. An appeal by those plaintiffs of the District Court's decision is pending. In addition, some FX-related individual and putative class actions based on similar alleged underlying conduct have been filed outside the U.S., including in the U.K., Israel, the Netherlands, Brazil and Australia. An agreement to resolve one of the U.K. actions was reached in December 2022. In July 2023, the U.K. Court of Appeal overturned the Competition Appeal Tribunal's earlier denial of a request for class certification on an opt-out basis. In Israel, a settlement in principle has been reached on the putative class action, which remains subject to court approval. \nGovernment Inquiries Related to the Zelle Network. The Firm is responding to inquiries from civil government authorities regarding the handling of disputes related to transfers of funds through the Zelle Network. The Firm is cooperating with these inquiries and responding to requests for information.\nInterchange Litigation. Groups of merchants and retail associations filed a series of class action complaints alleging that Visa and Mastercard, as well as certain banks, conspired to set the price of credit and debit card interchange fees and enacted related rules in violation of antitrust laws.\nIn September 2018, the parties settled the class action seeking monetary relief, with the defendants collectively contributing approximately $6.2 billion. The settlement has been approved by the District Court and affirmed on appeal. Based on the percentage of merchants that opted out of the settlement, $700 million has been returned to the defendants from the settlement escrow. A separate class action seeking injunctive relief continues, and in September 2021, the District Court granted plaintiffs' motion for class certification in part, and denied the motion in part.\nOf the merchants who opted out of the damages class settlement, certain merchants filed individual actions raising similar allegations against Visa and Mastercard, as well as against the Firm and other banks. While some of those actions remain pending, the defendants have reached settlements with the merchants who opted out representing approximately 70% of the combined Mastercard-branded and Visa-branded payment card sales volume. \n\nJeffrey Epstein Litigation. JPMorgan Chase Bank, N.A. was named as a defendant in lawsuits filed in the United States \n\n\nDistrict Court for the Southern District of New York alleging that JPMorgan Chase Bank, N.A. knowingly facilitated Jeffrey Epstein's sex trafficking and other unlawful conduct by providing banking services to Epstein until 2013. In June 2023, the Court granted preliminary approval of a settlement between the victim class and JPMorgan Chase Bank, N.A., pursuant to which JPMorgan Chase Bank, N.A. paid $290 million to a fund for Epstein survivors. In November 2023, the Court granted final approval of the settlement, rejecting objections, including those of certain state Attorneys General, regarding the victims' releases. \n\nLIBOR and Other Benchmark Rate Investigations and Litigation. JPMorgan Chase has responded to inquiries from various governmental agencies and entities around the world relating primarily to the British Bankers Association's (\"BBA\") London Interbank Offered Rate (\"LIBOR\") for various currencies and the European Banking Federation's Euro Interbank Offered Rate (\"EURIBOR\"). The Swiss Competition Commission's investigation relating to EURIBOR, to which the Firm and one other bank remain subject, continues. The Firm appealed a December 2016 decision by the European Commission against the Firm and other banks finding an infringement of European antitrust rules relating to EURIBOR. In December 2023, the European General Court annulled the fine imposed by the European Commission, but exercised its discretion to re-impose a fine in an identical amount. The Firm is considering its options. \n\nIn addition, the Firm has been named as a defendant along with other banks in various individual and putative class actions related to benchmark rates, including U.S. dollar LIBOR. In actions related to U.S. dollar LIBOR during the period that it was administered by the BBA, the Firm has obtained dismissal of certain actions and resolved certain other actions, and others are in various stages of litigation. The United States District Court for the Southern District of New York has granted class certification of antitrust claims related to bonds and interest rate swaps sold directly by the defendants, including the Firm. In addition, a lawsuit filed by a group of individual plaintiffs asserting antitrust claims, alleging that the Firm and other defendants were engaged in an unlawful agreement to set U.S. dollar LIBOR and conspired to monopolize the market for LIBOR-based consumer loans and credit cards was dismissed in October 2023. Plaintiff filed an appeal of the dismissal to the United States Court of Appeals for the Ninth Circuit in November 2023. The Firm has resolved all non-U.S. dollar LIBOR actions.\nRussian Litigation. The Firm is obligated to comply with international sanctions laws, which mandate the freezing or restriction of certain assets. These laws apply when assets associated with individuals, companies, products or services are within the scope of the sanctions. The Firm has faced actual and threatened litigation in Russia seeking payments on transactions that the Firm cannot make, and is contractually excused from paying, under relevant sanctions laws, with judgment entered against the Firm in one claim in February 2024. The Russian court may \n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">299<\/td><\/tr><\/table>\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 300: Notes to consolidated financial statements\n\ndisregard the parties' contractual agreement on forum selection, and may not recognize foreign sanctions laws as a basis for not making payment. The Firm holds assets in Russia, which could be seized if the claims are granted and enforced.\nSEC Inquiries. The Firm is responding to requests from the SEC regarding aspects of certain advisory programs within J.P. Morgan Securities LLC, including aggregation of accounts for billing, discounting advisory fees, and selecting portfolio managers. Separately, the Firm is responding to requests from the SEC in connection with the timing of the Firm's liquidation of shares distributed in-kind to certain investment vehicles that invest in third-party managed private funds. The Firm is cooperating with the SEC in regard to both inquires.\nSecurities Lending Antitrust Litigation. JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, J.P. Morgan Prime, Inc., and J.P. Morgan Strategic Securities Lending Corp. are named as defendants in a putative class action filed in the United States District Court for the Southern District of New York. The complaint asserts violations of federal antitrust law and New York State common law in connection with an alleged conspiracy to prevent the emergence of anonymous exchange trading for securities lending transactions. The settlement of this action by the parties has been preliminarily approved, and is subject to final court approval.\nShareholder Litigation. Several shareholder putative class actions, as well as shareholder derivative actions purporting to act on behalf of the Firm, have been filed against the Firm, its Board of Directors and certain of its current and former officers. \nCertain of these shareholder suits relate to historical trading practices by former employees in the precious metals and U.S. treasuries markets and related conduct which were the subject of the Firm's resolutions with the DOJ, CFTC and SEC in September 2020, and fiduciary activities that were separately the subject of a resolution between JPMorgan Chase Bank, N.A. and the OCC in November 2020. One of these shareholder derivative suits was filed in the Supreme Court of the State of New York in May 2022, asserting breach of fiduciary duty and unjust enrichment claims relating to the historical trading practices and related conduct and fiduciary activities which were the subject of the resolutions described above. In December 2022, the court granted defendants' motion to dismiss this action in full, and in July 2023, the plaintiff filed an appeal, which remains pending. A second shareholder derivative action was filed in the United States District Court for the Eastern District of New York in December 2022 relating to the historical trading practices and related conduct, which asserts breach of fiduciary duty and contribution claims and alleges that the shareholder is excused from making a demand to commence litigation because such a demand would have been futile. Defendants have moved to dismiss the complaint. In addition, a consolidated putative class action is pending in the United \n\nStates District Court for the Eastern District of New York on behalf of shareholders who acquired shares of JPMorgan Chase common stock during the putative class period, alleging that certain SEC filings of the Firm were materially false or misleading because they did not disclose certain information relating to the historical trading practices and conduct. In December 2023, the court granted Defendants' motion to dismiss the amended complaint.\nA shareholder derivative suit was filed in May 2023 in the United States District Court for the Southern District of New York against various officers and directors of the Firm asserting breaches of fiduciary duty and unjust enrichment based upon allegations that the defendants caused the Firm to retain Jeffrey Epstein as a client of the bank after defendants knew, or should have known, that Epstein was using the Firm's financial services to facilitate his alleged sex trafficking activities. In December 2023, the Court dismissed the derivative action.\nA separate shareholder derivative suit was filed in March 2022 in the United States District Court for the Eastern District of New York asserting breaches of fiduciary duty and violations of federal securities laws based on the alleged failure of the Board of Directors to exercise adequate oversight over the Firm's compliance with records preservation requirements which were the subject of resolutions between certain of the Firm's subsidiaries and the SEC and the CFTC. Defendants' motion to dismiss the amended complaint is pending.\nTrading Venues Investigations. The Firm has been responding to government inquiries regarding its processes to inventory trading venues and confirm the completeness of certain data fed to trade surveillance platforms. The Firm self-identified that certain trading and order data through the CIB was not feeding into its trade surveillance platforms. The Firm has completed enhancements to the CIB's venue inventory and data completeness controls, and other remediation is underway. The Firm has also performed a review of the data not originally surveilled, which is nearly complete, and has not identified any employee misconduct, harm to clients or the market. While the identified gaps represent a fraction of the overall activity across the CIB, the data gap on one venue, which largely consisted of sponsored client access activity, was significant. The Firm is dedicated to maintaining rigorous controls and continuously enhancing the reliability of its trade infrastructure. The Firm expects to enter into resolutions with two U.S. regulators that will require the Firm to, among other things, complete its remediation, engage an independent consultant, and pay aggregate civil penalties of approximately $350 million. The Firm is also in advanced negotiations with a third U.S. regulator, but there is no assurance that such discussions will result in a resolution. The Firm does not expect any disruption of service to clients as a result of these resolutions.\n* * *\n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">300<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><\/tr><\/table>\n, JPMORGAN CHASE & CO 10-K form for the fiscal year ended 2023-12-31, page 301: In addition to the various legal proceedings discussed above, JPMorgan Chase and its subsidiaries are named as defendants or are otherwise involved in a substantial number of other legal proceedings. The Firm believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and it intends to defend itself vigorously. Additional legal proceedings may be initiated from time to time in the future.\nThe Firm has established reserves for several hundred of its currently outstanding legal proceedings. In accordance with the provisions of U.S. GAAP for contingencies, the Firm accrues for a litigation-related liability when it is probable that such a liability has been incurred and the amount of the loss can be reasonably estimated. The Firm evaluates its outstanding legal proceedings each quarter to assess its litigation reserves, and makes adjustments in such reserves, upward or downward, as appropriate, based on management's best judgment after consultation with counsel. The Firm's legal expense was $1.4 billion, $266 million and $426 million for the years ended December 31, 2023, 2022 and 2021, respectively. There is no assurance that the Firm's litigation reserves will not need to be adjusted in the future. \nIn view of the inherent difficulty of predicting the outcome of legal proceedings, particularly where the claimants seek very large or indeterminate damages, or where the matters present novel legal theories, involve a large number of parties or are in early stages of discovery, the Firm cannot state with confidence what will be the eventual outcomes of the currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or consequences related to those matters. JPMorgan Chase believes, based upon its current knowledge and after consultation with counsel, consideration of the material legal proceedings described above and after taking into account its current litigation reserves and its estimated aggregate range of possible losses, that the other legal proceedings currently pending against it should not have a material adverse effect on the Firm's consolidated financial condition. The Firm notes, however, that in light of the uncertainties involved in such proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves it has currently accrued or that a matter will not have material reputational consequences. As a result, the outcome of a particular matter may be material to JPMorgan Chase's operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of JPMorgan Chase's income for that period.\n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">301<\/td><\/tr><\/table>\n","context_html_without_headers":"\nItem 9A. Controls and Procedures.\n\nThe internal control framework promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (\"COSO\"), \"Internal Control - Integrated Framework\" (\"COSO 2013\"), provides guidance for designing, implementing and conducting internal control and assessing its effectiveness. The Firm used the COSO 2013 framework to assess the effectiveness of the Firm's internal control over financial reporting as of December 31, 2023. Refer to \"Management's report on internal control over financial reporting\" on page 162.\n\nAs of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Firm's management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective. Refer to Exhibits 31.1 and 31.2 for the Certifications furnished by the Chairman and Chief Executive Officer and Chief Financial Officer, respectively.\n\nThe Firm is committed to maintaining high standards of internal control over financial reporting. Nevertheless, because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Deficiencies or lapses in internal controls may occur from time to time, and there can be no assurance that any such deficiencies will not result in significant deficiencies or material weaknesses in internal control in the future and collateral consequences therefrom. Refer to \"Management's report on internal control over financial reporting\" on page 162 for further information. \nOn May 1, 2023, the Firm acquired certain assets and assumed certain liabilities of First Republic Bank from the FDIC. The Firm has included internal controls over these acquired assets and assumed liabilities in its evaluation of \n\nthe effectiveness of disclosure controls and procedures. Otherwise, there was no change in the Firm's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the three months ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Firm's internal control over financial reporting.\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">36<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><\/table>, Notes to consolidated financial statements\n\n\nNote 30 \u2013 Litigation\n\n\nContingencies \n\nAs of December 31, 2023, the Firm and its subsidiaries and affiliates are defendants or respondents in numerous evolving legal proceedings, including private proceedings, public proceedings, government investigations, regulatory enforcement matters, and the matters described below. The litigations range from individual actions involving a single plaintiff to class action lawsuits with potentially millions of class members. Investigations and regulatory enforcement matters involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations. These legal proceedings are at varying stages of adjudication, arbitration or investigation, and involve each of the Firm's lines of business and several geographies and a wide variety of claims (including common law tort and contract claims and statutory antitrust, securities and consumer protection claims), some of which present novel legal theories.\nThe Firm believes the estimate of the aggregate range of reasonably possible losses, in excess of reserves established, for its legal proceedings is from $0 to approximately $1.3 billion at December 31, 2023. This estimated aggregate range of reasonably possible losses was based upon information available as of that date for those proceedings in which the Firm believes that an estimate of reasonably possible loss can be made. For certain matters, the Firm does not believe that such an estimate can be made, as of that date. The Firm's estimate of the aggregate range of reasonably possible losses involves significant judgment, given:\n\u2022the number, variety and varying stages of the proceedings, including the fact that many are in preliminary stages, \n\u2022the existence in many such proceedings of multiple defendants, including the Firm, whose share of liability (if any) has yet to be determined, \n\u2022the numerous yet-unresolved issues in many of the proceedings, including issues regarding class certification and the scope of many of the claims, and \n\u2022the uncertainty of the various potential outcomes of such proceedings, including where the Firm has made assumptions concerning future rulings by the court or other adjudicator, or about the behavior or incentives of adverse parties or regulatory authorities, and those assumptions prove to be incorrect.\nIn addition, the outcome of a particular proceeding may be a result which the Firm did not take into account in its estimate because the Firm had deemed the likelihood of that outcome to be remote. Accordingly, the Firm's estimate of the aggregate range of reasonably possible losses will change from time to time, and actual losses may vary significantly.\n\nSet forth below are descriptions of the Firm's material legal proceedings.\n1MDB Litigation. J.P. Morgan (Suisse) SA was named as a defendant in a civil litigation filed in May 2021 in Malaysia by 1Malaysia Development Berhad (\"1MDB\"), a Malaysian state-owned and controlled investment fund. The claim alleges \"dishonest assistance\" against J.P. Morgan (Suisse) SA in relation to payments of $300 million and $500 million, from 2009 and 2010, respectively, received from 1MDB and paid into an account at J.P. Morgan (Suisse) SA held by 1MDB PetroSaudi Limited, a joint venture company between 1MDB and PetroSaudi Holdings (Cayman) Limited. The Firm is challenging the validity of service and the Malaysian Court's jurisdiction to hear the claim. In August 2023 the Court denied an application by 1MDB to discontinue its claim with permission to re-file a new claim in the future. An appeals court is scheduled in August 2024 to hear separate appeals filed by 1MDB and the Firm against that August 2023 decision. In its appeal, the Firm seeks to prevent any claim from continuing. \nIn addition, in November 2023, the Federal Office of the Attorney General (OAG) in Switzerland notified J.P. Morgan (Suisse) SA that it is conducting an investigation into possible criminal liability in connection with transactions arising from J.P. Morgan (Suisse) SA's relationship with the 1MDB PetroSaudi joint venture and its related persons for the period September 2009 through August 2015. The OAG investigation is ongoing. \nAmrapali. India's Enforcement Directorate (\"ED\") is investigating J.P. Morgan India Private Limited in connection with investments made in 2010 and 2012 by two offshore funds formerly managed by JPMorgan Chase entities into residential housing projects developed by the Amrapali Group (\"Amrapali\") relating to delays in delivering or failure to deliver residential units. In August 2021, the ED issued an order fining J.P. Morgan India Private Limited approximately $31.5 million, and the Firm is appealing that order. Relatedly, in July 2019, the Supreme Court of India issued an order making preliminary findings that Amrapali and other parties, including unspecified JPMorgan Chase entities and the offshore funds that had invested in the projects, violated certain criminal currency control and money laundering provisions, and ordered the ED to conduct a further inquiry. The Firm is responding to and cooperating with the inquiry. \nForeign Exchange Investigations and Litigation. The Firm previously reported settlements with certain government authorities relating to its foreign exchange (\"FX\") sales and trading activities and controls related to those activities. Among those resolutions, in May 2015, the Firm pleaded guilty to a single violation of federal antitrust law. The Department of Labor (\"DOL\") granted the Firm exemptions that permit the Firm and its affiliates to continue to rely on the Qualified Professional Asset Manager exemption under \n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">298<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><\/tr><\/table>\n, the Employee Retirement Income Security Act (\"ERISA\") through the ten-year disqualification period following the antitrust plea. The only remaining FX-related governmental inquiry is a South Africa Competition Commission matter which is currently pending before the South Africa Competition Tribunal.\nWith respect to civil litigation matters, in a putative class action filed against the Firm and other foreign exchange dealers on behalf of certain parties who purchased foreign currencies at allegedly inflated rates, the District Court denied certification of a class and granted summary judgment against the named plaintiffs in March 2023. An appeal by those plaintiffs of the District Court's decision is pending. In addition, some FX-related individual and putative class actions based on similar alleged underlying conduct have been filed outside the U.S., including in the U.K., Israel, the Netherlands, Brazil and Australia. An agreement to resolve one of the U.K. actions was reached in December 2022. In July 2023, the U.K. Court of Appeal overturned the Competition Appeal Tribunal's earlier denial of a request for class certification on an opt-out basis. In Israel, a settlement in principle has been reached on the putative class action, which remains subject to court approval. \nGovernment Inquiries Related to the Zelle Network. The Firm is responding to inquiries from civil government authorities regarding the handling of disputes related to transfers of funds through the Zelle Network. The Firm is cooperating with these inquiries and responding to requests for information.\nInterchange Litigation. Groups of merchants and retail associations filed a series of class action complaints alleging that Visa and Mastercard, as well as certain banks, conspired to set the price of credit and debit card interchange fees and enacted related rules in violation of antitrust laws.\nIn September 2018, the parties settled the class action seeking monetary relief, with the defendants collectively contributing approximately $6.2 billion. The settlement has been approved by the District Court and affirmed on appeal. Based on the percentage of merchants that opted out of the settlement, $700 million has been returned to the defendants from the settlement escrow. A separate class action seeking injunctive relief continues, and in September 2021, the District Court granted plaintiffs' motion for class certification in part, and denied the motion in part.\nOf the merchants who opted out of the damages class settlement, certain merchants filed individual actions raising similar allegations against Visa and Mastercard, as well as against the Firm and other banks. While some of those actions remain pending, the defendants have reached settlements with the merchants who opted out representing approximately 70% of the combined Mastercard-branded and Visa-branded payment card sales volume. \n\nJeffrey Epstein Litigation. JPMorgan Chase Bank, N.A. was named as a defendant in lawsuits filed in the United States \n\n\nDistrict Court for the Southern District of New York alleging that JPMorgan Chase Bank, N.A. knowingly facilitated Jeffrey Epstein's sex trafficking and other unlawful conduct by providing banking services to Epstein until 2013. In June 2023, the Court granted preliminary approval of a settlement between the victim class and JPMorgan Chase Bank, N.A., pursuant to which JPMorgan Chase Bank, N.A. paid $290 million to a fund for Epstein survivors. In November 2023, the Court granted final approval of the settlement, rejecting objections, including those of certain state Attorneys General, regarding the victims' releases. \n\nLIBOR and Other Benchmark Rate Investigations and Litigation. JPMorgan Chase has responded to inquiries from various governmental agencies and entities around the world relating primarily to the British Bankers Association's (\"BBA\") London Interbank Offered Rate (\"LIBOR\") for various currencies and the European Banking Federation's Euro Interbank Offered Rate (\"EURIBOR\"). The Swiss Competition Commission's investigation relating to EURIBOR, to which the Firm and one other bank remain subject, continues. The Firm appealed a December 2016 decision by the European Commission against the Firm and other banks finding an infringement of European antitrust rules relating to EURIBOR. In December 2023, the European General Court annulled the fine imposed by the European Commission, but exercised its discretion to re-impose a fine in an identical amount. The Firm is considering its options. \n\nIn addition, the Firm has been named as a defendant along with other banks in various individual and putative class actions related to benchmark rates, including U.S. dollar LIBOR. In actions related to U.S. dollar LIBOR during the period that it was administered by the BBA, the Firm has obtained dismissal of certain actions and resolved certain other actions, and others are in various stages of litigation. The United States District Court for the Southern District of New York has granted class certification of antitrust claims related to bonds and interest rate swaps sold directly by the defendants, including the Firm. In addition, a lawsuit filed by a group of individual plaintiffs asserting antitrust claims, alleging that the Firm and other defendants were engaged in an unlawful agreement to set U.S. dollar LIBOR and conspired to monopolize the market for LIBOR-based consumer loans and credit cards was dismissed in October 2023. Plaintiff filed an appeal of the dismissal to the United States Court of Appeals for the Ninth Circuit in November 2023. The Firm has resolved all non-U.S. dollar LIBOR actions.\nRussian Litigation. The Firm is obligated to comply with international sanctions laws, which mandate the freezing or restriction of certain assets. These laws apply when assets associated with individuals, companies, products or services are within the scope of the sanctions. The Firm has faced actual and threatened litigation in Russia seeking payments on transactions that the Firm cannot make, and is contractually excused from paying, under relevant sanctions laws, with judgment entered against the Firm in one claim in February 2024. The Russian court may \n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">299<\/td><\/tr><\/table>\n, Notes to consolidated financial statements\n\ndisregard the parties' contractual agreement on forum selection, and may not recognize foreign sanctions laws as a basis for not making payment. The Firm holds assets in Russia, which could be seized if the claims are granted and enforced.\nSEC Inquiries. The Firm is responding to requests from the SEC regarding aspects of certain advisory programs within J.P. Morgan Securities LLC, including aggregation of accounts for billing, discounting advisory fees, and selecting portfolio managers. Separately, the Firm is responding to requests from the SEC in connection with the timing of the Firm's liquidation of shares distributed in-kind to certain investment vehicles that invest in third-party managed private funds. The Firm is cooperating with the SEC in regard to both inquires.\nSecurities Lending Antitrust Litigation. JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, J.P. Morgan Prime, Inc., and J.P. Morgan Strategic Securities Lending Corp. are named as defendants in a putative class action filed in the United States District Court for the Southern District of New York. The complaint asserts violations of federal antitrust law and New York State common law in connection with an alleged conspiracy to prevent the emergence of anonymous exchange trading for securities lending transactions. The settlement of this action by the parties has been preliminarily approved, and is subject to final court approval.\nShareholder Litigation. Several shareholder putative class actions, as well as shareholder derivative actions purporting to act on behalf of the Firm, have been filed against the Firm, its Board of Directors and certain of its current and former officers. \nCertain of these shareholder suits relate to historical trading practices by former employees in the precious metals and U.S. treasuries markets and related conduct which were the subject of the Firm's resolutions with the DOJ, CFTC and SEC in September 2020, and fiduciary activities that were separately the subject of a resolution between JPMorgan Chase Bank, N.A. and the OCC in November 2020. One of these shareholder derivative suits was filed in the Supreme Court of the State of New York in May 2022, asserting breach of fiduciary duty and unjust enrichment claims relating to the historical trading practices and related conduct and fiduciary activities which were the subject of the resolutions described above. In December 2022, the court granted defendants' motion to dismiss this action in full, and in July 2023, the plaintiff filed an appeal, which remains pending. A second shareholder derivative action was filed in the United States District Court for the Eastern District of New York in December 2022 relating to the historical trading practices and related conduct, which asserts breach of fiduciary duty and contribution claims and alleges that the shareholder is excused from making a demand to commence litigation because such a demand would have been futile. Defendants have moved to dismiss the complaint. In addition, a consolidated putative class action is pending in the United \n\nStates District Court for the Eastern District of New York on behalf of shareholders who acquired shares of JPMorgan Chase common stock during the putative class period, alleging that certain SEC filings of the Firm were materially false or misleading because they did not disclose certain information relating to the historical trading practices and conduct. In December 2023, the court granted Defendants' motion to dismiss the amended complaint.\nA shareholder derivative suit was filed in May 2023 in the United States District Court for the Southern District of New York against various officers and directors of the Firm asserting breaches of fiduciary duty and unjust enrichment based upon allegations that the defendants caused the Firm to retain Jeffrey Epstein as a client of the bank after defendants knew, or should have known, that Epstein was using the Firm's financial services to facilitate his alleged sex trafficking activities. In December 2023, the Court dismissed the derivative action.\nA separate shareholder derivative suit was filed in March 2022 in the United States District Court for the Eastern District of New York asserting breaches of fiduciary duty and violations of federal securities laws based on the alleged failure of the Board of Directors to exercise adequate oversight over the Firm's compliance with records preservation requirements which were the subject of resolutions between certain of the Firm's subsidiaries and the SEC and the CFTC. Defendants' motion to dismiss the amended complaint is pending.\nTrading Venues Investigations. The Firm has been responding to government inquiries regarding its processes to inventory trading venues and confirm the completeness of certain data fed to trade surveillance platforms. The Firm self-identified that certain trading and order data through the CIB was not feeding into its trade surveillance platforms. The Firm has completed enhancements to the CIB's venue inventory and data completeness controls, and other remediation is underway. The Firm has also performed a review of the data not originally surveilled, which is nearly complete, and has not identified any employee misconduct, harm to clients or the market. While the identified gaps represent a fraction of the overall activity across the CIB, the data gap on one venue, which largely consisted of sponsored client access activity, was significant. The Firm is dedicated to maintaining rigorous controls and continuously enhancing the reliability of its trade infrastructure. The Firm expects to enter into resolutions with two U.S. regulators that will require the Firm to, among other things, complete its remediation, engage an independent consultant, and pay aggregate civil penalties of approximately $350 million. The Firm is also in advanced negotiations with a third U.S. regulator, but there is no assurance that such discussions will result in a resolution. The Firm does not expect any disruption of service to clients as a result of these resolutions.\n* * *\n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">300<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><\/tr><\/table>\n, In addition to the various legal proceedings discussed above, JPMorgan Chase and its subsidiaries are named as defendants or are otherwise involved in a substantial number of other legal proceedings. The Firm believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and it intends to defend itself vigorously. Additional legal proceedings may be initiated from time to time in the future.\nThe Firm has established reserves for several hundred of its currently outstanding legal proceedings. In accordance with the provisions of U.S. GAAP for contingencies, the Firm accrues for a litigation-related liability when it is probable that such a liability has been incurred and the amount of the loss can be reasonably estimated. The Firm evaluates its outstanding legal proceedings each quarter to assess its litigation reserves, and makes adjustments in such reserves, upward or downward, as appropriate, based on management's best judgment after consultation with counsel. The Firm's legal expense was $1.4 billion, $266 million and $426 million for the years ended December 31, 2023, 2022 and 2021, respectively. There is no assurance that the Firm's litigation reserves will not need to be adjusted in the future. \nIn view of the inherent difficulty of predicting the outcome of legal proceedings, particularly where the claimants seek very large or indeterminate damages, or where the matters present novel legal theories, involve a large number of parties or are in early stages of discovery, the Firm cannot state with confidence what will be the eventual outcomes of the currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or consequences related to those matters. JPMorgan Chase believes, based upon its current knowledge and after consultation with counsel, consideration of the material legal proceedings described above and after taking into account its current litigation reserves and its estimated aggregate range of possible losses, that the other legal proceedings currently pending against it should not have a material adverse effect on the Firm's consolidated financial condition. The Firm notes, however, that in light of the uncertainties involved in such proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves it has currently accrued or that a matter will not have material reputational consequences. As a result, the outcome of a particular matter may be material to JPMorgan Chase's operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of JPMorgan Chase's income for that period.\n\n\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">JPMorgan Chase &amp; Co.\/2023 Form 10-K<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">301<\/td><\/tr><\/table>\n"}
{"QID":"q_Ri028","Question":"How might non-compliance with privacy and data protection laws affect The Coca-Cola Company?","ground_truth_answer":"Non-compliance with privacy and data protection laws can have significant adverse effects on The Coca-Cola Company. Privacy laws, such as GDPR in Europe or CCPA in California, impose strict requirements on how companies handle personal data. Failure to comply with these regulations can result in hefty fines, legal actions, and increased regulatory scrutiny. For Coca-Cola, non-compliance could lead to financial penalties that directly impact profitability. Furthermore, there could be reputational damage as consumers and business partners may perceive Coca-Cola as negligent in protecting personal information. This erosion of trust can lead to loss of business and diminished brand reputation.","question_type":"Risk","page_number":"23, 24","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 23: system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_markdown_without_headers":"system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 23: system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_without_headers":"system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n"}
{"QID":"q_Ri029","Question":"How could concerns about plastic packaging impact The Coca-Cola Company\u2019s business and costs?","ground_truth_answer":"Concerns about plastic packaging can significantly impact The Coca-Cola Company\u2019s business and costs. As consumers and regulators increasingly focus on the environmental impact of plastic waste, Coca-Cola may face pressure to adopt more sustainable packaging solutions. Failure to address these concerns can lead to reputational damage and reduced consumer demand for products packaged in plastic bottles.","question_type":"Risk","page_number":"24, 25","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_markdown_without_headers":"for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n, and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_html_without_headers":"for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n, and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n"}
{"QID":"q_Ri030","Question":"What are the potential impacts of water scarcity and quality issues on The Coca-Cola Company\u2019s operations?","ground_truth_answer":"Water scarcity and quality issues can have severe impacts on The Coca-Cola Company\u2019s operations. Water is a critical ingredient in Coca-Cola\u2019s products and is essential for manufacturing processes. Scarcity of water due to overexploitation, pollution, or climate change can lead to increased costs and operational constraints. For instance, if water sources become scarce or contaminated, Coca-Cola may face higher costs for water procurement and treatment. This could also limit production capacity and affect the company\u2019s ability to meet market demand. Furthermore, poor water quality can lead to reputational damage if consumers perceive Coca-Cola\u2019s products as less safe or environmentally responsible. To address these challenges, Coca-Cola must invest in sustainable water management practices, support water conservation initiatives, and ensure the quality of its water sources.","question_type":"Risk","page_number":"25","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_markdown_without_headers":"and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_html_without_headers":"and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n"}
{"QID":"q_Ri031","Question":"How might risks related to agricultural commodity availability and cost affect The Coca-Cola Company?","ground_truth_answer":"Risks related to agricultural commodity availability and cost can significantly affect The Coca-Cola Company. The company relies on various agricultural commodities, such as sugarcane, corn, and coffee, for its products. Increased demand for these commodities, combined with factors like climate change and regulatory pressures, can lead to higher costs and supply chain disruptions. For instance, decreased agricultural productivity due to changing weather patterns or regulatory changes can increase the cost of raw materials, impacting Coca-Cola\u2019s profit margins.","question_type":"Risk","page_number":"25","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_markdown_without_headers":"and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n","context_html_without_headers":"and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n"}
{"QID":"q_Ri032","Question":"How could adverse weather conditions affect The Coca-Cola Company\u2019s sales and profitability?","ground_truth_answer":"Adverse weather conditions can significantly impact The Coca-Cola Company\u2019s sales and profitability. Unusually cold or rainy weather during peak selling seasons, such as summer, can reduce consumer demand for Coca-Cola\u2019s beverages. For instance, cooler weather may lead to decreased consumption of cold drinks, resulting in lower sales volume. This decline in sales can adversely affect revenue and profitability during such periods.","question_type":"Risk","page_number":"26","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 26: production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n","context_markdown_without_headers":"production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 26: production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n","context_html_without_headers":"production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n"}
{"QID":"q_Ri033","Question":"What are the potential consequences for The Coca-Cola Company in the event of a major data breach?","ground_truth_answer":"A major data breach could have severe consequences for The Coca-Cola Company. Financially, the company may face significant costs related to data breach response, including forensic investigations, legal fees, and regulatory fines. Moreover, a breach involving sensitive customer or employee data could lead to lawsuits and increased liability. Reputationally, a data breach can undermine consumer trust and damage Coca-Cola\u2019s brand image, potentially leading to reduced customer loyalty and loss of business. The company may also experience operational disruptions and have to invest in enhanced security measures to prevent future breaches. To mitigate these risks, Coca-Cola should prioritize data protection, conduct regular security assessments, and develop a comprehensive incident response plan.","question_type":"Risk","page_number":"23, 24","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 23: system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_markdown_without_headers":"system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 23: system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_without_headers":"system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n, for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n"}
{"QID":"q_Ri034","Question":"How could the need to comply with evolving regulations impact The Coca-Cola Company\u2019s operations and financial performance?","ground_truth_answer":"The need to comply with evolving regulations could impact The Coca-Cola Company's operations and financial performance by leading to higher compliance costs, higher capital expenditures, and higher production costs. Changes in laws or their interpretations, enforcement priorities, and differing regulations across markets where products are made, manufactured, distributed, or sold could necessitate reformulating certain products, resulting in adverse effects on the business. Furthermore, increased regulations aimed at limiting carbon dioxide and greenhouse gas emissions, discouraging plastic materials, or addressing water scarcity and wastewater discharge could lead to additional financial obligations for The Coca-Cola Company and its bottling partners. This may affect profitability, impede production, distribution, marketing, and sales, and potentially reduce net operating revenues. Non-compliance with these laws could also result in litigation, penalties, and reputational damage, further harming profitability.","question_type":"Risk","page_number":"24","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_markdown_without_headers":"for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 24: for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n","context_html_without_headers":"for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. Some laws and regulations also impose obligations regarding cross-border data transfers of personal data. These requirements with respect to personal data have subjected and may continue in the future to subject the Company to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information technology and security systems, policies, procedures and practices. In addition, some countries are considering or have enacted data localization or residency laws, which require that certain data be maintained, stored and\/or processed within their country of origin. Maintaining local data centers in individual countries could increase our operating costs significantly. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we have implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage and transmission of personal data. Our bottling partners, distributors, joint venture partners and suppliers have privacy and security controls and policies over personal data that differ in scope and complexity from our policies, procedures and practices, and we may also experience secondary contractual, regulatory, financial and reputational harm as a result of improper disclosure of personal data by our bottling partners. Unauthorized access to or improper disclosure of personal data in violation of privacy and data protection laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including penalties, fines and investigations), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and\/or criminal prosecution, all of which could negatively affect our business and operating results. We have incurred, and will continue to incur, expenses to comply with privacy and data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Increased regulation of data collection, use, disclosure and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.\n\nRISKS RELATED TO ENVIRONMENTAL AND SOCIAL FACTORS\n\nOur business is subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks.\nWe have established and publicly announced sustainability goals and aspirations. We also report progress related to the circular economy of packaging; water stewardship; climate; portfolio; sustainable agriculture; human and workplace rights and diversity, equity and inclusion. These goals reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve our sustainability goals and targets and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks and is dependent on the actions of our bottling partners, suppliers and other third parties, some of which are outside of our control. If we are unable to meet our sustainability goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for sustainability issues, our reputation, and therefore our ability to sell products, could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability. If, as a result of their assessment of our sustainability practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our Company. At the same time, there also exists \"anti-ESG\" sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, product boycotts, lawsuits or market access restrictions from these parties regarding our sustainability initiatives. \nIncreasing focus on sustainability matters has resulted in, and is expected to continue to result in, evolving legal and regulatory requirements, including mandatory due diligence, disclosure and reporting requirements, as well as a variety of voluntary disclosure frameworks and standards. We have incurred, and are likely to continue to incur, increased costs complying with such standards and regulations, particularly given the lack of convergence among standards. In addition, our processes and controls may not always comply with evolving standards and regulations for identifying, measuring and reporting sustainability metrics; our interpretation of reporting standards and regulations may differ from those of others; and such standards and regulations may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. In addition, methodologies for reporting our data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations (including from acquisitions and divestitures), and other changes in circumstances. Any failure or perceived failure, whether or not valid, to pursue or fulfill our sustainability goals and aspirations or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could increase the risk of litigation or result in regulatory actions.\nIncreasing concerns about the environmental impact of plastic bottles and other packaging materials could result in reduced demand for our beverage products and increased production and distribution costs.\nThere are increasing concerns among consumers, governments and other stakeholders about the damaging impact of the accumulation of plastic bottles and other packaging materials in the environment, particularly in the world's waterways, lakes \n24\n\n\n\n\n"}
{"QID":"q_Ri035","Question":"How might increased regulatory and compliance costs affect The Coca-Cola Company's financial performance?","ground_truth_answer":"Increased regulatory and compliance costs can significantly affect The Coca-Cola Company's financial performance. As regulations evolve, particularly those related to sustainability, environmental impact, and data protection, Coca-Cola may incur higher expenses to ensure compliance. These costs can include investments in new technologies, changes to operational processes, and additional reporting requirements. Such expenditures can reduce profit margins and impact overall profitability.","question_type":"Risk","page_number":"21","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 21: Failure to adequately protect, or disputes relating to, trademarks, formulas and other intellectual property rights could harm our business.\nOur trademarks, formulas and other intellectual property rights (refer to the heading \"Patents, Copyrights, Trade Secrets and Trademarks\" in Part I, \"Item 1. Business\" of this report) are essential to the success of our business. We cannot be certain that the legal steps we are taking around the world are sufficient to protect our intellectual property rights or that, notwithstanding legal protection, others do not or will not infringe or misappropriate our intellectual property rights. If we fail to adequately protect our intellectual property rights, or if changes in laws diminish or remove the current legal protections available to them, the competitiveness of our products may be eroded and our business could suffer. In addition, we could come into conflict with third parties over intellectual property rights, which could result in disruptive and expensive litigation. Any of the foregoing could harm our business. \nChanges in, or failure to comply with, the laws and regulations applicable to our products or our business operations could increase our costs or reduce our net operating revenues.\nOur Company is subject to various laws and regulations in the countries and territories throughout the world in which we do business, including laws and regulations relating to competition, distribution and pricing, product safety, product design, advertising and labeling, container deposits, recycling, recycled content, product stewardship, the protection of the environment, occupational health and safety, employment and labor practices, machine learning and artificial intelligence, personal data protection and privacy, and data security. For additional information regarding laws and regulations applicable to our business, refer to the heading \"Governmental Regulation\" set forth in Part I, \"Item 1. Business\" of this report. Changes in applicable laws or regulations or evolving interpretations thereof, changes in enforcement priorities of regulators, and differing or competing regulations and standards across the markets where our products or raw materials are made, manufactured, distributed or sold, have in the past resulted in, and could continue to result in, higher compliance costs, higher capital expenditures and higher production costs, or make it necessary for us to reformulate certain of our products, resulting in adverse effects on our business. In addition, increased or additional regulations to limit and\/or report carbon dioxide and other greenhouse gas emissions as a result of concern over climate change; to discourage the use of plastic materials, including regulations relating to recovery and\/or disposal of plastic bottles and other packaging materials due to environmental concerns; to limit or impose additional costs on commercial water use due to local water scarcity concerns; or to address wastewater discharge to protect local bodies of water, have in the past and could continue to result in increased compliance costs, capital expenditures and other financial obligations for us and our bottling partners, which could affect our profitability, or may impede the production, distribution, marketing and sale of our products, which could affect our net operating revenues. Failure to comply with various laws and regulations (or allegations thereof), such as U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and the Office of Foreign Assets Control trade sanction regulations and anti-boycott regulations; antitrust and competition laws; anti-modern slavery laws; anti-bribery and anti-corruption laws; data privacy laws, including the European Union's General Data Protection Regulation and China's Personal Information Protection Law; tax laws and regulations; and a variety of other applicable local, national and multinational regulations and laws, could result in litigation or criminal or civil enforcement actions, including voluntary and involuntary document requests, the assessment of damages, the imposition of penalties, the suspension of production or distribution, costly changes to equipment or processes due to required corrective action, or the cessation or interruption of operations at our or our bottling partners' facilities, as well as damage to our or our bottling partners' image and reputation, all of which could harm our or our bottling partners' profitability. \n\nRISKS RELATED TO FINANCE, ACCOUNTING AND INVESTMENTS\n\nFluctuations in foreign currency exchange rates could have a material adverse effect on our financial results.\nWe earn revenues, pay expenses, own assets and incur liabilities in countries using many currencies other than the U.S. dollar. In 2023, we derived $29.2 billion of net operating revenues from operations outside the United States. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other currencies affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. Global events, including political instability, international conflicts, trade disputes, economic sanctions, inflation, increasing interest rates and emerging market volatility, and the resulting uncertainties, may cause currencies to fluctuate in relation to the U.S. dollar. Due to the geographic diversity of our operations, weakness in some currencies may be offset by strength in other currencies over time. We also use derivative financial instruments to further reduce our net exposure to foreign currency exchange rate fluctuations. However, fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies or the currencies of large developing countries, could materially affect our financial results. \nIf interest rates increase, our net income could be negatively affected.\nWe maintain levels of debt that we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital. We use debt financing to lower our cost of capital, which increases our return on shareowners' equity. This exposes us \n21\n\n\n\n\n","context_markdown_without_headers":"Failure to adequately protect, or disputes relating to, trademarks, formulas and other intellectual property rights could harm our business.\nOur trademarks, formulas and other intellectual property rights (refer to the heading \"Patents, Copyrights, Trade Secrets and Trademarks\" in Part I, \"Item 1. Business\" of this report) are essential to the success of our business. We cannot be certain that the legal steps we are taking around the world are sufficient to protect our intellectual property rights or that, notwithstanding legal protection, others do not or will not infringe or misappropriate our intellectual property rights. If we fail to adequately protect our intellectual property rights, or if changes in laws diminish or remove the current legal protections available to them, the competitiveness of our products may be eroded and our business could suffer. In addition, we could come into conflict with third parties over intellectual property rights, which could result in disruptive and expensive litigation. Any of the foregoing could harm our business. \nChanges in, or failure to comply with, the laws and regulations applicable to our products or our business operations could increase our costs or reduce our net operating revenues.\nOur Company is subject to various laws and regulations in the countries and territories throughout the world in which we do business, including laws and regulations relating to competition, distribution and pricing, product safety, product design, advertising and labeling, container deposits, recycling, recycled content, product stewardship, the protection of the environment, occupational health and safety, employment and labor practices, machine learning and artificial intelligence, personal data protection and privacy, and data security. For additional information regarding laws and regulations applicable to our business, refer to the heading \"Governmental Regulation\" set forth in Part I, \"Item 1. Business\" of this report. Changes in applicable laws or regulations or evolving interpretations thereof, changes in enforcement priorities of regulators, and differing or competing regulations and standards across the markets where our products or raw materials are made, manufactured, distributed or sold, have in the past resulted in, and could continue to result in, higher compliance costs, higher capital expenditures and higher production costs, or make it necessary for us to reformulate certain of our products, resulting in adverse effects on our business. In addition, increased or additional regulations to limit and\/or report carbon dioxide and other greenhouse gas emissions as a result of concern over climate change; to discourage the use of plastic materials, including regulations relating to recovery and\/or disposal of plastic bottles and other packaging materials due to environmental concerns; to limit or impose additional costs on commercial water use due to local water scarcity concerns; or to address wastewater discharge to protect local bodies of water, have in the past and could continue to result in increased compliance costs, capital expenditures and other financial obligations for us and our bottling partners, which could affect our profitability, or may impede the production, distribution, marketing and sale of our products, which could affect our net operating revenues. Failure to comply with various laws and regulations (or allegations thereof), such as U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and the Office of Foreign Assets Control trade sanction regulations and anti-boycott regulations; antitrust and competition laws; anti-modern slavery laws; anti-bribery and anti-corruption laws; data privacy laws, including the European Union's General Data Protection Regulation and China's Personal Information Protection Law; tax laws and regulations; and a variety of other applicable local, national and multinational regulations and laws, could result in litigation or criminal or civil enforcement actions, including voluntary and involuntary document requests, the assessment of damages, the imposition of penalties, the suspension of production or distribution, costly changes to equipment or processes due to required corrective action, or the cessation or interruption of operations at our or our bottling partners' facilities, as well as damage to our or our bottling partners' image and reputation, all of which could harm our or our bottling partners' profitability. \n\nRISKS RELATED TO FINANCE, ACCOUNTING AND INVESTMENTS\n\nFluctuations in foreign currency exchange rates could have a material adverse effect on our financial results.\nWe earn revenues, pay expenses, own assets and incur liabilities in countries using many currencies other than the U.S. dollar. In 2023, we derived $29.2 billion of net operating revenues from operations outside the United States. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other currencies affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. Global events, including political instability, international conflicts, trade disputes, economic sanctions, inflation, increasing interest rates and emerging market volatility, and the resulting uncertainties, may cause currencies to fluctuate in relation to the U.S. dollar. Due to the geographic diversity of our operations, weakness in some currencies may be offset by strength in other currencies over time. We also use derivative financial instruments to further reduce our net exposure to foreign currency exchange rate fluctuations. However, fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies or the currencies of large developing countries, could materially affect our financial results. \nIf interest rates increase, our net income could be negatively affected.\nWe maintain levels of debt that we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital. We use debt financing to lower our cost of capital, which increases our return on shareowners' equity. This exposes us \n21\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 21: Failure to adequately protect, or disputes relating to, trademarks, formulas and other intellectual property rights could harm our business.\nOur trademarks, formulas and other intellectual property rights (refer to the heading \"Patents, Copyrights, Trade Secrets and Trademarks\" in Part I, \"Item 1. Business\" of this report) are essential to the success of our business. We cannot be certain that the legal steps we are taking around the world are sufficient to protect our intellectual property rights or that, notwithstanding legal protection, others do not or will not infringe or misappropriate our intellectual property rights. If we fail to adequately protect our intellectual property rights, or if changes in laws diminish or remove the current legal protections available to them, the competitiveness of our products may be eroded and our business could suffer. In addition, we could come into conflict with third parties over intellectual property rights, which could result in disruptive and expensive litigation. Any of the foregoing could harm our business. \nChanges in, or failure to comply with, the laws and regulations applicable to our products or our business operations could increase our costs or reduce our net operating revenues.\nOur Company is subject to various laws and regulations in the countries and territories throughout the world in which we do business, including laws and regulations relating to competition, distribution and pricing, product safety, product design, advertising and labeling, container deposits, recycling, recycled content, product stewardship, the protection of the environment, occupational health and safety, employment and labor practices, machine learning and artificial intelligence, personal data protection and privacy, and data security. For additional information regarding laws and regulations applicable to our business, refer to the heading \"Governmental Regulation\" set forth in Part I, \"Item 1. Business\" of this report. Changes in applicable laws or regulations or evolving interpretations thereof, changes in enforcement priorities of regulators, and differing or competing regulations and standards across the markets where our products or raw materials are made, manufactured, distributed or sold, have in the past resulted in, and could continue to result in, higher compliance costs, higher capital expenditures and higher production costs, or make it necessary for us to reformulate certain of our products, resulting in adverse effects on our business. In addition, increased or additional regulations to limit and\/or report carbon dioxide and other greenhouse gas emissions as a result of concern over climate change; to discourage the use of plastic materials, including regulations relating to recovery and\/or disposal of plastic bottles and other packaging materials due to environmental concerns; to limit or impose additional costs on commercial water use due to local water scarcity concerns; or to address wastewater discharge to protect local bodies of water, have in the past and could continue to result in increased compliance costs, capital expenditures and other financial obligations for us and our bottling partners, which could affect our profitability, or may impede the production, distribution, marketing and sale of our products, which could affect our net operating revenues. Failure to comply with various laws and regulations (or allegations thereof), such as U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and the Office of Foreign Assets Control trade sanction regulations and anti-boycott regulations; antitrust and competition laws; anti-modern slavery laws; anti-bribery and anti-corruption laws; data privacy laws, including the European Union's General Data Protection Regulation and China's Personal Information Protection Law; tax laws and regulations; and a variety of other applicable local, national and multinational regulations and laws, could result in litigation or criminal or civil enforcement actions, including voluntary and involuntary document requests, the assessment of damages, the imposition of penalties, the suspension of production or distribution, costly changes to equipment or processes due to required corrective action, or the cessation or interruption of operations at our or our bottling partners' facilities, as well as damage to our or our bottling partners' image and reputation, all of which could harm our or our bottling partners' profitability. \n\nRISKS RELATED TO FINANCE, ACCOUNTING AND INVESTMENTS\n\nFluctuations in foreign currency exchange rates could have a material adverse effect on our financial results.\nWe earn revenues, pay expenses, own assets and incur liabilities in countries using many currencies other than the U.S. dollar. In 2023, we derived $29.2 billion of net operating revenues from operations outside the United States. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other currencies affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. Global events, including political instability, international conflicts, trade disputes, economic sanctions, inflation, increasing interest rates and emerging market volatility, and the resulting uncertainties, may cause currencies to fluctuate in relation to the U.S. dollar. Due to the geographic diversity of our operations, weakness in some currencies may be offset by strength in other currencies over time. We also use derivative financial instruments to further reduce our net exposure to foreign currency exchange rate fluctuations. However, fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies or the currencies of large developing countries, could materially affect our financial results. \nIf interest rates increase, our net income could be negatively affected.\nWe maintain levels of debt that we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital. We use debt financing to lower our cost of capital, which increases our return on shareowners' equity. This exposes us \n21\n\n\n\n\n","context_html_without_headers":"Failure to adequately protect, or disputes relating to, trademarks, formulas and other intellectual property rights could harm our business.\nOur trademarks, formulas and other intellectual property rights (refer to the heading \"Patents, Copyrights, Trade Secrets and Trademarks\" in Part I, \"Item 1. Business\" of this report) are essential to the success of our business. We cannot be certain that the legal steps we are taking around the world are sufficient to protect our intellectual property rights or that, notwithstanding legal protection, others do not or will not infringe or misappropriate our intellectual property rights. If we fail to adequately protect our intellectual property rights, or if changes in laws diminish or remove the current legal protections available to them, the competitiveness of our products may be eroded and our business could suffer. In addition, we could come into conflict with third parties over intellectual property rights, which could result in disruptive and expensive litigation. Any of the foregoing could harm our business. \nChanges in, or failure to comply with, the laws and regulations applicable to our products or our business operations could increase our costs or reduce our net operating revenues.\nOur Company is subject to various laws and regulations in the countries and territories throughout the world in which we do business, including laws and regulations relating to competition, distribution and pricing, product safety, product design, advertising and labeling, container deposits, recycling, recycled content, product stewardship, the protection of the environment, occupational health and safety, employment and labor practices, machine learning and artificial intelligence, personal data protection and privacy, and data security. For additional information regarding laws and regulations applicable to our business, refer to the heading \"Governmental Regulation\" set forth in Part I, \"Item 1. Business\" of this report. Changes in applicable laws or regulations or evolving interpretations thereof, changes in enforcement priorities of regulators, and differing or competing regulations and standards across the markets where our products or raw materials are made, manufactured, distributed or sold, have in the past resulted in, and could continue to result in, higher compliance costs, higher capital expenditures and higher production costs, or make it necessary for us to reformulate certain of our products, resulting in adverse effects on our business. In addition, increased or additional regulations to limit and\/or report carbon dioxide and other greenhouse gas emissions as a result of concern over climate change; to discourage the use of plastic materials, including regulations relating to recovery and\/or disposal of plastic bottles and other packaging materials due to environmental concerns; to limit or impose additional costs on commercial water use due to local water scarcity concerns; or to address wastewater discharge to protect local bodies of water, have in the past and could continue to result in increased compliance costs, capital expenditures and other financial obligations for us and our bottling partners, which could affect our profitability, or may impede the production, distribution, marketing and sale of our products, which could affect our net operating revenues. Failure to comply with various laws and regulations (or allegations thereof), such as U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and the Office of Foreign Assets Control trade sanction regulations and anti-boycott regulations; antitrust and competition laws; anti-modern slavery laws; anti-bribery and anti-corruption laws; data privacy laws, including the European Union's General Data Protection Regulation and China's Personal Information Protection Law; tax laws and regulations; and a variety of other applicable local, national and multinational regulations and laws, could result in litigation or criminal or civil enforcement actions, including voluntary and involuntary document requests, the assessment of damages, the imposition of penalties, the suspension of production or distribution, costly changes to equipment or processes due to required corrective action, or the cessation or interruption of operations at our or our bottling partners' facilities, as well as damage to our or our bottling partners' image and reputation, all of which could harm our or our bottling partners' profitability. \n\nRISKS RELATED TO FINANCE, ACCOUNTING AND INVESTMENTS\n\nFluctuations in foreign currency exchange rates could have a material adverse effect on our financial results.\nWe earn revenues, pay expenses, own assets and incur liabilities in countries using many currencies other than the U.S. dollar. In 2023, we derived $29.2 billion of net operating revenues from operations outside the United States. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other currencies affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. Global events, including political instability, international conflicts, trade disputes, economic sanctions, inflation, increasing interest rates and emerging market volatility, and the resulting uncertainties, may cause currencies to fluctuate in relation to the U.S. dollar. Due to the geographic diversity of our operations, weakness in some currencies may be offset by strength in other currencies over time. We also use derivative financial instruments to further reduce our net exposure to foreign currency exchange rate fluctuations. However, fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies or the currencies of large developing countries, could materially affect our financial results. \nIf interest rates increase, our net income could be negatively affected.\nWe maintain levels of debt that we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital. We use debt financing to lower our cost of capital, which increases our return on shareowners' equity. This exposes us \n21\n\n\n\n\n"}
{"QID":"q_Ri036","Question":"How might the risk of product recalls affect The Coca-Cola Company's reputation and financial stability?","ground_truth_answer":"The risk of product recalls can have adverse effects on The Coca-Cola Company's reputation and financial stability. If a product is found to be unsafe or defective, Coca-Cola may need to recall the affected products from the market, leading to substantial costs related to logistics, compensation, and damage control.","question_type":"Risk","page_number":"16","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 16: benefits needs of our employees. If we are unable to renew collective bargaining agreements on satisfactory terms, our labor costs could increase, which could affect our profit margins. In addition, many of our bottling partners' employees are represented by labor unions. Strikes, work stoppages or other forms of labor unrest at any of our major manufacturing facilities or at our bottling operations or our major bottlers' plants could impair our ability to supply concentrates and syrups to our bottling partners or our bottlers' ability to supply finished beverages to customers, which could reduce our net operating revenues and could expose us to customer claims. Furthermore, from time to time, we and our bottling partners restructure manufacturing and other operations to improve productivity, which may have negative impacts on employee morale and work performance, result in escalation of grievances and adversely affect the negotiation of collective bargaining agreements. If these labor relations are not effectively managed at the local level, they could escalate in the form of corporate campaigns supported by the labor organizations and could negatively affect our Company's overall reputation and brand image, which in turn could have a negative impact on our products' acceptance by consumers.\n\nRISKS RELATED TO CONSUMER DEMAND FOR OUR PRODUCTS\n\nObesity and other health-related concerns may reduce demand for some of our products.\nThere is concern among consumers, public health professionals and government agencies about the health problems associated with obesity. Ongoing public concern about obesity; other health-related public concerns surrounding consumption of sweetened beverages; the effects or perceived effects of the usage of weight-loss drugs on consumption patterns; potential new or increased taxes on sweetened beverages by government entities to reduce consumption or to raise revenue; additional governmental regulations concerning the advertising, marketing, labeling, packaging or sale of our sweetened beverages; and negative publicity resulting from actual or threatened legal actions against us or other companies in our industry relating to the marketing, labeling or sale of sweetened beverages may reduce demand for, or increase the cost of, our sweetened beverages, which could adversely affect our profitability.\nIf we do not address evolving consumer product and shopping preferences, our business could suffer.\nConsumer product preferences have evolved and continue to evolve as a result of, among other things, health, wellness and nutrition considerations, including concerns regarding caloric intake associated with sweetened beverages and the perceived undesirability of artificial ingredients; concerns regarding the perceived health effects of, or location of origin of, ingredients, raw materials or substances in our products or packaging, including due to the results of third-party studies (whether or not scientifically valid); shifting consumer demographics; changes in consumer tastes and needs coupled with a rapid expansion of beverage options and delivery methods; changes in consumer lifestyles; concerns regarding the environmental, social and sustainability impact of ingredient sources and the product manufacturing process; consumer emphasis on transparency related to ingredients we use in our products and collection and recyclability of, and amount of recycled content contained in, our packaging containers and other materials; concerns about the health and welfare of animals in our dairy supply chain; and competitive product and pricing pressures. In addition, in many of our markets, shopping patterns are being affected by the digital evolution, with consumers rapidly embracing shopping by way of mobile device applications, e-commerce retailers and e-commerce websites or platforms. If we fail to address changes in consumer product and shopping preferences, do not successfully anticipate and prepare for future changes in such preferences, or are ineffective or slow in developing and implementing appropriate digital transformation initiatives, our share of sales, revenue growth and overall financial results could be negatively affected.\nProduct safety and quality concerns could negatively affect our business.\nOur success depends in large part on our ability to maintain consumer confidence in the safety and quality of all of our products. We have rigorous product safety and quality standards, which we expect our operations as well as our bottling partners to meet. However, despite our strong commitment to product safety and quality, we or our bottling partners at times have not met, and may not always meet, these standards, particularly as we expand our product offerings through innovation or acquisitions into beverage categories, such as value-added dairy and plant-based beverages, that are beyond our traditional range of beverage products. We and our bottling partners have had, and may in the future need, to recall products if they become contaminated or adulterated by any means or if they are mislabeled. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time, and could also subject us to product liability claims and negative publicity, all of which could cause our business to suffer.\nPublic debate and concern about perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials, may reduce demand for our beverage products or result in additional governmental regulation.\nPublic debate and concern about perceived negative health consequences of certain ingredients in our beverage products, such as synthetic colors, non-nutritive sweeteners and biotechnology-derived substances; substances that are present in our beverage products naturally or that occur as a result of the manufacturing process, such as 4-methylimidazole (\"4-MEI\"), a chemical \n16\n\n\n\n\n","context_markdown_without_headers":"benefits needs of our employees. If we are unable to renew collective bargaining agreements on satisfactory terms, our labor costs could increase, which could affect our profit margins. In addition, many of our bottling partners' employees are represented by labor unions. Strikes, work stoppages or other forms of labor unrest at any of our major manufacturing facilities or at our bottling operations or our major bottlers' plants could impair our ability to supply concentrates and syrups to our bottling partners or our bottlers' ability to supply finished beverages to customers, which could reduce our net operating revenues and could expose us to customer claims. Furthermore, from time to time, we and our bottling partners restructure manufacturing and other operations to improve productivity, which may have negative impacts on employee morale and work performance, result in escalation of grievances and adversely affect the negotiation of collective bargaining agreements. If these labor relations are not effectively managed at the local level, they could escalate in the form of corporate campaigns supported by the labor organizations and could negatively affect our Company's overall reputation and brand image, which in turn could have a negative impact on our products' acceptance by consumers.\n\nRISKS RELATED TO CONSUMER DEMAND FOR OUR PRODUCTS\n\nObesity and other health-related concerns may reduce demand for some of our products.\nThere is concern among consumers, public health professionals and government agencies about the health problems associated with obesity. Ongoing public concern about obesity; other health-related public concerns surrounding consumption of sweetened beverages; the effects or perceived effects of the usage of weight-loss drugs on consumption patterns; potential new or increased taxes on sweetened beverages by government entities to reduce consumption or to raise revenue; additional governmental regulations concerning the advertising, marketing, labeling, packaging or sale of our sweetened beverages; and negative publicity resulting from actual or threatened legal actions against us or other companies in our industry relating to the marketing, labeling or sale of sweetened beverages may reduce demand for, or increase the cost of, our sweetened beverages, which could adversely affect our profitability.\nIf we do not address evolving consumer product and shopping preferences, our business could suffer.\nConsumer product preferences have evolved and continue to evolve as a result of, among other things, health, wellness and nutrition considerations, including concerns regarding caloric intake associated with sweetened beverages and the perceived undesirability of artificial ingredients; concerns regarding the perceived health effects of, or location of origin of, ingredients, raw materials or substances in our products or packaging, including due to the results of third-party studies (whether or not scientifically valid); shifting consumer demographics; changes in consumer tastes and needs coupled with a rapid expansion of beverage options and delivery methods; changes in consumer lifestyles; concerns regarding the environmental, social and sustainability impact of ingredient sources and the product manufacturing process; consumer emphasis on transparency related to ingredients we use in our products and collection and recyclability of, and amount of recycled content contained in, our packaging containers and other materials; concerns about the health and welfare of animals in our dairy supply chain; and competitive product and pricing pressures. In addition, in many of our markets, shopping patterns are being affected by the digital evolution, with consumers rapidly embracing shopping by way of mobile device applications, e-commerce retailers and e-commerce websites or platforms. If we fail to address changes in consumer product and shopping preferences, do not successfully anticipate and prepare for future changes in such preferences, or are ineffective or slow in developing and implementing appropriate digital transformation initiatives, our share of sales, revenue growth and overall financial results could be negatively affected.\nProduct safety and quality concerns could negatively affect our business.\nOur success depends in large part on our ability to maintain consumer confidence in the safety and quality of all of our products. We have rigorous product safety and quality standards, which we expect our operations as well as our bottling partners to meet. However, despite our strong commitment to product safety and quality, we or our bottling partners at times have not met, and may not always meet, these standards, particularly as we expand our product offerings through innovation or acquisitions into beverage categories, such as value-added dairy and plant-based beverages, that are beyond our traditional range of beverage products. We and our bottling partners have had, and may in the future need, to recall products if they become contaminated or adulterated by any means or if they are mislabeled. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time, and could also subject us to product liability claims and negative publicity, all of which could cause our business to suffer.\nPublic debate and concern about perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials, may reduce demand for our beverage products or result in additional governmental regulation.\nPublic debate and concern about perceived negative health consequences of certain ingredients in our beverage products, such as synthetic colors, non-nutritive sweeteners and biotechnology-derived substances; substances that are present in our beverage products naturally or that occur as a result of the manufacturing process, such as 4-methylimidazole (\"4-MEI\"), a chemical \n16\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 16: benefits needs of our employees. If we are unable to renew collective bargaining agreements on satisfactory terms, our labor costs could increase, which could affect our profit margins. In addition, many of our bottling partners' employees are represented by labor unions. Strikes, work stoppages or other forms of labor unrest at any of our major manufacturing facilities or at our bottling operations or our major bottlers' plants could impair our ability to supply concentrates and syrups to our bottling partners or our bottlers' ability to supply finished beverages to customers, which could reduce our net operating revenues and could expose us to customer claims. Furthermore, from time to time, we and our bottling partners restructure manufacturing and other operations to improve productivity, which may have negative impacts on employee morale and work performance, result in escalation of grievances and adversely affect the negotiation of collective bargaining agreements. If these labor relations are not effectively managed at the local level, they could escalate in the form of corporate campaigns supported by the labor organizations and could negatively affect our Company's overall reputation and brand image, which in turn could have a negative impact on our products' acceptance by consumers.\n\nRISKS RELATED TO CONSUMER DEMAND FOR OUR PRODUCTS\n\nObesity and other health-related concerns may reduce demand for some of our products.\nThere is concern among consumers, public health professionals and government agencies about the health problems associated with obesity. Ongoing public concern about obesity; other health-related public concerns surrounding consumption of sweetened beverages; the effects or perceived effects of the usage of weight-loss drugs on consumption patterns; potential new or increased taxes on sweetened beverages by government entities to reduce consumption or to raise revenue; additional governmental regulations concerning the advertising, marketing, labeling, packaging or sale of our sweetened beverages; and negative publicity resulting from actual or threatened legal actions against us or other companies in our industry relating to the marketing, labeling or sale of sweetened beverages may reduce demand for, or increase the cost of, our sweetened beverages, which could adversely affect our profitability.\nIf we do not address evolving consumer product and shopping preferences, our business could suffer.\nConsumer product preferences have evolved and continue to evolve as a result of, among other things, health, wellness and nutrition considerations, including concerns regarding caloric intake associated with sweetened beverages and the perceived undesirability of artificial ingredients; concerns regarding the perceived health effects of, or location of origin of, ingredients, raw materials or substances in our products or packaging, including due to the results of third-party studies (whether or not scientifically valid); shifting consumer demographics; changes in consumer tastes and needs coupled with a rapid expansion of beverage options and delivery methods; changes in consumer lifestyles; concerns regarding the environmental, social and sustainability impact of ingredient sources and the product manufacturing process; consumer emphasis on transparency related to ingredients we use in our products and collection and recyclability of, and amount of recycled content contained in, our packaging containers and other materials; concerns about the health and welfare of animals in our dairy supply chain; and competitive product and pricing pressures. In addition, in many of our markets, shopping patterns are being affected by the digital evolution, with consumers rapidly embracing shopping by way of mobile device applications, e-commerce retailers and e-commerce websites or platforms. If we fail to address changes in consumer product and shopping preferences, do not successfully anticipate and prepare for future changes in such preferences, or are ineffective or slow in developing and implementing appropriate digital transformation initiatives, our share of sales, revenue growth and overall financial results could be negatively affected.\nProduct safety and quality concerns could negatively affect our business.\nOur success depends in large part on our ability to maintain consumer confidence in the safety and quality of all of our products. We have rigorous product safety and quality standards, which we expect our operations as well as our bottling partners to meet. However, despite our strong commitment to product safety and quality, we or our bottling partners at times have not met, and may not always meet, these standards, particularly as we expand our product offerings through innovation or acquisitions into beverage categories, such as value-added dairy and plant-based beverages, that are beyond our traditional range of beverage products. We and our bottling partners have had, and may in the future need, to recall products if they become contaminated or adulterated by any means or if they are mislabeled. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time, and could also subject us to product liability claims and negative publicity, all of which could cause our business to suffer.\nPublic debate and concern about perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials, may reduce demand for our beverage products or result in additional governmental regulation.\nPublic debate and concern about perceived negative health consequences of certain ingredients in our beverage products, such as synthetic colors, non-nutritive sweeteners and biotechnology-derived substances; substances that are present in our beverage products naturally or that occur as a result of the manufacturing process, such as 4-methylimidazole (\"4-MEI\"), a chemical \n16\n\n\n\n\n","context_html_without_headers":"benefits needs of our employees. If we are unable to renew collective bargaining agreements on satisfactory terms, our labor costs could increase, which could affect our profit margins. In addition, many of our bottling partners' employees are represented by labor unions. Strikes, work stoppages or other forms of labor unrest at any of our major manufacturing facilities or at our bottling operations or our major bottlers' plants could impair our ability to supply concentrates and syrups to our bottling partners or our bottlers' ability to supply finished beverages to customers, which could reduce our net operating revenues and could expose us to customer claims. Furthermore, from time to time, we and our bottling partners restructure manufacturing and other operations to improve productivity, which may have negative impacts on employee morale and work performance, result in escalation of grievances and adversely affect the negotiation of collective bargaining agreements. If these labor relations are not effectively managed at the local level, they could escalate in the form of corporate campaigns supported by the labor organizations and could negatively affect our Company's overall reputation and brand image, which in turn could have a negative impact on our products' acceptance by consumers.\n\nRISKS RELATED TO CONSUMER DEMAND FOR OUR PRODUCTS\n\nObesity and other health-related concerns may reduce demand for some of our products.\nThere is concern among consumers, public health professionals and government agencies about the health problems associated with obesity. Ongoing public concern about obesity; other health-related public concerns surrounding consumption of sweetened beverages; the effects or perceived effects of the usage of weight-loss drugs on consumption patterns; potential new or increased taxes on sweetened beverages by government entities to reduce consumption or to raise revenue; additional governmental regulations concerning the advertising, marketing, labeling, packaging or sale of our sweetened beverages; and negative publicity resulting from actual or threatened legal actions against us or other companies in our industry relating to the marketing, labeling or sale of sweetened beverages may reduce demand for, or increase the cost of, our sweetened beverages, which could adversely affect our profitability.\nIf we do not address evolving consumer product and shopping preferences, our business could suffer.\nConsumer product preferences have evolved and continue to evolve as a result of, among other things, health, wellness and nutrition considerations, including concerns regarding caloric intake associated with sweetened beverages and the perceived undesirability of artificial ingredients; concerns regarding the perceived health effects of, or location of origin of, ingredients, raw materials or substances in our products or packaging, including due to the results of third-party studies (whether or not scientifically valid); shifting consumer demographics; changes in consumer tastes and needs coupled with a rapid expansion of beverage options and delivery methods; changes in consumer lifestyles; concerns regarding the environmental, social and sustainability impact of ingredient sources and the product manufacturing process; consumer emphasis on transparency related to ingredients we use in our products and collection and recyclability of, and amount of recycled content contained in, our packaging containers and other materials; concerns about the health and welfare of animals in our dairy supply chain; and competitive product and pricing pressures. In addition, in many of our markets, shopping patterns are being affected by the digital evolution, with consumers rapidly embracing shopping by way of mobile device applications, e-commerce retailers and e-commerce websites or platforms. If we fail to address changes in consumer product and shopping preferences, do not successfully anticipate and prepare for future changes in such preferences, or are ineffective or slow in developing and implementing appropriate digital transformation initiatives, our share of sales, revenue growth and overall financial results could be negatively affected.\nProduct safety and quality concerns could negatively affect our business.\nOur success depends in large part on our ability to maintain consumer confidence in the safety and quality of all of our products. We have rigorous product safety and quality standards, which we expect our operations as well as our bottling partners to meet. However, despite our strong commitment to product safety and quality, we or our bottling partners at times have not met, and may not always meet, these standards, particularly as we expand our product offerings through innovation or acquisitions into beverage categories, such as value-added dairy and plant-based beverages, that are beyond our traditional range of beverage products. We and our bottling partners have had, and may in the future need, to recall products if they become contaminated or adulterated by any means or if they are mislabeled. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time, and could also subject us to product liability claims and negative publicity, all of which could cause our business to suffer.\nPublic debate and concern about perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials, may reduce demand for our beverage products or result in additional governmental regulation.\nPublic debate and concern about perceived negative health consequences of certain ingredients in our beverage products, such as synthetic colors, non-nutritive sweeteners and biotechnology-derived substances; substances that are present in our beverage products naturally or that occur as a result of the manufacturing process, such as 4-methylimidazole (\"4-MEI\"), a chemical \n16\n\n\n\n\n"}
{"QID":"q_Ri037","Question":"What are the potential effects of supply chain disruptions on The Coca-Cola Company's operations?","ground_truth_answer":"Supply chain disruptions can significantly affect The Coca-Cola Company's operations. Disruptions may result from various factors, including natural disasters, geopolitical events, or supplier issues. Such disruptions can lead to delays in receiving raw materials or distributing finished products, impacting production schedules and inventory levels. This, in turn, can lead to higher costs and reduced sales, affecting overall profitability.","question_type":"Risk","page_number":"14, 15","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 14: If we do not successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nWe believe that improved productivity is essential to achieving our long-term growth objectives and, therefore, a leading priority of our Company is to design and implement the most effective and efficient business model possible. Consequently, we continuously search for productivity opportunities in our business. Some of the actions we may take from time to time in pursuing these opportunities may become a distraction for our managers and employees and may disrupt our ongoing business operations; cause deterioration in employee morale, which may make it more difficult for us to retain or attract qualified managers and employees; disrupt or weaken the internal control structures of the affected business operations; and give rise to negative publicity, which could affect our corporate reputation. If we are unable to successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nIf we are unable to attract or retain a highly skilled and diverse workforce, our business could be negatively affected.\nThe success of our business depends on our Company's and the Coca-Cola system's ability to attract, hire, develop, motivate and retain a highly skilled and diverse workforce as well as on our success in nurturing a culture that supports our growth and aligns employees around the Company's purpose and work that matters most. Competition for, along with compensation and benefits expectations of, existing and prospective employees has increased, especially in light of changing worker expectations and talent marketplace variability regarding flexible work models. In addition, the broader labor market is experiencing a shortage of qualified workers, which has further increased the competition we face for qualified employees. We may not be able to successfully compete for, attract or retain the highly skilled and diverse workforce that we want and may require for our future business needs, such as employees with advanced technology, artificial intelligence and machine learning, social media and digital marketing skills, and\/or digital and analytics capabilities. Changes in immigration laws and policies could also make it more difficult for us to recruit or relocate highly skilled technical, professional and management personnel to meet our business needs. In addition, the unexpected loss of experienced and highly skilled employees due to an increase in aggressive recruiting for best-in-class talent could deplete our institutional knowledge base and erode our competitiveness. Failure to attract, hire, develop, motivate and retain highly skilled and diverse talent; to meet our goals related to fostering an inclusive and diverse culture; to develop and implement an adequate succession plan for our management team; to maintain a corporate culture that fosters innovation, collaboration and inclusion; or to design and successfully implement flexible work models that meet the expectations of employees and prospective employees could disrupt our operations and adversely affect our business and our future success. \nDisruption of our supply chain, including increased commodity, raw material, packaging, energy, transportation and other input costs, may adversely affect our financial condition or results of operations.\nAt times, we have experienced, and could continue to experience, disruptions in our manufacturing operations and supply chain. In connection with our manufacturing and bottling operations, we and our bottling partners are dependent upon, among other things, various ingredients and other raw materials and packaging materials. For additional information on the raw materials and supplies we use in our business, refer to the heading \"Raw Materials\" set forth in Part I, \"Item 1. Business\" of this report. Some of the raw materials and supplies used in the production of our products are available from a limited number of suppliers or from a sole supplier or are in short supply when seasonal demand is at its peak. We and our bottling partners may not be able to maintain favorable arrangements and relationships with these suppliers, and our contingency plans may not be effective in preventing disruptions that may arise from shortages of any ingredients or other raw materials. Furthermore, some of our suppliers are located in countries experiencing political instability or other risks and\/or unfavorable economic conditions. In addition, adverse and extreme weather conditions may affect the supply of agricultural commodities from which key ingredients for our products are derived. Any sustained or significant disruption to the manufacturing or sourcing of products or materials could increase our costs and interrupt product supply, which could adversely impact our business.\nWe and our independent bottlers operate a large fleet of trucks and other motor vehicles to distribute beverage products to customers. In addition, we and our independent bottlers use a significant amount of electricity, natural gas and other energy sources to operate production plants, bottling plants and distribution facilities. Increases in energy demand have in the past resulted, and could in the future result, in higher energy prices, impacting us and our independent bottlers.\nThe raw materials and other supplies, including ingredients, agricultural commodities, energy, fuel, packaging materials, transportation, labor and other supply chain inputs that we use for the production and distribution of our products, are subject to price volatility and fluctuations in availability caused by many factors. These factors include changes in supply and demand; supplier capacity constraints; a deterioration of our or our bottling partners' relationships with suppliers; international conflicts; political uncertainties; acts of terrorism; governmental instability; inflation; weather conditions (including the effects of climate change); wildfires, floods and other natural disasters; disease or pests (including the impact of citrus greening disease on the citrus industry); agricultural uncertainty; health epidemics, pandemics or other contagious outbreaks (including COVID-19); labor shortages, strikes or work stoppages; changes in or the enactment of new laws and regulations; governmental actions or controls (including import\/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers); port \n14\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 15: congestion or delays; transport capacity constraints; cybersecurity incidents or other disruptions; or fluctuations in foreign currency exchange rates. Many of our raw materials and supplies are purchased in the open market and the prices we pay for such items are subject to fluctuation. We expect the inflationary pressures on certain input and other costs to continue to impact our business in 2024. \nOur attempts to offset cost pressures, such as through price increases of some of our products, may not be successful. Higher product prices may result in reductions in sales volume. Consumers may be less willing to pay a price differential for our branded products and may increasingly purchase lower-priced offerings, or may forgo some purchases altogether. To the extent that price increases are not sufficient to offset higher costs adequately or in a timely manner, and\/or if they result in significant decreases in sales volume, our financial condition or results of operations may be adversely affected. Furthermore, we may not be able to offset cost increases through productivity initiatives or through our commodity hedging activity.\nIf we do not successfully integrate and manage our acquired businesses, brands or bottling operations, or if we are unable to realize a significant portion of the anticipated benefits of our joint ventures or strategic relationships, our financial results could suffer.\nWe routinely evaluate opportunities to acquire businesses or brands to expand our beverage portfolio and capabilities. Additionally, from time to time, we have acquired or taken control of bottling operations, often in underperforming markets where we believe we can use our resources and expertise to improve performance. Acquisitions of businesses, brands or bottling operations may involve significant challenges and risks, and the expected benefits, including cost and growth synergies associated with such acquisitions, may take longer to realize than expected or may not be realized at all. \nWe have encountered, and may in the future encounter, challenges in successfully integrating the operations, technologies, services, products and systems of any acquired businesses, brands or bottling partners in an effective, timely and cost-efficient manner. We have faced, and may in the future face, difficulties in operating through new business models and\/or supply chain models, or in new categories or territories, and challenges in extending Company controls (including internal controls over financial reporting, disclosure controls and procedures, data protection and cybersecurity), policies and governance structures (including with respect to food safety and quality, occupational safety, and sustainability) to newly acquired businesses, brands or bottling operations, which, at times, has resulted in increased costs and negative publicity. Our financial performance is impacted by how well we can integrate and manage our acquisitions, and we may not be able to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations. If we incur unforeseen liabilities or costs in connection with acquiring or integrating businesses, brands or bottling operations, experience internal control or product quality failures, or are unable to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations, our consolidated results could be negatively affected. \nWe also participate in the sales of other beverage brands through licenses, joint ventures and strategic relationships. If we are unable to successfully manage our relationships with our joint venture partners or our strategic relationships, including our relationship with Monster, or if for any other reason we fail to realize all or a significant portion of the benefits we expect from our joint ventures or strategic relationships, our financial performance could be adversely affected.\nIf our third-party service providers and business partners do not satisfactorily fulfill their commitments and responsibilities, or experience adverse events, our financial results could suffer.\nIn the conduct of our business, we rely on relationships with third parties, including cloud data storage and other information technology service providers, suppliers, distributors, contractors, joint venture partners and other external business partners, for certain services in support of key portions of our operations. These third parties are subject to similar risks as we are relating to cybersecurity, privacy violations, business interruption, and systems and employee failures, and are subject to legal, regulatory and market risks of their own. Our third-party service providers and business partners may not fulfill their respective commitments and responsibilities in a timely manner and in accordance with the agreed-upon terms or applicable laws. In addition, while we have procedures in place for assessing risk along with selecting, managing and monitoring our relationships with third-party service providers and other business partners, we do not have control over their business operations or governance and compliance systems, practices and procedures, which increases our financial, legal, cybersecurity, reputational and operational risk. If we are unable to effectively manage our third-party relationships, or for any reason our third-party service providers or business partners fail to satisfactorily fulfill their commitments and responsibilities or experience events that could directly or indirectly impact us, our financial results could suffer.\nIf we are unable to renew collective bargaining agreements on satisfactory terms, or if we or our bottling partners experience strikes, work stoppages or labor unrest, our business could suffer.\nMany of our employees at our key manufacturing locations and bottling plants are covered by collective bargaining agreements. While we generally have been able to renegotiate collective bargaining agreements on satisfactory terms when they expire and regard our relations with employees and their representatives as generally satisfactory, negotiations may nevertheless be challenging, as the Company must have competitive cost structures in each market while meeting the compensation and \n15\n\n\n\n\n","context_markdown_without_headers":"If we do not successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nWe believe that improved productivity is essential to achieving our long-term growth objectives and, therefore, a leading priority of our Company is to design and implement the most effective and efficient business model possible. Consequently, we continuously search for productivity opportunities in our business. Some of the actions we may take from time to time in pursuing these opportunities may become a distraction for our managers and employees and may disrupt our ongoing business operations; cause deterioration in employee morale, which may make it more difficult for us to retain or attract qualified managers and employees; disrupt or weaken the internal control structures of the affected business operations; and give rise to negative publicity, which could affect our corporate reputation. If we are unable to successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nIf we are unable to attract or retain a highly skilled and diverse workforce, our business could be negatively affected.\nThe success of our business depends on our Company's and the Coca-Cola system's ability to attract, hire, develop, motivate and retain a highly skilled and diverse workforce as well as on our success in nurturing a culture that supports our growth and aligns employees around the Company's purpose and work that matters most. Competition for, along with compensation and benefits expectations of, existing and prospective employees has increased, especially in light of changing worker expectations and talent marketplace variability regarding flexible work models. In addition, the broader labor market is experiencing a shortage of qualified workers, which has further increased the competition we face for qualified employees. We may not be able to successfully compete for, attract or retain the highly skilled and diverse workforce that we want and may require for our future business needs, such as employees with advanced technology, artificial intelligence and machine learning, social media and digital marketing skills, and\/or digital and analytics capabilities. Changes in immigration laws and policies could also make it more difficult for us to recruit or relocate highly skilled technical, professional and management personnel to meet our business needs. In addition, the unexpected loss of experienced and highly skilled employees due to an increase in aggressive recruiting for best-in-class talent could deplete our institutional knowledge base and erode our competitiveness. Failure to attract, hire, develop, motivate and retain highly skilled and diverse talent; to meet our goals related to fostering an inclusive and diverse culture; to develop and implement an adequate succession plan for our management team; to maintain a corporate culture that fosters innovation, collaboration and inclusion; or to design and successfully implement flexible work models that meet the expectations of employees and prospective employees could disrupt our operations and adversely affect our business and our future success. \nDisruption of our supply chain, including increased commodity, raw material, packaging, energy, transportation and other input costs, may adversely affect our financial condition or results of operations.\nAt times, we have experienced, and could continue to experience, disruptions in our manufacturing operations and supply chain. In connection with our manufacturing and bottling operations, we and our bottling partners are dependent upon, among other things, various ingredients and other raw materials and packaging materials. For additional information on the raw materials and supplies we use in our business, refer to the heading \"Raw Materials\" set forth in Part I, \"Item 1. Business\" of this report. Some of the raw materials and supplies used in the production of our products are available from a limited number of suppliers or from a sole supplier or are in short supply when seasonal demand is at its peak. We and our bottling partners may not be able to maintain favorable arrangements and relationships with these suppliers, and our contingency plans may not be effective in preventing disruptions that may arise from shortages of any ingredients or other raw materials. Furthermore, some of our suppliers are located in countries experiencing political instability or other risks and\/or unfavorable economic conditions. In addition, adverse and extreme weather conditions may affect the supply of agricultural commodities from which key ingredients for our products are derived. Any sustained or significant disruption to the manufacturing or sourcing of products or materials could increase our costs and interrupt product supply, which could adversely impact our business.\nWe and our independent bottlers operate a large fleet of trucks and other motor vehicles to distribute beverage products to customers. In addition, we and our independent bottlers use a significant amount of electricity, natural gas and other energy sources to operate production plants, bottling plants and distribution facilities. Increases in energy demand have in the past resulted, and could in the future result, in higher energy prices, impacting us and our independent bottlers.\nThe raw materials and other supplies, including ingredients, agricultural commodities, energy, fuel, packaging materials, transportation, labor and other supply chain inputs that we use for the production and distribution of our products, are subject to price volatility and fluctuations in availability caused by many factors. These factors include changes in supply and demand; supplier capacity constraints; a deterioration of our or our bottling partners' relationships with suppliers; international conflicts; political uncertainties; acts of terrorism; governmental instability; inflation; weather conditions (including the effects of climate change); wildfires, floods and other natural disasters; disease or pests (including the impact of citrus greening disease on the citrus industry); agricultural uncertainty; health epidemics, pandemics or other contagious outbreaks (including COVID-19); labor shortages, strikes or work stoppages; changes in or the enactment of new laws and regulations; governmental actions or controls (including import\/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers); port \n14\n\n\n\n\n, congestion or delays; transport capacity constraints; cybersecurity incidents or other disruptions; or fluctuations in foreign currency exchange rates. Many of our raw materials and supplies are purchased in the open market and the prices we pay for such items are subject to fluctuation. We expect the inflationary pressures on certain input and other costs to continue to impact our business in 2024. \nOur attempts to offset cost pressures, such as through price increases of some of our products, may not be successful. Higher product prices may result in reductions in sales volume. Consumers may be less willing to pay a price differential for our branded products and may increasingly purchase lower-priced offerings, or may forgo some purchases altogether. To the extent that price increases are not sufficient to offset higher costs adequately or in a timely manner, and\/or if they result in significant decreases in sales volume, our financial condition or results of operations may be adversely affected. Furthermore, we may not be able to offset cost increases through productivity initiatives or through our commodity hedging activity.\nIf we do not successfully integrate and manage our acquired businesses, brands or bottling operations, or if we are unable to realize a significant portion of the anticipated benefits of our joint ventures or strategic relationships, our financial results could suffer.\nWe routinely evaluate opportunities to acquire businesses or brands to expand our beverage portfolio and capabilities. Additionally, from time to time, we have acquired or taken control of bottling operations, often in underperforming markets where we believe we can use our resources and expertise to improve performance. Acquisitions of businesses, brands or bottling operations may involve significant challenges and risks, and the expected benefits, including cost and growth synergies associated with such acquisitions, may take longer to realize than expected or may not be realized at all. \nWe have encountered, and may in the future encounter, challenges in successfully integrating the operations, technologies, services, products and systems of any acquired businesses, brands or bottling partners in an effective, timely and cost-efficient manner. We have faced, and may in the future face, difficulties in operating through new business models and\/or supply chain models, or in new categories or territories, and challenges in extending Company controls (including internal controls over financial reporting, disclosure controls and procedures, data protection and cybersecurity), policies and governance structures (including with respect to food safety and quality, occupational safety, and sustainability) to newly acquired businesses, brands or bottling operations, which, at times, has resulted in increased costs and negative publicity. Our financial performance is impacted by how well we can integrate and manage our acquisitions, and we may not be able to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations. If we incur unforeseen liabilities or costs in connection with acquiring or integrating businesses, brands or bottling operations, experience internal control or product quality failures, or are unable to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations, our consolidated results could be negatively affected. \nWe also participate in the sales of other beverage brands through licenses, joint ventures and strategic relationships. If we are unable to successfully manage our relationships with our joint venture partners or our strategic relationships, including our relationship with Monster, or if for any other reason we fail to realize all or a significant portion of the benefits we expect from our joint ventures or strategic relationships, our financial performance could be adversely affected.\nIf our third-party service providers and business partners do not satisfactorily fulfill their commitments and responsibilities, or experience adverse events, our financial results could suffer.\nIn the conduct of our business, we rely on relationships with third parties, including cloud data storage and other information technology service providers, suppliers, distributors, contractors, joint venture partners and other external business partners, for certain services in support of key portions of our operations. These third parties are subject to similar risks as we are relating to cybersecurity, privacy violations, business interruption, and systems and employee failures, and are subject to legal, regulatory and market risks of their own. Our third-party service providers and business partners may not fulfill their respective commitments and responsibilities in a timely manner and in accordance with the agreed-upon terms or applicable laws. In addition, while we have procedures in place for assessing risk along with selecting, managing and monitoring our relationships with third-party service providers and other business partners, we do not have control over their business operations or governance and compliance systems, practices and procedures, which increases our financial, legal, cybersecurity, reputational and operational risk. If we are unable to effectively manage our third-party relationships, or for any reason our third-party service providers or business partners fail to satisfactorily fulfill their commitments and responsibilities or experience events that could directly or indirectly impact us, our financial results could suffer.\nIf we are unable to renew collective bargaining agreements on satisfactory terms, or if we or our bottling partners experience strikes, work stoppages or labor unrest, our business could suffer.\nMany of our employees at our key manufacturing locations and bottling plants are covered by collective bargaining agreements. While we generally have been able to renegotiate collective bargaining agreements on satisfactory terms when they expire and regard our relations with employees and their representatives as generally satisfactory, negotiations may nevertheless be challenging, as the Company must have competitive cost structures in each market while meeting the compensation and \n15\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 14: If we do not successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nWe believe that improved productivity is essential to achieving our long-term growth objectives and, therefore, a leading priority of our Company is to design and implement the most effective and efficient business model possible. Consequently, we continuously search for productivity opportunities in our business. Some of the actions we may take from time to time in pursuing these opportunities may become a distraction for our managers and employees and may disrupt our ongoing business operations; cause deterioration in employee morale, which may make it more difficult for us to retain or attract qualified managers and employees; disrupt or weaken the internal control structures of the affected business operations; and give rise to negative publicity, which could affect our corporate reputation. If we are unable to successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nIf we are unable to attract or retain a highly skilled and diverse workforce, our business could be negatively affected.\nThe success of our business depends on our Company's and the Coca-Cola system's ability to attract, hire, develop, motivate and retain a highly skilled and diverse workforce as well as on our success in nurturing a culture that supports our growth and aligns employees around the Company's purpose and work that matters most. Competition for, along with compensation and benefits expectations of, existing and prospective employees has increased, especially in light of changing worker expectations and talent marketplace variability regarding flexible work models. In addition, the broader labor market is experiencing a shortage of qualified workers, which has further increased the competition we face for qualified employees. We may not be able to successfully compete for, attract or retain the highly skilled and diverse workforce that we want and may require for our future business needs, such as employees with advanced technology, artificial intelligence and machine learning, social media and digital marketing skills, and\/or digital and analytics capabilities. Changes in immigration laws and policies could also make it more difficult for us to recruit or relocate highly skilled technical, professional and management personnel to meet our business needs. In addition, the unexpected loss of experienced and highly skilled employees due to an increase in aggressive recruiting for best-in-class talent could deplete our institutional knowledge base and erode our competitiveness. Failure to attract, hire, develop, motivate and retain highly skilled and diverse talent; to meet our goals related to fostering an inclusive and diverse culture; to develop and implement an adequate succession plan for our management team; to maintain a corporate culture that fosters innovation, collaboration and inclusion; or to design and successfully implement flexible work models that meet the expectations of employees and prospective employees could disrupt our operations and adversely affect our business and our future success. \nDisruption of our supply chain, including increased commodity, raw material, packaging, energy, transportation and other input costs, may adversely affect our financial condition or results of operations.\nAt times, we have experienced, and could continue to experience, disruptions in our manufacturing operations and supply chain. In connection with our manufacturing and bottling operations, we and our bottling partners are dependent upon, among other things, various ingredients and other raw materials and packaging materials. For additional information on the raw materials and supplies we use in our business, refer to the heading \"Raw Materials\" set forth in Part I, \"Item 1. Business\" of this report. Some of the raw materials and supplies used in the production of our products are available from a limited number of suppliers or from a sole supplier or are in short supply when seasonal demand is at its peak. We and our bottling partners may not be able to maintain favorable arrangements and relationships with these suppliers, and our contingency plans may not be effective in preventing disruptions that may arise from shortages of any ingredients or other raw materials. Furthermore, some of our suppliers are located in countries experiencing political instability or other risks and\/or unfavorable economic conditions. In addition, adverse and extreme weather conditions may affect the supply of agricultural commodities from which key ingredients for our products are derived. Any sustained or significant disruption to the manufacturing or sourcing of products or materials could increase our costs and interrupt product supply, which could adversely impact our business.\nWe and our independent bottlers operate a large fleet of trucks and other motor vehicles to distribute beverage products to customers. In addition, we and our independent bottlers use a significant amount of electricity, natural gas and other energy sources to operate production plants, bottling plants and distribution facilities. Increases in energy demand have in the past resulted, and could in the future result, in higher energy prices, impacting us and our independent bottlers.\nThe raw materials and other supplies, including ingredients, agricultural commodities, energy, fuel, packaging materials, transportation, labor and other supply chain inputs that we use for the production and distribution of our products, are subject to price volatility and fluctuations in availability caused by many factors. These factors include changes in supply and demand; supplier capacity constraints; a deterioration of our or our bottling partners' relationships with suppliers; international conflicts; political uncertainties; acts of terrorism; governmental instability; inflation; weather conditions (including the effects of climate change); wildfires, floods and other natural disasters; disease or pests (including the impact of citrus greening disease on the citrus industry); agricultural uncertainty; health epidemics, pandemics or other contagious outbreaks (including COVID-19); labor shortages, strikes or work stoppages; changes in or the enactment of new laws and regulations; governmental actions or controls (including import\/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers); port \n14\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 15: congestion or delays; transport capacity constraints; cybersecurity incidents or other disruptions; or fluctuations in foreign currency exchange rates. Many of our raw materials and supplies are purchased in the open market and the prices we pay for such items are subject to fluctuation. We expect the inflationary pressures on certain input and other costs to continue to impact our business in 2024. \nOur attempts to offset cost pressures, such as through price increases of some of our products, may not be successful. Higher product prices may result in reductions in sales volume. Consumers may be less willing to pay a price differential for our branded products and may increasingly purchase lower-priced offerings, or may forgo some purchases altogether. To the extent that price increases are not sufficient to offset higher costs adequately or in a timely manner, and\/or if they result in significant decreases in sales volume, our financial condition or results of operations may be adversely affected. Furthermore, we may not be able to offset cost increases through productivity initiatives or through our commodity hedging activity.\nIf we do not successfully integrate and manage our acquired businesses, brands or bottling operations, or if we are unable to realize a significant portion of the anticipated benefits of our joint ventures or strategic relationships, our financial results could suffer.\nWe routinely evaluate opportunities to acquire businesses or brands to expand our beverage portfolio and capabilities. Additionally, from time to time, we have acquired or taken control of bottling operations, often in underperforming markets where we believe we can use our resources and expertise to improve performance. Acquisitions of businesses, brands or bottling operations may involve significant challenges and risks, and the expected benefits, including cost and growth synergies associated with such acquisitions, may take longer to realize than expected or may not be realized at all. \nWe have encountered, and may in the future encounter, challenges in successfully integrating the operations, technologies, services, products and systems of any acquired businesses, brands or bottling partners in an effective, timely and cost-efficient manner. We have faced, and may in the future face, difficulties in operating through new business models and\/or supply chain models, or in new categories or territories, and challenges in extending Company controls (including internal controls over financial reporting, disclosure controls and procedures, data protection and cybersecurity), policies and governance structures (including with respect to food safety and quality, occupational safety, and sustainability) to newly acquired businesses, brands or bottling operations, which, at times, has resulted in increased costs and negative publicity. Our financial performance is impacted by how well we can integrate and manage our acquisitions, and we may not be able to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations. If we incur unforeseen liabilities or costs in connection with acquiring or integrating businesses, brands or bottling operations, experience internal control or product quality failures, or are unable to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations, our consolidated results could be negatively affected. \nWe also participate in the sales of other beverage brands through licenses, joint ventures and strategic relationships. If we are unable to successfully manage our relationships with our joint venture partners or our strategic relationships, including our relationship with Monster, or if for any other reason we fail to realize all or a significant portion of the benefits we expect from our joint ventures or strategic relationships, our financial performance could be adversely affected.\nIf our third-party service providers and business partners do not satisfactorily fulfill their commitments and responsibilities, or experience adverse events, our financial results could suffer.\nIn the conduct of our business, we rely on relationships with third parties, including cloud data storage and other information technology service providers, suppliers, distributors, contractors, joint venture partners and other external business partners, for certain services in support of key portions of our operations. These third parties are subject to similar risks as we are relating to cybersecurity, privacy violations, business interruption, and systems and employee failures, and are subject to legal, regulatory and market risks of their own. Our third-party service providers and business partners may not fulfill their respective commitments and responsibilities in a timely manner and in accordance with the agreed-upon terms or applicable laws. In addition, while we have procedures in place for assessing risk along with selecting, managing and monitoring our relationships with third-party service providers and other business partners, we do not have control over their business operations or governance and compliance systems, practices and procedures, which increases our financial, legal, cybersecurity, reputational and operational risk. If we are unable to effectively manage our third-party relationships, or for any reason our third-party service providers or business partners fail to satisfactorily fulfill their commitments and responsibilities or experience events that could directly or indirectly impact us, our financial results could suffer.\nIf we are unable to renew collective bargaining agreements on satisfactory terms, or if we or our bottling partners experience strikes, work stoppages or labor unrest, our business could suffer.\nMany of our employees at our key manufacturing locations and bottling plants are covered by collective bargaining agreements. While we generally have been able to renegotiate collective bargaining agreements on satisfactory terms when they expire and regard our relations with employees and their representatives as generally satisfactory, negotiations may nevertheless be challenging, as the Company must have competitive cost structures in each market while meeting the compensation and \n15\n\n\n\n\n","context_html_without_headers":"If we do not successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nWe believe that improved productivity is essential to achieving our long-term growth objectives and, therefore, a leading priority of our Company is to design and implement the most effective and efficient business model possible. Consequently, we continuously search for productivity opportunities in our business. Some of the actions we may take from time to time in pursuing these opportunities may become a distraction for our managers and employees and may disrupt our ongoing business operations; cause deterioration in employee morale, which may make it more difficult for us to retain or attract qualified managers and employees; disrupt or weaken the internal control structures of the affected business operations; and give rise to negative publicity, which could affect our corporate reputation. If we are unable to successfully manage the potential negative consequences of our productivity initiatives, our business operations could be adversely affected.\nIf we are unable to attract or retain a highly skilled and diverse workforce, our business could be negatively affected.\nThe success of our business depends on our Company's and the Coca-Cola system's ability to attract, hire, develop, motivate and retain a highly skilled and diverse workforce as well as on our success in nurturing a culture that supports our growth and aligns employees around the Company's purpose and work that matters most. Competition for, along with compensation and benefits expectations of, existing and prospective employees has increased, especially in light of changing worker expectations and talent marketplace variability regarding flexible work models. In addition, the broader labor market is experiencing a shortage of qualified workers, which has further increased the competition we face for qualified employees. We may not be able to successfully compete for, attract or retain the highly skilled and diverse workforce that we want and may require for our future business needs, such as employees with advanced technology, artificial intelligence and machine learning, social media and digital marketing skills, and\/or digital and analytics capabilities. Changes in immigration laws and policies could also make it more difficult for us to recruit or relocate highly skilled technical, professional and management personnel to meet our business needs. In addition, the unexpected loss of experienced and highly skilled employees due to an increase in aggressive recruiting for best-in-class talent could deplete our institutional knowledge base and erode our competitiveness. Failure to attract, hire, develop, motivate and retain highly skilled and diverse talent; to meet our goals related to fostering an inclusive and diverse culture; to develop and implement an adequate succession plan for our management team; to maintain a corporate culture that fosters innovation, collaboration and inclusion; or to design and successfully implement flexible work models that meet the expectations of employees and prospective employees could disrupt our operations and adversely affect our business and our future success. \nDisruption of our supply chain, including increased commodity, raw material, packaging, energy, transportation and other input costs, may adversely affect our financial condition or results of operations.\nAt times, we have experienced, and could continue to experience, disruptions in our manufacturing operations and supply chain. In connection with our manufacturing and bottling operations, we and our bottling partners are dependent upon, among other things, various ingredients and other raw materials and packaging materials. For additional information on the raw materials and supplies we use in our business, refer to the heading \"Raw Materials\" set forth in Part I, \"Item 1. Business\" of this report. Some of the raw materials and supplies used in the production of our products are available from a limited number of suppliers or from a sole supplier or are in short supply when seasonal demand is at its peak. We and our bottling partners may not be able to maintain favorable arrangements and relationships with these suppliers, and our contingency plans may not be effective in preventing disruptions that may arise from shortages of any ingredients or other raw materials. Furthermore, some of our suppliers are located in countries experiencing political instability or other risks and\/or unfavorable economic conditions. In addition, adverse and extreme weather conditions may affect the supply of agricultural commodities from which key ingredients for our products are derived. Any sustained or significant disruption to the manufacturing or sourcing of products or materials could increase our costs and interrupt product supply, which could adversely impact our business.\nWe and our independent bottlers operate a large fleet of trucks and other motor vehicles to distribute beverage products to customers. In addition, we and our independent bottlers use a significant amount of electricity, natural gas and other energy sources to operate production plants, bottling plants and distribution facilities. Increases in energy demand have in the past resulted, and could in the future result, in higher energy prices, impacting us and our independent bottlers.\nThe raw materials and other supplies, including ingredients, agricultural commodities, energy, fuel, packaging materials, transportation, labor and other supply chain inputs that we use for the production and distribution of our products, are subject to price volatility and fluctuations in availability caused by many factors. These factors include changes in supply and demand; supplier capacity constraints; a deterioration of our or our bottling partners' relationships with suppliers; international conflicts; political uncertainties; acts of terrorism; governmental instability; inflation; weather conditions (including the effects of climate change); wildfires, floods and other natural disasters; disease or pests (including the impact of citrus greening disease on the citrus industry); agricultural uncertainty; health epidemics, pandemics or other contagious outbreaks (including COVID-19); labor shortages, strikes or work stoppages; changes in or the enactment of new laws and regulations; governmental actions or controls (including import\/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers); port \n14\n\n\n\n\n, congestion or delays; transport capacity constraints; cybersecurity incidents or other disruptions; or fluctuations in foreign currency exchange rates. Many of our raw materials and supplies are purchased in the open market and the prices we pay for such items are subject to fluctuation. We expect the inflationary pressures on certain input and other costs to continue to impact our business in 2024. \nOur attempts to offset cost pressures, such as through price increases of some of our products, may not be successful. Higher product prices may result in reductions in sales volume. Consumers may be less willing to pay a price differential for our branded products and may increasingly purchase lower-priced offerings, or may forgo some purchases altogether. To the extent that price increases are not sufficient to offset higher costs adequately or in a timely manner, and\/or if they result in significant decreases in sales volume, our financial condition or results of operations may be adversely affected. Furthermore, we may not be able to offset cost increases through productivity initiatives or through our commodity hedging activity.\nIf we do not successfully integrate and manage our acquired businesses, brands or bottling operations, or if we are unable to realize a significant portion of the anticipated benefits of our joint ventures or strategic relationships, our financial results could suffer.\nWe routinely evaluate opportunities to acquire businesses or brands to expand our beverage portfolio and capabilities. Additionally, from time to time, we have acquired or taken control of bottling operations, often in underperforming markets where we believe we can use our resources and expertise to improve performance. Acquisitions of businesses, brands or bottling operations may involve significant challenges and risks, and the expected benefits, including cost and growth synergies associated with such acquisitions, may take longer to realize than expected or may not be realized at all. \nWe have encountered, and may in the future encounter, challenges in successfully integrating the operations, technologies, services, products and systems of any acquired businesses, brands or bottling partners in an effective, timely and cost-efficient manner. We have faced, and may in the future face, difficulties in operating through new business models and\/or supply chain models, or in new categories or territories, and challenges in extending Company controls (including internal controls over financial reporting, disclosure controls and procedures, data protection and cybersecurity), policies and governance structures (including with respect to food safety and quality, occupational safety, and sustainability) to newly acquired businesses, brands or bottling operations, which, at times, has resulted in increased costs and negative publicity. Our financial performance is impacted by how well we can integrate and manage our acquisitions, and we may not be able to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations. If we incur unforeseen liabilities or costs in connection with acquiring or integrating businesses, brands or bottling operations, experience internal control or product quality failures, or are unable to achieve our strategic and financial objectives for acquired businesses, brands or bottling operations, our consolidated results could be negatively affected. \nWe also participate in the sales of other beverage brands through licenses, joint ventures and strategic relationships. If we are unable to successfully manage our relationships with our joint venture partners or our strategic relationships, including our relationship with Monster, or if for any other reason we fail to realize all or a significant portion of the benefits we expect from our joint ventures or strategic relationships, our financial performance could be adversely affected.\nIf our third-party service providers and business partners do not satisfactorily fulfill their commitments and responsibilities, or experience adverse events, our financial results could suffer.\nIn the conduct of our business, we rely on relationships with third parties, including cloud data storage and other information technology service providers, suppliers, distributors, contractors, joint venture partners and other external business partners, for certain services in support of key portions of our operations. These third parties are subject to similar risks as we are relating to cybersecurity, privacy violations, business interruption, and systems and employee failures, and are subject to legal, regulatory and market risks of their own. Our third-party service providers and business partners may not fulfill their respective commitments and responsibilities in a timely manner and in accordance with the agreed-upon terms or applicable laws. In addition, while we have procedures in place for assessing risk along with selecting, managing and monitoring our relationships with third-party service providers and other business partners, we do not have control over their business operations or governance and compliance systems, practices and procedures, which increases our financial, legal, cybersecurity, reputational and operational risk. If we are unable to effectively manage our third-party relationships, or for any reason our third-party service providers or business partners fail to satisfactorily fulfill their commitments and responsibilities or experience events that could directly or indirectly impact us, our financial results could suffer.\nIf we are unable to renew collective bargaining agreements on satisfactory terms, or if we or our bottling partners experience strikes, work stoppages or labor unrest, our business could suffer.\nMany of our employees at our key manufacturing locations and bottling plants are covered by collective bargaining agreements. While we generally have been able to renegotiate collective bargaining agreements on satisfactory terms when they expire and regard our relations with employees and their representatives as generally satisfactory, negotiations may nevertheless be challenging, as the Company must have competitive cost structures in each market while meeting the compensation and \n15\n\n\n\n\n"}
{"QID":"q_Ri038","Question":"How might economic downturns impact The Coca-Cola Company's financial performance and business operations?","ground_truth_answer":"Economic downturns can have a substantial impact on The Coca-Cola Company's financial performance and business operations. During periods of economic decline, consumer spending typically decreases, which can lead to reduced demand for discretionary products like Coca-Cola's beverages. This decline in sales can negatively affect revenue and profitability.","question_type":"Risk","page_number":"22","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 22: to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n","context_markdown_without_headers":"to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 22: to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n","context_html_without_headers":"to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n"}
{"QID":"q_Ri039","Question":"How does the changing consumer preferences affect P&Gs operations?","ground_truth_answer":"Changing consumer preferences impact Procter & Gamble's operations in several ways. The shift towards online shopping and digital engagement necessitates adjustments in sales channels and marketing strategies to capture market share. This shift could affect traditional retail revenue streams and require increased investment in e-commerce platforms.","question_type":"Risk","page_number":"5","accession_number":"0000080424-24-000083","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 5: \nThe Procter & Gamble Company 5\n\n\nand data systems or those of our suppliers, cybersecurity incidents including but not limited to ransomware attacks, misuse of artificial intelligence and machine learning technologies, inability to procure sufficient raw or input materials (including water, recycled materials and materials that meet our labor standards), significant changes in trade policy, natural disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or terrorism, disease outbreaks or other external factors over which we have no control, have at times interrupted and could, in the future, interrupt product supply and, if not effectively managed and remedied, could have an adverse impact on our business, financial condition, results of operations or cash flows.\nOur businesses face cost fluctuations and pressures that could affect our business results.\nOur costs are subject to fluctuations, particularly due to changes in the prices of commodities (including certain petroleum-derived materials like resins and paper-based materials like pulp) and raw and packaging materials and the costs of labor, transportation (including trucks and containers), energy, pension and healthcare. Inflation pressures sometimes result in increases in these input costs. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share. Failure to manage these fluctuations and to anticipate consumer reaction to our management of these fluctuations could adversely impact our results of operations or cash flows.\nThe ability to achieve our business objectives depends on how well we can compete with our local and global competitors in new and existing markets and channels.\nThe consumer products industry is highly competitive. Across all of our categories, we compete against a wide variety of global and local competitors. As a result, we experience ongoing competitive pressures in the environments in which we operate, which may result in challenges in maintaining sales and profit margins. To address these challenges, we must be able to successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product delivery windows and trade terms. In addition, evolving sales channels and business models may affect customer and consumer preferences as well as market dynamics, which, for example, may be seen in the growing consumer preference for shopping online, ease of competitive entry into certain categories and growth in hard discounter channels. Failure to successfully respond to competitive factors and emerging retail trends and effectively compete in growing sales channels and business models, particularly e-commerce and mobile or social commerce applications, could negatively impact our results of operations or cash flows.\nA significant change in customer relationships or in customer demand for our products could have a significant impact on our business.\nWe sell most of our products via retail customers, which include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. Our success depends on our ability to successfully manage relationships with our retail trade customers, which includes our ability to offer trade terms that are mutually acceptable and are aligned with our pricing and profitability targets. Continued concentration among our retail customers could create significant cost and margin pressure on our business, and our business performance could suffer if we cannot reach agreement with a key customer on trade terms and principles. Our business could also be negatively impacted if a key customer were to significantly reduce the inventory level of or shelf space allocated to our products as a result of increased offerings of other branded manufacturers, private label brands and generic non-branded products or for other reasons, significantly tighten product delivery windows or experience a significant business disruption.\nIf the reputation of the Company or one or more of our brands erodes significantly, it could have a material impact on our financial results.\nThe Company's reputation, and the reputation of our brands, form the foundation of our relationships with key stakeholders and other constituencies, including consumers, customers and suppliers. The quality and safety of our products are critical to our business. Many of our brands have worldwide recognition and our financial success directly depends on the success of our brands. The success of our brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand's image or its ability to attract consumers. Our results of operations or cash flows could also be negatively impacted if the Company or one of our brands suffers substantial harm to its reputation due to a significant product recall, product-related litigation, defects or impurities in our products, product misuse, changing consumer perceptions of certain ingredients, negative perceptions of packaging (such as plastic and other petroleum-based materials), lack of recyclability or other environmental attributes, concerns about actual or alleged labor or equality and inclusion practices, privacy failures or data breaches, allegations of product tampering or the distribution and sale of counterfeit products. Additionally, negative or inaccurate postings or comments on social media or networking websites about the Company or one of its brands could generate adverse publicity that could damage the reputation of our brands or the Company. If we are unable to effectively manage real or perceived issues, including concerns about safety, quality, ingredients, efficacy, environmental or social impacts or similar matters, sentiments toward the Company or our products could be negatively impacted, and our results of operations or cash flows could suffer. Our Company also devotes time and resources to citizenship efforts that are consistent with our corporate values and are designed to strengthen our business and protect and preserve our reputation, including programs driving ethics and corporate responsibility, strong communities, equality and inclusion and environmental sustainability. While the Company \n\n\n","context_markdown_without_headers":"\nThe Procter & Gamble Company 5\n\n\nand data systems or those of our suppliers, cybersecurity incidents including but not limited to ransomware attacks, misuse of artificial intelligence and machine learning technologies, inability to procure sufficient raw or input materials (including water, recycled materials and materials that meet our labor standards), significant changes in trade policy, natural disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or terrorism, disease outbreaks or other external factors over which we have no control, have at times interrupted and could, in the future, interrupt product supply and, if not effectively managed and remedied, could have an adverse impact on our business, financial condition, results of operations or cash flows.\nOur businesses face cost fluctuations and pressures that could affect our business results.\nOur costs are subject to fluctuations, particularly due to changes in the prices of commodities (including certain petroleum-derived materials like resins and paper-based materials like pulp) and raw and packaging materials and the costs of labor, transportation (including trucks and containers), energy, pension and healthcare. Inflation pressures sometimes result in increases in these input costs. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share. Failure to manage these fluctuations and to anticipate consumer reaction to our management of these fluctuations could adversely impact our results of operations or cash flows.\nThe ability to achieve our business objectives depends on how well we can compete with our local and global competitors in new and existing markets and channels.\nThe consumer products industry is highly competitive. Across all of our categories, we compete against a wide variety of global and local competitors. As a result, we experience ongoing competitive pressures in the environments in which we operate, which may result in challenges in maintaining sales and profit margins. To address these challenges, we must be able to successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product delivery windows and trade terms. In addition, evolving sales channels and business models may affect customer and consumer preferences as well as market dynamics, which, for example, may be seen in the growing consumer preference for shopping online, ease of competitive entry into certain categories and growth in hard discounter channels. Failure to successfully respond to competitive factors and emerging retail trends and effectively compete in growing sales channels and business models, particularly e-commerce and mobile or social commerce applications, could negatively impact our results of operations or cash flows.\nA significant change in customer relationships or in customer demand for our products could have a significant impact on our business.\nWe sell most of our products via retail customers, which include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. Our success depends on our ability to successfully manage relationships with our retail trade customers, which includes our ability to offer trade terms that are mutually acceptable and are aligned with our pricing and profitability targets. Continued concentration among our retail customers could create significant cost and margin pressure on our business, and our business performance could suffer if we cannot reach agreement with a key customer on trade terms and principles. Our business could also be negatively impacted if a key customer were to significantly reduce the inventory level of or shelf space allocated to our products as a result of increased offerings of other branded manufacturers, private label brands and generic non-branded products or for other reasons, significantly tighten product delivery windows or experience a significant business disruption.\nIf the reputation of the Company or one or more of our brands erodes significantly, it could have a material impact on our financial results.\nThe Company's reputation, and the reputation of our brands, form the foundation of our relationships with key stakeholders and other constituencies, including consumers, customers and suppliers. The quality and safety of our products are critical to our business. Many of our brands have worldwide recognition and our financial success directly depends on the success of our brands. The success of our brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand's image or its ability to attract consumers. Our results of operations or cash flows could also be negatively impacted if the Company or one of our brands suffers substantial harm to its reputation due to a significant product recall, product-related litigation, defects or impurities in our products, product misuse, changing consumer perceptions of certain ingredients, negative perceptions of packaging (such as plastic and other petroleum-based materials), lack of recyclability or other environmental attributes, concerns about actual or alleged labor or equality and inclusion practices, privacy failures or data breaches, allegations of product tampering or the distribution and sale of counterfeit products. Additionally, negative or inaccurate postings or comments on social media or networking websites about the Company or one of its brands could generate adverse publicity that could damage the reputation of our brands or the Company. If we are unable to effectively manage real or perceived issues, including concerns about safety, quality, ingredients, efficacy, environmental or social impacts or similar matters, sentiments toward the Company or our products could be negatively impacted, and our results of operations or cash flows could suffer. Our Company also devotes time and resources to citizenship efforts that are consistent with our corporate values and are designed to strengthen our business and protect and preserve our reputation, including programs driving ethics and corporate responsibility, strong communities, equality and inclusion and environmental sustainability. While the Company \n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 5: \nThe Procter & Gamble Company 5\n\n\nand data systems or those of our suppliers, cybersecurity incidents including but not limited to ransomware attacks, misuse of artificial intelligence and machine learning technologies, inability to procure sufficient raw or input materials (including water, recycled materials and materials that meet our labor standards), significant changes in trade policy, natural disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or terrorism, disease outbreaks or other external factors over which we have no control, have at times interrupted and could, in the future, interrupt product supply and, if not effectively managed and remedied, could have an adverse impact on our business, financial condition, results of operations or cash flows.\nOur businesses face cost fluctuations and pressures that could affect our business results.\nOur costs are subject to fluctuations, particularly due to changes in the prices of commodities (including certain petroleum-derived materials like resins and paper-based materials like pulp) and raw and packaging materials and the costs of labor, transportation (including trucks and containers), energy, pension and healthcare. Inflation pressures sometimes result in increases in these input costs. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share. Failure to manage these fluctuations and to anticipate consumer reaction to our management of these fluctuations could adversely impact our results of operations or cash flows.\nThe ability to achieve our business objectives depends on how well we can compete with our local and global competitors in new and existing markets and channels.\nThe consumer products industry is highly competitive. Across all of our categories, we compete against a wide variety of global and local competitors. As a result, we experience ongoing competitive pressures in the environments in which we operate, which may result in challenges in maintaining sales and profit margins. To address these challenges, we must be able to successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product delivery windows and trade terms. In addition, evolving sales channels and business models may affect customer and consumer preferences as well as market dynamics, which, for example, may be seen in the growing consumer preference for shopping online, ease of competitive entry into certain categories and growth in hard discounter channels. Failure to successfully respond to competitive factors and emerging retail trends and effectively compete in growing sales channels and business models, particularly e-commerce and mobile or social commerce applications, could negatively impact our results of operations or cash flows.\nA significant change in customer relationships or in customer demand for our products could have a significant impact on our business.\nWe sell most of our products via retail customers, which include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. Our success depends on our ability to successfully manage relationships with our retail trade customers, which includes our ability to offer trade terms that are mutually acceptable and are aligned with our pricing and profitability targets. Continued concentration among our retail customers could create significant cost and margin pressure on our business, and our business performance could suffer if we cannot reach agreement with a key customer on trade terms and principles. Our business could also be negatively impacted if a key customer were to significantly reduce the inventory level of or shelf space allocated to our products as a result of increased offerings of other branded manufacturers, private label brands and generic non-branded products or for other reasons, significantly tighten product delivery windows or experience a significant business disruption.\nIf the reputation of the Company or one or more of our brands erodes significantly, it could have a material impact on our financial results.\nThe Company's reputation, and the reputation of our brands, form the foundation of our relationships with key stakeholders and other constituencies, including consumers, customers and suppliers. The quality and safety of our products are critical to our business. Many of our brands have worldwide recognition and our financial success directly depends on the success of our brands. The success of our brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand's image or its ability to attract consumers. Our results of operations or cash flows could also be negatively impacted if the Company or one of our brands suffers substantial harm to its reputation due to a significant product recall, product-related litigation, defects or impurities in our products, product misuse, changing consumer perceptions of certain ingredients, negative perceptions of packaging (such as plastic and other petroleum-based materials), lack of recyclability or other environmental attributes, concerns about actual or alleged labor or equality and inclusion practices, privacy failures or data breaches, allegations of product tampering or the distribution and sale of counterfeit products. Additionally, negative or inaccurate postings or comments on social media or networking websites about the Company or one of its brands could generate adverse publicity that could damage the reputation of our brands or the Company. If we are unable to effectively manage real or perceived issues, including concerns about safety, quality, ingredients, efficacy, environmental or social impacts or similar matters, sentiments toward the Company or our products could be negatively impacted, and our results of operations or cash flows could suffer. Our Company also devotes time and resources to citizenship efforts that are consistent with our corporate values and are designed to strengthen our business and protect and preserve our reputation, including programs driving ethics and corporate responsibility, strong communities, equality and inclusion and environmental sustainability. While the Company \n\n\n","context_html_without_headers":"\nThe Procter & Gamble Company 5\n\n\nand data systems or those of our suppliers, cybersecurity incidents including but not limited to ransomware attacks, misuse of artificial intelligence and machine learning technologies, inability to procure sufficient raw or input materials (including water, recycled materials and materials that meet our labor standards), significant changes in trade policy, natural disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or terrorism, disease outbreaks or other external factors over which we have no control, have at times interrupted and could, in the future, interrupt product supply and, if not effectively managed and remedied, could have an adverse impact on our business, financial condition, results of operations or cash flows.\nOur businesses face cost fluctuations and pressures that could affect our business results.\nOur costs are subject to fluctuations, particularly due to changes in the prices of commodities (including certain petroleum-derived materials like resins and paper-based materials like pulp) and raw and packaging materials and the costs of labor, transportation (including trucks and containers), energy, pension and healthcare. Inflation pressures sometimes result in increases in these input costs. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share. Failure to manage these fluctuations and to anticipate consumer reaction to our management of these fluctuations could adversely impact our results of operations or cash flows.\nThe ability to achieve our business objectives depends on how well we can compete with our local and global competitors in new and existing markets and channels.\nThe consumer products industry is highly competitive. Across all of our categories, we compete against a wide variety of global and local competitors. As a result, we experience ongoing competitive pressures in the environments in which we operate, which may result in challenges in maintaining sales and profit margins. To address these challenges, we must be able to successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product delivery windows and trade terms. In addition, evolving sales channels and business models may affect customer and consumer preferences as well as market dynamics, which, for example, may be seen in the growing consumer preference for shopping online, ease of competitive entry into certain categories and growth in hard discounter channels. Failure to successfully respond to competitive factors and emerging retail trends and effectively compete in growing sales channels and business models, particularly e-commerce and mobile or social commerce applications, could negatively impact our results of operations or cash flows.\nA significant change in customer relationships or in customer demand for our products could have a significant impact on our business.\nWe sell most of our products via retail customers, which include mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. Our success depends on our ability to successfully manage relationships with our retail trade customers, which includes our ability to offer trade terms that are mutually acceptable and are aligned with our pricing and profitability targets. Continued concentration among our retail customers could create significant cost and margin pressure on our business, and our business performance could suffer if we cannot reach agreement with a key customer on trade terms and principles. Our business could also be negatively impacted if a key customer were to significantly reduce the inventory level of or shelf space allocated to our products as a result of increased offerings of other branded manufacturers, private label brands and generic non-branded products or for other reasons, significantly tighten product delivery windows or experience a significant business disruption.\nIf the reputation of the Company or one or more of our brands erodes significantly, it could have a material impact on our financial results.\nThe Company's reputation, and the reputation of our brands, form the foundation of our relationships with key stakeholders and other constituencies, including consumers, customers and suppliers. The quality and safety of our products are critical to our business. Many of our brands have worldwide recognition and our financial success directly depends on the success of our brands. The success of our brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand's image or its ability to attract consumers. Our results of operations or cash flows could also be negatively impacted if the Company or one of our brands suffers substantial harm to its reputation due to a significant product recall, product-related litigation, defects or impurities in our products, product misuse, changing consumer perceptions of certain ingredients, negative perceptions of packaging (such as plastic and other petroleum-based materials), lack of recyclability or other environmental attributes, concerns about actual or alleged labor or equality and inclusion practices, privacy failures or data breaches, allegations of product tampering or the distribution and sale of counterfeit products. Additionally, negative or inaccurate postings or comments on social media or networking websites about the Company or one of its brands could generate adverse publicity that could damage the reputation of our brands or the Company. If we are unable to effectively manage real or perceived issues, including concerns about safety, quality, ingredients, efficacy, environmental or social impacts or similar matters, sentiments toward the Company or our products could be negatively impacted, and our results of operations or cash flows could suffer. Our Company also devotes time and resources to citizenship efforts that are consistent with our corporate values and are designed to strengthen our business and protect and preserve our reputation, including programs driving ethics and corporate responsibility, strong communities, equality and inclusion and environmental sustainability. While the Company \n\n\n"}
{"QID":"q_Ri040","Question":"How does a sudden outbreak of disease like COVID 19 affects the opearions of P&G? ","ground_truth_answer":"A sudden outbreak of disease, such as COVID-19, affects Procter & Gamble's operations through several key challenges. First, there may be significant reductions or volatility in demand for products due to consumer illness, quarantine, or financial hardship, potentially leading to shifts from higher-priced to lower-priced products or increased stockpiling. Such demand fluctuations complicate business planning and can negatively impact results and cash flows.","question_type":"Risk","page_number":"7","accession_number":"0000080424-24-000083","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 7: \nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n","context_markdown_without_headers":"\nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 7: \nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n","context_html_without_headers":"\nThe Procter & Gamble Company 7\n\n\nfrom customers, consumers, employees, vendors, investors and other stakeholders, and we may suffer financial and reputational damage as a result. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, reporting requirements, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs.\nPeriodically, we and\/or our suppliers also upgrade IT\/OT systems or adopt new technologies, including those enabled by machine learning or artificial intelligence. If such a new system or technology does not function properly, provides flawed or inaccurate outputs or exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows and generate negative publicity affecting Company reputation and relationships among consumers, customers and other business partners.\nWe must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.\nOur business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern. These impacts may include, but are not limited to:\n\u2022Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or\n\u2022Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import\/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.\nDespite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. \n\nBUSINESS STRATEGY & ORGANIZATIONAL RISKS\n\nOur ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation, evolving digital marketing and selling platforms and changing consumer habits.\nWe are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others and to continue to deliver efficient and effective marketing across evolving media and mobile platforms with dynamic and increasingly more restrictive privacy requirements. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors, customers and vendors. Failure to continually innovate, improve and respond to competitive moves, changing consumer habits and platform evolution, including the timely and effective adoption of emerging technologies, could compromise our competitive position and adversely impact our financial condition, results of operations or cash flows.\nWe must successfully manage ongoing acquisition, joint venture and divestiture activities.\nAs a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.\nOur business results depend on our ability to successfully manage productivity improvements and ongoing organizational change, including attracting and retaining key talent as part of our overall succession planning.\nOur financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments and employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to \n\n\n"}
{"QID":"q_Ri041","Question":"What was the impact of regulatory changes related to taxation in FY 2024 on P&Gs business and operations?","ground_truth_answer":"In fiscal year 2024, Procter & Gamble's business and operations were impacted by ongoing regulatory changes, primarily related to taxation. The comprehensive U.S. tax reform proposals under the current administration, including potential increases in the corporate income tax rate and changes to the taxation of non-U.S. earnings, could have significant effects, though their final impact remains uncertain due to the controversial nature and potential legislative changes.","question_type":"Risk","page_number":"8, 9","accession_number":"0000080424-24-000083","item":"Item 1A. Risk Factors.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 8: \n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 9: \nThe Procter & Gamble Company 9\n\n\nenacted and implemented, a material impact to our financial condition, results of operations, cash flows or effective tax rate may occur. \nFurthermore, we are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation, including maintaining our intended tax treatment of divestiture transactions such as the fiscal 2017 Beauty Brands transaction with Coty, may differ materially from the tax amounts recorded in our Consolidated Financial Statements, which could adversely impact our results of operations and cash flows.\n","context_markdown_without_headers":"\n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n, \nThe Procter & Gamble Company 9\n\n\nenacted and implemented, a material impact to our financial condition, results of operations, cash flows or effective tax rate may occur. \nFurthermore, we are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation, including maintaining our intended tax treatment of divestiture transactions such as the fiscal 2017 Beauty Brands transaction with Coty, may differ materially from the tax amounts recorded in our Consolidated Financial Statements, which could adversely impact our results of operations and cash flows.\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 8: \n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 9: \nThe Procter & Gamble Company 9\n\n\nenacted and implemented, a material impact to our financial condition, results of operations, cash flows or effective tax rate may occur. \nFurthermore, we are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation, including maintaining our intended tax treatment of divestiture transactions such as the fiscal 2017 Beauty Brands transaction with Coty, may differ materially from the tax amounts recorded in our Consolidated Financial Statements, which could adversely impact our results of operations and cash flows.\n","context_html_without_headers":"\n8 The Procter & Gamble Company\n\n\ninvest in business growth, could adversely impact our results of operations and cash flows. Additionally, successfully executing organizational change, management transitions at leadership levels of the Company and motivation and retention of key employees is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified individuals. Our success depends on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense as well as continuing the development and execution of robust leadership succession plans.\n\nLEGAL & REGULATORY RISKS\n\nWe must successfully manage compliance with current and expanding laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.\nOur business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, manufacturing processes, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, cybersecurity and data protection, artificial intelligence, environmental (including increasing focus on the climate, nature, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters. In addition, increasing governmental and societal attention to environmental, social and governance (ESG) matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, waste production, water usage, nature impacts, human capital, labor and risk oversight, could expand the nature, scope and complexity of matters that we are required to control, assess and report. These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results. Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceedings and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business. Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our financial condition, results of operations and cash flows. Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position.\nChanges in applicable tax laws and regulations and resolutions of tax disputes could negatively affect our financial results.\nThe Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, in December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the U.S. Tax Act). The changes included in the U.S. Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings. While these proposals are controversial, likely to change during the legislative process and may prove difficult to enact as proposed in the current closely divided U.S. Congress, their impact could nonetheless be significant.\nAdditionally, longstanding international tax norms that determine each country's jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on \"Addressing the Challenges of the Digitalization of the Economy.\" The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax. In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Most member states complied with the directive while some were permitted a delayed implementation. In addition, several non-EU countries have proposed and\/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. \nBased on current legislation and available guidance, we do not anticipate the Pillar Two global minimum tax to have a material impact to our financial condition, results of operations, cash flows or effective tax rate in the fiscal year ending June 30, 2025. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice to monitor all changes in tax laws. As the Pillar Two global minimum tax and other tax laws and related regulations are revised, \n\n\n, \nThe Procter & Gamble Company 9\n\n\nenacted and implemented, a material impact to our financial condition, results of operations, cash flows or effective tax rate may occur. \nFurthermore, we are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation, including maintaining our intended tax treatment of divestiture transactions such as the fiscal 2017 Beauty Brands transaction with Coty, may differ materially from the tax amounts recorded in our Consolidated Financial Statements, which could adversely impact our results of operations and cash flows.\n"}
{"QID":"q_Ri042","Question":"How does P&G manages the cybersecurity risk faced by the business?","ground_truth_answer":"The Company manages its cybersecurity risk through a comprehensive oversight and management structure. The Board of Directors reviews significant enterprise risks, including cybersecurity, at least annually. The Audit Committee specifically oversees the security of the Company\u2019s information systems and receives updates from the CIO and CISO on cybersecurity programs and trends.\n\nThe Security Operations Center handles incident alerts, working with central experts to contain and manage threats. Incidents are reported to the CISO, management, and the Audit Committee based on escalation criteria. The central team also reviews incident reports to update the CISO and refine the cybersecurity approach.\n","question_type":"Risk","page_number":"9","accession_number":"0000080424-24-000083","item":"Item 1C. Cybersecurity.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 9: \nItem 1C. Cybersecurity.\n\n\nRisk Management and Strategy\n\nThe Company employs multiple tools and processes for assessing, identifying, and managing material risks from cybersecurity threats. A multi-functional enterprise security team reviews and assesses top cybersecurity risks. This assessment is shared with members of senior management, including the Chief Information Officer (CIO) and Chief Information Security Officer (CISO), and helps guide the Company's cybersecurity operational priorities and strategy. In addition, cybersecurity risks are integrated into the Company's broader Enterprise Risk Management program and, when identified, are reported to relevant business and governance leaders within the Company for appropriate action.\nTo support the ongoing identification and management of cybersecurity issues, the Company provides information security employee training, conducts global and targeted phishing simulation campaigns and conducts tabletop exercises. The Company also deploys a large library of security tools and experts to help prevent, detect, contain, eradicate and recover from potential cybersecurity issues and cyber-attacks. Further, the Company engages third-party consultants and services for cyber intelligence, insights and assessments of its cybersecurity risk posture and governance. \nCybersecurity reviews are embedded into the Company's Third-Party Risk Management program. Generally under this program, third parties that process personal data or high-risk business data on behalf of the Company complete privacy and cybersecurity assessments on a risk basis, which may require such third parties to sign data processing agreements, comply with particular security controls or complete an additional security and privacy assessment.\nAs a global company, we manage a variety of cybersecurity threats and cannot wholly eliminate the risk of adverse impacts from such incidents. However, as of the date of this Form 10-K, we have not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of our operations or financial condition. For additional information on the risks from cybersecurity threats that we have faced in the past and expect to continue to face in the future, please refer to the \"Risk Factors\" in Part I, Item 1A of this Form 10-K.\n\nGovernance\n\nThe Company's Board of Directors oversees cybersecurity risks consistent with its general risk oversight responsibility. The Audit Committee of the Board has specific responsibility for reviewing the status of the security of the Company's electronic data processing information systems and the general security, including cybersecurity, of the Company's people, assets and information systems. In support of this general oversight, the full Board reviews at least annually the most significant enterprise risks facing the Company, including cybersecurity risks, as identified in the Company's Enterprise Risk Management program. This review, which includes key members of senior management, covers any key risks from information security that have been identified and corresponding action plans. The Audit Committee also receives regular updates from the Company's CIO and CISO about the Company's information security and systems security programs and plans, including emerging trends and progress on overall enterprise cybersecurity programs and priorities. These updates occur at least three times a year, with interim updates as needed. \nThe Company's management is responsible for implementing its strategic plans, including identifying, evaluating, managing and mitigating the risks inherent in them, such as cybersecurity risks. Within management, the Company's CISO has specific responsibility for cybersecurity risk management, reporting to the CIO. \nThe Company's CISO has over 15 years of experience in cybersecurity, information security and information risk management, including several years each in security engineering and in operations, as well as running incident response organizations. The CISO's organization includes a dedicated team of centralized information security experts and a network of security professionals embedded in each business unit and function. \nThe CISO also leads the design and development of the Company's cybersecurity program, relying on functional experts within the central Information Security organization as well as on information security experts within each of the Company's Organizational Units. These embedded experts are responsible for the execution of the Company's overall information security strategy and report security risks in their area of responsibility to their Organization Unit leader and to the CISO. Experts within the Company's central Information Security organization help develop the Company's cybersecurity strategies, policies and standards and similarly report security risks within the central enterprise to the CISO.\n\n\n","context_markdown_without_headers":"\nItem 1C. Cybersecurity.\n\n\nRisk Management and Strategy\n\nThe Company employs multiple tools and processes for assessing, identifying, and managing material risks from cybersecurity threats. A multi-functional enterprise security team reviews and assesses top cybersecurity risks. This assessment is shared with members of senior management, including the Chief Information Officer (CIO) and Chief Information Security Officer (CISO), and helps guide the Company's cybersecurity operational priorities and strategy. In addition, cybersecurity risks are integrated into the Company's broader Enterprise Risk Management program and, when identified, are reported to relevant business and governance leaders within the Company for appropriate action.\nTo support the ongoing identification and management of cybersecurity issues, the Company provides information security employee training, conducts global and targeted phishing simulation campaigns and conducts tabletop exercises. The Company also deploys a large library of security tools and experts to help prevent, detect, contain, eradicate and recover from potential cybersecurity issues and cyber-attacks. Further, the Company engages third-party consultants and services for cyber intelligence, insights and assessments of its cybersecurity risk posture and governance. \nCybersecurity reviews are embedded into the Company's Third-Party Risk Management program. Generally under this program, third parties that process personal data or high-risk business data on behalf of the Company complete privacy and cybersecurity assessments on a risk basis, which may require such third parties to sign data processing agreements, comply with particular security controls or complete an additional security and privacy assessment.\nAs a global company, we manage a variety of cybersecurity threats and cannot wholly eliminate the risk of adverse impacts from such incidents. However, as of the date of this Form 10-K, we have not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of our operations or financial condition. For additional information on the risks from cybersecurity threats that we have faced in the past and expect to continue to face in the future, please refer to the \"Risk Factors\" in Part I, Item 1A of this Form 10-K.\n\nGovernance\n\nThe Company's Board of Directors oversees cybersecurity risks consistent with its general risk oversight responsibility. The Audit Committee of the Board has specific responsibility for reviewing the status of the security of the Company's electronic data processing information systems and the general security, including cybersecurity, of the Company's people, assets and information systems. In support of this general oversight, the full Board reviews at least annually the most significant enterprise risks facing the Company, including cybersecurity risks, as identified in the Company's Enterprise Risk Management program. This review, which includes key members of senior management, covers any key risks from information security that have been identified and corresponding action plans. The Audit Committee also receives regular updates from the Company's CIO and CISO about the Company's information security and systems security programs and plans, including emerging trends and progress on overall enterprise cybersecurity programs and priorities. These updates occur at least three times a year, with interim updates as needed. \nThe Company's management is responsible for implementing its strategic plans, including identifying, evaluating, managing and mitigating the risks inherent in them, such as cybersecurity risks. Within management, the Company's CISO has specific responsibility for cybersecurity risk management, reporting to the CIO. \nThe Company's CISO has over 15 years of experience in cybersecurity, information security and information risk management, including several years each in security engineering and in operations, as well as running incident response organizations. The CISO's organization includes a dedicated team of centralized information security experts and a network of security professionals embedded in each business unit and function. \nThe CISO also leads the design and development of the Company's cybersecurity program, relying on functional experts within the central Information Security organization as well as on information security experts within each of the Company's Organizational Units. These embedded experts are responsible for the execution of the Company's overall information security strategy and report security risks in their area of responsibility to their Organization Unit leader and to the CISO. Experts within the Company's central Information Security organization help develop the Company's cybersecurity strategies, policies and standards and similarly report security risks within the central enterprise to the CISO.\n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 9: \nItem 1C. Cybersecurity.\n\n\nRisk Management and Strategy\n\nThe Company employs multiple tools and processes for assessing, identifying, and managing material risks from cybersecurity threats. A multi-functional enterprise security team reviews and assesses top cybersecurity risks. This assessment is shared with members of senior management, including the Chief Information Officer (CIO) and Chief Information Security Officer (CISO), and helps guide the Company's cybersecurity operational priorities and strategy. In addition, cybersecurity risks are integrated into the Company's broader Enterprise Risk Management program and, when identified, are reported to relevant business and governance leaders within the Company for appropriate action.\nTo support the ongoing identification and management of cybersecurity issues, the Company provides information security employee training, conducts global and targeted phishing simulation campaigns and conducts tabletop exercises. The Company also deploys a large library of security tools and experts to help prevent, detect, contain, eradicate and recover from potential cybersecurity issues and cyber-attacks. Further, the Company engages third-party consultants and services for cyber intelligence, insights and assessments of its cybersecurity risk posture and governance. \nCybersecurity reviews are embedded into the Company's Third-Party Risk Management program. Generally under this program, third parties that process personal data or high-risk business data on behalf of the Company complete privacy and cybersecurity assessments on a risk basis, which may require such third parties to sign data processing agreements, comply with particular security controls or complete an additional security and privacy assessment.\nAs a global company, we manage a variety of cybersecurity threats and cannot wholly eliminate the risk of adverse impacts from such incidents. However, as of the date of this Form 10-K, we have not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of our operations or financial condition. For additional information on the risks from cybersecurity threats that we have faced in the past and expect to continue to face in the future, please refer to the \"Risk Factors\" in Part I, Item 1A of this Form 10-K.\n\nGovernance\n\nThe Company's Board of Directors oversees cybersecurity risks consistent with its general risk oversight responsibility. The Audit Committee of the Board has specific responsibility for reviewing the status of the security of the Company's electronic data processing information systems and the general security, including cybersecurity, of the Company's people, assets and information systems. In support of this general oversight, the full Board reviews at least annually the most significant enterprise risks facing the Company, including cybersecurity risks, as identified in the Company's Enterprise Risk Management program. This review, which includes key members of senior management, covers any key risks from information security that have been identified and corresponding action plans. The Audit Committee also receives regular updates from the Company's CIO and CISO about the Company's information security and systems security programs and plans, including emerging trends and progress on overall enterprise cybersecurity programs and priorities. These updates occur at least three times a year, with interim updates as needed. \nThe Company's management is responsible for implementing its strategic plans, including identifying, evaluating, managing and mitigating the risks inherent in them, such as cybersecurity risks. Within management, the Company's CISO has specific responsibility for cybersecurity risk management, reporting to the CIO. \nThe Company's CISO has over 15 years of experience in cybersecurity, information security and information risk management, including several years each in security engineering and in operations, as well as running incident response organizations. The CISO's organization includes a dedicated team of centralized information security experts and a network of security professionals embedded in each business unit and function. \nThe CISO also leads the design and development of the Company's cybersecurity program, relying on functional experts within the central Information Security organization as well as on information security experts within each of the Company's Organizational Units. These embedded experts are responsible for the execution of the Company's overall information security strategy and report security risks in their area of responsibility to their Organization Unit leader and to the CISO. Experts within the Company's central Information Security organization help develop the Company's cybersecurity strategies, policies and standards and similarly report security risks within the central enterprise to the CISO.\n\n\n","context_html_without_headers":"\nItem 1C. Cybersecurity.\n\n\nRisk Management and Strategy\n\nThe Company employs multiple tools and processes for assessing, identifying, and managing material risks from cybersecurity threats. A multi-functional enterprise security team reviews and assesses top cybersecurity risks. This assessment is shared with members of senior management, including the Chief Information Officer (CIO) and Chief Information Security Officer (CISO), and helps guide the Company's cybersecurity operational priorities and strategy. In addition, cybersecurity risks are integrated into the Company's broader Enterprise Risk Management program and, when identified, are reported to relevant business and governance leaders within the Company for appropriate action.\nTo support the ongoing identification and management of cybersecurity issues, the Company provides information security employee training, conducts global and targeted phishing simulation campaigns and conducts tabletop exercises. The Company also deploys a large library of security tools and experts to help prevent, detect, contain, eradicate and recover from potential cybersecurity issues and cyber-attacks. Further, the Company engages third-party consultants and services for cyber intelligence, insights and assessments of its cybersecurity risk posture and governance. \nCybersecurity reviews are embedded into the Company's Third-Party Risk Management program. Generally under this program, third parties that process personal data or high-risk business data on behalf of the Company complete privacy and cybersecurity assessments on a risk basis, which may require such third parties to sign data processing agreements, comply with particular security controls or complete an additional security and privacy assessment.\nAs a global company, we manage a variety of cybersecurity threats and cannot wholly eliminate the risk of adverse impacts from such incidents. However, as of the date of this Form 10-K, we have not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of our operations or financial condition. For additional information on the risks from cybersecurity threats that we have faced in the past and expect to continue to face in the future, please refer to the \"Risk Factors\" in Part I, Item 1A of this Form 10-K.\n\nGovernance\n\nThe Company's Board of Directors oversees cybersecurity risks consistent with its general risk oversight responsibility. The Audit Committee of the Board has specific responsibility for reviewing the status of the security of the Company's electronic data processing information systems and the general security, including cybersecurity, of the Company's people, assets and information systems. In support of this general oversight, the full Board reviews at least annually the most significant enterprise risks facing the Company, including cybersecurity risks, as identified in the Company's Enterprise Risk Management program. This review, which includes key members of senior management, covers any key risks from information security that have been identified and corresponding action plans. The Audit Committee also receives regular updates from the Company's CIO and CISO about the Company's information security and systems security programs and plans, including emerging trends and progress on overall enterprise cybersecurity programs and priorities. These updates occur at least three times a year, with interim updates as needed. \nThe Company's management is responsible for implementing its strategic plans, including identifying, evaluating, managing and mitigating the risks inherent in them, such as cybersecurity risks. Within management, the Company's CISO has specific responsibility for cybersecurity risk management, reporting to the CIO. \nThe Company's CISO has over 15 years of experience in cybersecurity, information security and information risk management, including several years each in security engineering and in operations, as well as running incident response organizations. The CISO's organization includes a dedicated team of centralized information security experts and a network of security professionals embedded in each business unit and function. \nThe CISO also leads the design and development of the Company's cybersecurity program, relying on functional experts within the central Information Security organization as well as on information security experts within each of the Company's Organizational Units. These embedded experts are responsible for the execution of the Company's overall information security strategy and report security risks in their area of responsibility to their Organization Unit leader and to the CISO. Experts within the Company's central Information Security organization help develop the Company's cybersecurity strategies, policies and standards and similarly report security risks within the central enterprise to the CISO.\n\n\n"}
{"QID":"q_Ri043","Question":"What environmental risks faced by P&G, and has it been involved in any litigation related to environmental regulations?","ground_truth_answer":"The Company faces environmental risks related to regulatory compliance and sustainability practices. Key risks include managing greenhouse gas emissions, reducing the use of virgin petroleum-based plastics, enhancing packaging recyclability, and optimizing water usage. The Company is committed to addressing these risks through its Climate Transition Action Plan, which focuses on achieving net-zero emissions by 2040 and improving overall environmental sustainability.\n\nIn terms of litigation, on November 22, 2023, Procter & Gamble UK received notice from the U.K. Environment Agency regarding an intent to assess a civil penalty for failing to secure a required permit for its London-based manufacturing site under the Emission Trading Systems. Although the site has been properly registered since March 2021, this issue highlights ongoing regulatory challenges related to environmental compliance.","question_type":"Risk","page_number":"2; 10","accession_number":"0000080424-24-000083;0000080424-24-000083","item":"Item 1. Business.;Item 3. Legal Proceedings.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 2: \n2 The Procter & Gamble Company\n\n\nGovernment Regulation. Our Company is subject to a wide variety of laws and regulations across the countries in which we do business. In the United States, many of our products and manufacturing operations are subject to one or more federal or state regulatory agencies, including the U.S. Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Federal Trade Commission (FTC) and the Consumer Product Safety Commission (CPSC). We are also subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act, and antitrust and competition laws and regulations that govern our dealings with suppliers, customers, competitors and government officials. \nIn addition, many foreign jurisdictions in which we do business have regulations and regulatory bodies that govern similar aspects of our operations and products, in some cases to an even more significant degree. We are also subject to expanding laws and regulations related to environmental protection and other sustainability-related matters, non-financial reporting and diligence, labor and employment, trade, taxation and privacy and data protection, including the European Union's General Data Protection Regulation and similar regulations in states within the United States and in countries around the world.\nThe Company has in place compliance programs and internal and external experts to help guide our business in complying with these and other existing laws and regulations that apply to us around the globe; and we have made, and plan to continue making, necessary expenditures for compliance with these laws and regulations. We also expect that our many suppliers, consultants and other third parties working on our behalf share our commitment to compliance, and we have policies and procedures in place to manage these relationships, though they inherently involve a lesser degree of control over operations and governance. We do not expect that the Company's expenditures for compliance with current government regulations, including current environmental regulations, will have a material effect on our total capital expenditures, earnings or competitive position in fiscal year 2025 as compared to prior periods.\nHuman Capital. Our employees are a key source of competitive advantage. Their actions, guided by our Purpose, Values and Principles (PVPs), are critical to the long-term success of our business. We aim to retain our talented employees by offering competitive compensation and benefits, strong career development and a respectful and inclusive culture that provides equal opportunity for all. \nOur Board of Directors, through the Compensation and Leadership Development Committee (C&LD Committee), provides oversight of the Company's policies and strategy relating to talent, including equality and inclusion, as well as the Company's compensation principles and practices. The C&LD Committee also evaluates and approves the Company's compensation plans, policies and programs applicable to our senior executives.\n\nEmployees\n\nAs of June 30, 2024, the Company had approximately 108,000 employees, unchanged versus the prior year. The total number of employees is an estimate of total Company employees excluding interns, co-ops, contractors and employees of joint ventures. 48% of our employees are in manufacturing roles and 28% of our employees are located in the United States. 42% of our global employees are women and 32% of our U.S. employees identify as multicultural.\n\nTraining and Development\n\nWe focus on attracting, developing and retaining the widest pool of talent available, both from universities and the broader market. We recruit from universities across markets in which we compete and are generally able to select from the top talent. We focus on developing our employees by providing a variety of job experiences, training programs and skill development opportunities. Given our develop-from-within model for staffing most of our senior leadership positions, it is particularly important for us to ensure holistic growth and full engagement of our employees. \n\nDiversity, Equality and Inclusion\n\nAs a consumer products company, we believe that it is important for our workforce to reflect the diversity of our consumers worldwide. We also seek to foster an inclusive work environment where each individual can bring their authentic self, which helps drive innovation and enables us to better serve our consumers. We aspire to achieve equal gender representation globally and at key management and leadership levels. Within the U.S. workforce, our aspiration is to achieve 40% multicultural representation overall as well as at management and leadership levels. \n\nCompensation and Benefits\n\nMarket-competitive compensation and reward programs are critical elements of our employee value equation to attract and retain the best talent. Our total rewards programs are based on the principles of paying for performance, paying competitively versus peer companies that we compete with for talent in the marketplace and focusing on long-term success through a combination of short-term and long-term incentive programs. We also offer competitive benefit programs, including retirement plans and health insurance, in line with local country practices, with flexibility to accommodate the needs of a diverse workforce.\nSustainability. Environmental sustainability is integrated into our business strategy. We are focused on designing and manufacturing irresistibly superior products that are more sustainable. We aim to reduce our own environmental footprint and enable our consumers to reduce their footprint without compromising on the performance of the products they use. We develop and license technologies that can be used across industries to improve environmental sustainability at a broader scale. \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 10: \nItem 3. Legal Proceedings.\n\nThe Company is subject, from time to time, to certain legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters and tax. In addition, SEC regulations require that we disclose certain environmental proceedings arising under Federal, State or local law when a governmental authority is a party and such proceeding involves potential monetary sanctions that the Company reasonably believes will exceed a certain threshold ($1 million or more).\nOn November 22, 2023, Procter & Gamble UK (\"P&G UK\"), a United Kingdom based wholly owned subsidiary of the Company, received notification from the U.K. Environment Agency of its intent to assess an unspecified civil penalty for P&G UK's prior inadvertent failure to secure a required permit for its London-based manufacturing site under the European Union's and United Kingdom's Emission Trading Systems. Among other requirements, these Emissions Trading Systems require registration of the site and accounting of and payment for certain past greenhouse gas emissions. The site has been properly registered since March 2021, and P&G UK proactively notified the U.K. Environment Agency after learning of the prior issue.\nThere are no other relevant matters to disclose under this Item for this period. See Note 13 to our Consolidated Financial Statements for information on certain legal proceedings for which there are contingencies. \n\nThis item should be read in conjunction with the Company's Risk Factors in Part I, Item 1A for additional information.\n\n","context_markdown_without_headers":"\n2 The Procter & Gamble Company\n\n\nGovernment Regulation. Our Company is subject to a wide variety of laws and regulations across the countries in which we do business. In the United States, many of our products and manufacturing operations are subject to one or more federal or state regulatory agencies, including the U.S. Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Federal Trade Commission (FTC) and the Consumer Product Safety Commission (CPSC). We are also subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act, and antitrust and competition laws and regulations that govern our dealings with suppliers, customers, competitors and government officials. \nIn addition, many foreign jurisdictions in which we do business have regulations and regulatory bodies that govern similar aspects of our operations and products, in some cases to an even more significant degree. We are also subject to expanding laws and regulations related to environmental protection and other sustainability-related matters, non-financial reporting and diligence, labor and employment, trade, taxation and privacy and data protection, including the European Union's General Data Protection Regulation and similar regulations in states within the United States and in countries around the world.\nThe Company has in place compliance programs and internal and external experts to help guide our business in complying with these and other existing laws and regulations that apply to us around the globe; and we have made, and plan to continue making, necessary expenditures for compliance with these laws and regulations. We also expect that our many suppliers, consultants and other third parties working on our behalf share our commitment to compliance, and we have policies and procedures in place to manage these relationships, though they inherently involve a lesser degree of control over operations and governance. We do not expect that the Company's expenditures for compliance with current government regulations, including current environmental regulations, will have a material effect on our total capital expenditures, earnings or competitive position in fiscal year 2025 as compared to prior periods.\nHuman Capital. Our employees are a key source of competitive advantage. Their actions, guided by our Purpose, Values and Principles (PVPs), are critical to the long-term success of our business. We aim to retain our talented employees by offering competitive compensation and benefits, strong career development and a respectful and inclusive culture that provides equal opportunity for all. \nOur Board of Directors, through the Compensation and Leadership Development Committee (C&LD Committee), provides oversight of the Company's policies and strategy relating to talent, including equality and inclusion, as well as the Company's compensation principles and practices. The C&LD Committee also evaluates and approves the Company's compensation plans, policies and programs applicable to our senior executives.\n\nEmployees\n\nAs of June 30, 2024, the Company had approximately 108,000 employees, unchanged versus the prior year. The total number of employees is an estimate of total Company employees excluding interns, co-ops, contractors and employees of joint ventures. 48% of our employees are in manufacturing roles and 28% of our employees are located in the United States. 42% of our global employees are women and 32% of our U.S. employees identify as multicultural.\n\nTraining and Development\n\nWe focus on attracting, developing and retaining the widest pool of talent available, both from universities and the broader market. We recruit from universities across markets in which we compete and are generally able to select from the top talent. We focus on developing our employees by providing a variety of job experiences, training programs and skill development opportunities. Given our develop-from-within model for staffing most of our senior leadership positions, it is particularly important for us to ensure holistic growth and full engagement of our employees. \n\nDiversity, Equality and Inclusion\n\nAs a consumer products company, we believe that it is important for our workforce to reflect the diversity of our consumers worldwide. We also seek to foster an inclusive work environment where each individual can bring their authentic self, which helps drive innovation and enables us to better serve our consumers. We aspire to achieve equal gender representation globally and at key management and leadership levels. Within the U.S. workforce, our aspiration is to achieve 40% multicultural representation overall as well as at management and leadership levels. \n\nCompensation and Benefits\n\nMarket-competitive compensation and reward programs are critical elements of our employee value equation to attract and retain the best talent. Our total rewards programs are based on the principles of paying for performance, paying competitively versus peer companies that we compete with for talent in the marketplace and focusing on long-term success through a combination of short-term and long-term incentive programs. We also offer competitive benefit programs, including retirement plans and health insurance, in line with local country practices, with flexibility to accommodate the needs of a diverse workforce.\nSustainability. Environmental sustainability is integrated into our business strategy. We are focused on designing and manufacturing irresistibly superior products that are more sustainable. We aim to reduce our own environmental footprint and enable our consumers to reduce their footprint without compromising on the performance of the products they use. We develop and license technologies that can be used across industries to improve environmental sustainability at a broader scale. \n\n\n, \nItem 3. Legal Proceedings.\n\nThe Company is subject, from time to time, to certain legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters and tax. In addition, SEC regulations require that we disclose certain environmental proceedings arising under Federal, State or local law when a governmental authority is a party and such proceeding involves potential monetary sanctions that the Company reasonably believes will exceed a certain threshold ($1 million or more).\nOn November 22, 2023, Procter & Gamble UK (\"P&G UK\"), a United Kingdom based wholly owned subsidiary of the Company, received notification from the U.K. Environment Agency of its intent to assess an unspecified civil penalty for P&G UK's prior inadvertent failure to secure a required permit for its London-based manufacturing site under the European Union's and United Kingdom's Emission Trading Systems. Among other requirements, these Emissions Trading Systems require registration of the site and accounting of and payment for certain past greenhouse gas emissions. The site has been properly registered since March 2021, and P&G UK proactively notified the U.K. Environment Agency after learning of the prior issue.\nThere are no other relevant matters to disclose under this Item for this period. See Note 13 to our Consolidated Financial Statements for information on certain legal proceedings for which there are contingencies. \n\nThis item should be read in conjunction with the Company's Risk Factors in Part I, Item 1A for additional information.\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 2: \n2 The Procter & Gamble Company\n\n\nGovernment Regulation. Our Company is subject to a wide variety of laws and regulations across the countries in which we do business. In the United States, many of our products and manufacturing operations are subject to one or more federal or state regulatory agencies, including the U.S. Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Federal Trade Commission (FTC) and the Consumer Product Safety Commission (CPSC). We are also subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act, and antitrust and competition laws and regulations that govern our dealings with suppliers, customers, competitors and government officials. \nIn addition, many foreign jurisdictions in which we do business have regulations and regulatory bodies that govern similar aspects of our operations and products, in some cases to an even more significant degree. We are also subject to expanding laws and regulations related to environmental protection and other sustainability-related matters, non-financial reporting and diligence, labor and employment, trade, taxation and privacy and data protection, including the European Union's General Data Protection Regulation and similar regulations in states within the United States and in countries around the world.\nThe Company has in place compliance programs and internal and external experts to help guide our business in complying with these and other existing laws and regulations that apply to us around the globe; and we have made, and plan to continue making, necessary expenditures for compliance with these laws and regulations. We also expect that our many suppliers, consultants and other third parties working on our behalf share our commitment to compliance, and we have policies and procedures in place to manage these relationships, though they inherently involve a lesser degree of control over operations and governance. We do not expect that the Company's expenditures for compliance with current government regulations, including current environmental regulations, will have a material effect on our total capital expenditures, earnings or competitive position in fiscal year 2025 as compared to prior periods.\nHuman Capital. Our employees are a key source of competitive advantage. Their actions, guided by our Purpose, Values and Principles (PVPs), are critical to the long-term success of our business. We aim to retain our talented employees by offering competitive compensation and benefits, strong career development and a respectful and inclusive culture that provides equal opportunity for all. \nOur Board of Directors, through the Compensation and Leadership Development Committee (C&LD Committee), provides oversight of the Company's policies and strategy relating to talent, including equality and inclusion, as well as the Company's compensation principles and practices. The C&LD Committee also evaluates and approves the Company's compensation plans, policies and programs applicable to our senior executives.\n\nEmployees\n\nAs of June 30, 2024, the Company had approximately 108,000 employees, unchanged versus the prior year. The total number of employees is an estimate of total Company employees excluding interns, co-ops, contractors and employees of joint ventures. 48% of our employees are in manufacturing roles and 28% of our employees are located in the United States. 42% of our global employees are women and 32% of our U.S. employees identify as multicultural.\n\nTraining and Development\n\nWe focus on attracting, developing and retaining the widest pool of talent available, both from universities and the broader market. We recruit from universities across markets in which we compete and are generally able to select from the top talent. We focus on developing our employees by providing a variety of job experiences, training programs and skill development opportunities. Given our develop-from-within model for staffing most of our senior leadership positions, it is particularly important for us to ensure holistic growth and full engagement of our employees. \n\nDiversity, Equality and Inclusion\n\nAs a consumer products company, we believe that it is important for our workforce to reflect the diversity of our consumers worldwide. We also seek to foster an inclusive work environment where each individual can bring their authentic self, which helps drive innovation and enables us to better serve our consumers. We aspire to achieve equal gender representation globally and at key management and leadership levels. Within the U.S. workforce, our aspiration is to achieve 40% multicultural representation overall as well as at management and leadership levels. \n\nCompensation and Benefits\n\nMarket-competitive compensation and reward programs are critical elements of our employee value equation to attract and retain the best talent. Our total rewards programs are based on the principles of paying for performance, paying competitively versus peer companies that we compete with for talent in the marketplace and focusing on long-term success through a combination of short-term and long-term incentive programs. We also offer competitive benefit programs, including retirement plans and health insurance, in line with local country practices, with flexibility to accommodate the needs of a diverse workforce.\nSustainability. Environmental sustainability is integrated into our business strategy. We are focused on designing and manufacturing irresistibly superior products that are more sustainable. We aim to reduce our own environmental footprint and enable our consumers to reduce their footprint without compromising on the performance of the products they use. We develop and license technologies that can be used across industries to improve environmental sustainability at a broader scale. \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 10: \nItem 3. Legal Proceedings.\n\nThe Company is subject, from time to time, to certain legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters and tax. In addition, SEC regulations require that we disclose certain environmental proceedings arising under Federal, State or local law when a governmental authority is a party and such proceeding involves potential monetary sanctions that the Company reasonably believes will exceed a certain threshold ($1 million or more).\nOn November 22, 2023, Procter & Gamble UK (\"P&G UK\"), a United Kingdom based wholly owned subsidiary of the Company, received notification from the U.K. Environment Agency of its intent to assess an unspecified civil penalty for P&G UK's prior inadvertent failure to secure a required permit for its London-based manufacturing site under the European Union's and United Kingdom's Emission Trading Systems. Among other requirements, these Emissions Trading Systems require registration of the site and accounting of and payment for certain past greenhouse gas emissions. The site has been properly registered since March 2021, and P&G UK proactively notified the U.K. Environment Agency after learning of the prior issue.\nThere are no other relevant matters to disclose under this Item for this period. See Note 13 to our Consolidated Financial Statements for information on certain legal proceedings for which there are contingencies. \n\nThis item should be read in conjunction with the Company's Risk Factors in Part I, Item 1A for additional information.\n\n","context_html_without_headers":"\n2 The Procter & Gamble Company\n\n\nGovernment Regulation. Our Company is subject to a wide variety of laws and regulations across the countries in which we do business. In the United States, many of our products and manufacturing operations are subject to one or more federal or state regulatory agencies, including the U.S. Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Federal Trade Commission (FTC) and the Consumer Product Safety Commission (CPSC). We are also subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act, and antitrust and competition laws and regulations that govern our dealings with suppliers, customers, competitors and government officials. \nIn addition, many foreign jurisdictions in which we do business have regulations and regulatory bodies that govern similar aspects of our operations and products, in some cases to an even more significant degree. We are also subject to expanding laws and regulations related to environmental protection and other sustainability-related matters, non-financial reporting and diligence, labor and employment, trade, taxation and privacy and data protection, including the European Union's General Data Protection Regulation and similar regulations in states within the United States and in countries around the world.\nThe Company has in place compliance programs and internal and external experts to help guide our business in complying with these and other existing laws and regulations that apply to us around the globe; and we have made, and plan to continue making, necessary expenditures for compliance with these laws and regulations. We also expect that our many suppliers, consultants and other third parties working on our behalf share our commitment to compliance, and we have policies and procedures in place to manage these relationships, though they inherently involve a lesser degree of control over operations and governance. We do not expect that the Company's expenditures for compliance with current government regulations, including current environmental regulations, will have a material effect on our total capital expenditures, earnings or competitive position in fiscal year 2025 as compared to prior periods.\nHuman Capital. Our employees are a key source of competitive advantage. Their actions, guided by our Purpose, Values and Principles (PVPs), are critical to the long-term success of our business. We aim to retain our talented employees by offering competitive compensation and benefits, strong career development and a respectful and inclusive culture that provides equal opportunity for all. \nOur Board of Directors, through the Compensation and Leadership Development Committee (C&LD Committee), provides oversight of the Company's policies and strategy relating to talent, including equality and inclusion, as well as the Company's compensation principles and practices. The C&LD Committee also evaluates and approves the Company's compensation plans, policies and programs applicable to our senior executives.\n\nEmployees\n\nAs of June 30, 2024, the Company had approximately 108,000 employees, unchanged versus the prior year. The total number of employees is an estimate of total Company employees excluding interns, co-ops, contractors and employees of joint ventures. 48% of our employees are in manufacturing roles and 28% of our employees are located in the United States. 42% of our global employees are women and 32% of our U.S. employees identify as multicultural.\n\nTraining and Development\n\nWe focus on attracting, developing and retaining the widest pool of talent available, both from universities and the broader market. We recruit from universities across markets in which we compete and are generally able to select from the top talent. We focus on developing our employees by providing a variety of job experiences, training programs and skill development opportunities. Given our develop-from-within model for staffing most of our senior leadership positions, it is particularly important for us to ensure holistic growth and full engagement of our employees. \n\nDiversity, Equality and Inclusion\n\nAs a consumer products company, we believe that it is important for our workforce to reflect the diversity of our consumers worldwide. We also seek to foster an inclusive work environment where each individual can bring their authentic self, which helps drive innovation and enables us to better serve our consumers. We aspire to achieve equal gender representation globally and at key management and leadership levels. Within the U.S. workforce, our aspiration is to achieve 40% multicultural representation overall as well as at management and leadership levels. \n\nCompensation and Benefits\n\nMarket-competitive compensation and reward programs are critical elements of our employee value equation to attract and retain the best talent. Our total rewards programs are based on the principles of paying for performance, paying competitively versus peer companies that we compete with for talent in the marketplace and focusing on long-term success through a combination of short-term and long-term incentive programs. We also offer competitive benefit programs, including retirement plans and health insurance, in line with local country practices, with flexibility to accommodate the needs of a diverse workforce.\nSustainability. Environmental sustainability is integrated into our business strategy. We are focused on designing and manufacturing irresistibly superior products that are more sustainable. We aim to reduce our own environmental footprint and enable our consumers to reduce their footprint without compromising on the performance of the products they use. We develop and license technologies that can be used across industries to improve environmental sustainability at a broader scale. \n\n\n, \nItem 3. Legal Proceedings.\n\nThe Company is subject, from time to time, to certain legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters and tax. In addition, SEC regulations require that we disclose certain environmental proceedings arising under Federal, State or local law when a governmental authority is a party and such proceeding involves potential monetary sanctions that the Company reasonably believes will exceed a certain threshold ($1 million or more).\nOn November 22, 2023, Procter & Gamble UK (\"P&G UK\"), a United Kingdom based wholly owned subsidiary of the Company, received notification from the U.K. Environment Agency of its intent to assess an unspecified civil penalty for P&G UK's prior inadvertent failure to secure a required permit for its London-based manufacturing site under the European Union's and United Kingdom's Emission Trading Systems. Among other requirements, these Emissions Trading Systems require registration of the site and accounting of and payment for certain past greenhouse gas emissions. The site has been properly registered since March 2021, and P&G UK proactively notified the U.K. Environment Agency after learning of the prior issue.\nThere are no other relevant matters to disclose under this Item for this period. See Note 13 to our Consolidated Financial Statements for information on certain legal proceedings for which there are contingencies. \n\nThis item should be read in conjunction with the Company's Risk Factors in Part I, Item 1A for additional information.\n\n"}
{"QID":"q_Ri044","Question":"What are the potential risks in operations of P&G that led to impairment of Gillette indefinite-lived intangible asset in FY 2024?","ground_truth_answer":"During the fiscal year ended June 30, 2024, P&G determined the fair value of the Gillette indefinite-lived intangible asset was less than its carrying value. As a result, the company recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) to reduce the carrying amount to be equivalent to the estimated fair value. As of June 30, 2024, the carrying value of the Gillette indefinite-lived intangible asset was $12.8 billion. The impairment charge arose due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of a new restructuring program focused primarily in certain Enterprise Markets, including Argentina and Nigeria.","question_type":"Risk","page_number":"27; 47","accession_number":"0000080424-24-000083;0000080424-24-000083","item":"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.;Item 8. Financial Statements and Supplementary Data.","context_markdown_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 27: \nThe Procter & Gamble Company 27\n\n\nregarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.\nRealization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.\nWe operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment.\nA core operating principle is that our tax structure is based on our business operating model, such that profits are earned in line with the business substance and functions of the various legal entities in the jurisdictions where those functions are performed. However, because of the complexity of transfer pricing concepts, we may have income tax uncertainty related to the determination of intercompany transfer prices for our various cross-border transactions. We have obtained and continue to prioritize the strategy of seeking advance rulings with tax authorities to reduce this uncertainty. We estimate that our current portfolio of advance rulings reduces this uncertainty with respect to over 70% of our global earnings. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties considering changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have several audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.\nBecause there are several estimates and assumptions inherent in calculating the various components of our tax provision, certain future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate. See Note 5 to the Consolidated Financial Statements for additional details on the Company's income taxes.\n\nEmployee Benefits\n\nWe sponsor various postretirement benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other postretirement benefit (OPRB) plans consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPRB plans require assumptions to estimate the net projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets; and health care cost trend rates. These and other assumptions affect the annual expense and net obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management's best judgment regarding future expectations. As permitted by U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.\nThe expected return on plan assets assumption impacts our defined benefit expense since many of our defined benefit pension plans and our primary OPRB plan are partially funded. The process for setting the expected rates of return is described in Note 8 to the Consolidated Financial Statements. For 2024, the average return on assets assumptions for pension plan assets and OPRB assets was 6.0% and 8.5%, respectively. A change in the rate of return of 100 basis points for both pension and OPRB assets would impact annual after-tax benefit\/expense by approximately $145 million.\nSince pension and OPRB liabilities are measured on a discounted basis, the discount rate impacts our plan obligations and expenses. Discount rates used for our U.S. defined benefit pension and OPRB plans are based on a yield curve constructed from a portfolio of high-quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 4.2% represents a weighted average of local rates in countries where such plans exist. A 100 basis-point change in the discount rate would impact annual after-tax benefit expense by approximately $85 million. The average discount rate on the OPRB plan of 5.8% reflects the higher interest rates generally applicable in the U.S., which is where most of the plan participants receive benefits. A 100 basis-point change in the discount rate would impact annual after-tax OPRB expense by approximately $30 million. See Note 8 to the Consolidated Financial Statements for additional details on our defined benefit pension and OPRB plans.\n\nGoodwill and Intangible Assets\n\nSignificant judgment is required to estimate the fair value of our goodwill reporting units and intangible assets. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant goodwill reporting units and intangible assets. Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 47: \nThe Procter & Gamble Company 47\n\n\n\nNOTE 4\n\n\nGOODWILL AND INTANGIBLE ASSETS\n\nThe change in the net carrying amount of goodwill by reportable segment was as follows:\n|    |                                    |        |          |             |                    |                              |       |       |       |       |    |        |    |       |    |        |\n|---:|:-----------------------------------|:-------|:---------|:------------|:-------------------|:-----------------------------|:------|:------|:------|:------|:---|:-------|:---|:------|:---|:-------|\n|  1 |                                    | Beauty | Grooming | Health Care | Fabric & Home Care | Baby, Feminine & Family Care | TOTAL |       |       |       |    |        |    |       |    |        |\n|  2 | BALANCE AT JUNE 30, 2022 - NET (1) | $      | 13,296   |             | $                  | 12,571                       |       | $     | 7,589 |       | $  | 1,808  | $  | 4,436 | $  | 39,700 |\n|  3 | Acquisitions and divestitures      | 405    |          | -           |                    | -                            |       | -     |       | 33    |    | 438    |    |       |    |        |\n|  4 | Translation and other              | 187    |          | 132         |                    | 129                          |       | 13    |       | 60    |    | 521    |    |       |    |        |\n|  5 | BALANCE AT JUNE 30, 2023 - NET (1) | 13,888 |          | 12,703      |                    | 7,718                        |       | 1,821 |       | 4,529 |    | 40,659 |    |       |    |        |\n|  6 | Acquisitions and divestitures      | (61)   |          | -           |                    | -                            |       | -     |       | -     |    | (61)   |    |       |    |        |\n|  7 | Translation and other              | (104)  |          | (71)        |                    | (80)                         |       | (10)  |       | (30)  |    | (295)  |    |       |    |        |\n|  8 | BALANCE AT JUNE 30, 2024 - NET (1) | $      | 13,723   |             | $                  | 12,633                       |       | $     | 7,638 |       | $  | 1,810  | $  | 4,499 | $  | 40,303 |\n(1)Grooming goodwill balance is net of $7.9 billion accumulated impairment losses.\nGoodwill decreased during fiscal 2024 primarily due to currency translation across all reportable segments and a brand divestiture in the Beauty reportable segment. Goodwill increased during fiscal 2023 primarily due to an acquisition in the Beauty segment, other minor brand acquisitions in the Baby, Feminine & Family Care segment and currency translation across all reportable segments.\nGoodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and indefinite-lived intangible assets to their respective carrying values. We use the income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. When appropriate, the market approach, which leverages comparable company revenue and earnings multiples, is weighted with the income approach to estimate fair value. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability). Significant judgment by management is required to estimate the impact of macroeconomic and other factors on future cash flows. Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. \nWe believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record additional non-cash impairment charges in the future. \nDuring the fiscal year ended June 30, 2024, we determined that the fair value of the Gillette indefinite-lived intangible asset was less than its carrying amount. As a result, we recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) to reduce the carrying amount to be equivalent to the estimated fair value as of December 31, 2023. Following the impairment charge, the carrying value of the Gillette indefinite-lived intangible asset is $12.8 billion. The impairment charge arose due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of a new restructuring program focused primarily in certain Enterprise Markets, including Argentina and Nigeria.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n","context_markdown_without_headers":"\nThe Procter & Gamble Company 27\n\n\nregarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.\nRealization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.\nWe operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment.\nA core operating principle is that our tax structure is based on our business operating model, such that profits are earned in line with the business substance and functions of the various legal entities in the jurisdictions where those functions are performed. However, because of the complexity of transfer pricing concepts, we may have income tax uncertainty related to the determination of intercompany transfer prices for our various cross-border transactions. We have obtained and continue to prioritize the strategy of seeking advance rulings with tax authorities to reduce this uncertainty. We estimate that our current portfolio of advance rulings reduces this uncertainty with respect to over 70% of our global earnings. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties considering changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have several audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.\nBecause there are several estimates and assumptions inherent in calculating the various components of our tax provision, certain future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate. See Note 5 to the Consolidated Financial Statements for additional details on the Company's income taxes.\n\nEmployee Benefits\n\nWe sponsor various postretirement benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other postretirement benefit (OPRB) plans consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPRB plans require assumptions to estimate the net projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets; and health care cost trend rates. These and other assumptions affect the annual expense and net obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management's best judgment regarding future expectations. As permitted by U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.\nThe expected return on plan assets assumption impacts our defined benefit expense since many of our defined benefit pension plans and our primary OPRB plan are partially funded. The process for setting the expected rates of return is described in Note 8 to the Consolidated Financial Statements. For 2024, the average return on assets assumptions for pension plan assets and OPRB assets was 6.0% and 8.5%, respectively. A change in the rate of return of 100 basis points for both pension and OPRB assets would impact annual after-tax benefit\/expense by approximately $145 million.\nSince pension and OPRB liabilities are measured on a discounted basis, the discount rate impacts our plan obligations and expenses. Discount rates used for our U.S. defined benefit pension and OPRB plans are based on a yield curve constructed from a portfolio of high-quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 4.2% represents a weighted average of local rates in countries where such plans exist. A 100 basis-point change in the discount rate would impact annual after-tax benefit expense by approximately $85 million. The average discount rate on the OPRB plan of 5.8% reflects the higher interest rates generally applicable in the U.S., which is where most of the plan participants receive benefits. A 100 basis-point change in the discount rate would impact annual after-tax OPRB expense by approximately $30 million. See Note 8 to the Consolidated Financial Statements for additional details on our defined benefit pension and OPRB plans.\n\nGoodwill and Intangible Assets\n\nSignificant judgment is required to estimate the fair value of our goodwill reporting units and intangible assets. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant goodwill reporting units and intangible assets. Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have \n\n\n, \nThe Procter & Gamble Company 47\n\n\n\nNOTE 4\n\n\nGOODWILL AND INTANGIBLE ASSETS\n\nThe change in the net carrying amount of goodwill by reportable segment was as follows:\n|    |                                    |        |          |             |                    |                              |       |       |       |       |    |        |    |       |    |        |\n|---:|:-----------------------------------|:-------|:---------|:------------|:-------------------|:-----------------------------|:------|:------|:------|:------|:---|:-------|:---|:------|:---|:-------|\n|  1 |                                    | Beauty | Grooming | Health Care | Fabric & Home Care | Baby, Feminine & Family Care | TOTAL |       |       |       |    |        |    |       |    |        |\n|  2 | BALANCE AT JUNE 30, 2022 - NET (1) | $      | 13,296   |             | $                  | 12,571                       |       | $     | 7,589 |       | $  | 1,808  | $  | 4,436 | $  | 39,700 |\n|  3 | Acquisitions and divestitures      | 405    |          | -           |                    | -                            |       | -     |       | 33    |    | 438    |    |       |    |        |\n|  4 | Translation and other              | 187    |          | 132         |                    | 129                          |       | 13    |       | 60    |    | 521    |    |       |    |        |\n|  5 | BALANCE AT JUNE 30, 2023 - NET (1) | 13,888 |          | 12,703      |                    | 7,718                        |       | 1,821 |       | 4,529 |    | 40,659 |    |       |    |        |\n|  6 | Acquisitions and divestitures      | (61)   |          | -           |                    | -                            |       | -     |       | -     |    | (61)   |    |       |    |        |\n|  7 | Translation and other              | (104)  |          | (71)        |                    | (80)                         |       | (10)  |       | (30)  |    | (295)  |    |       |    |        |\n|  8 | BALANCE AT JUNE 30, 2024 - NET (1) | $      | 13,723   |             | $                  | 12,633                       |       | $     | 7,638 |       | $  | 1,810  | $  | 4,499 | $  | 40,303 |\n(1)Grooming goodwill balance is net of $7.9 billion accumulated impairment losses.\nGoodwill decreased during fiscal 2024 primarily due to currency translation across all reportable segments and a brand divestiture in the Beauty reportable segment. Goodwill increased during fiscal 2023 primarily due to an acquisition in the Beauty segment, other minor brand acquisitions in the Baby, Feminine & Family Care segment and currency translation across all reportable segments.\nGoodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and indefinite-lived intangible assets to their respective carrying values. We use the income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. When appropriate, the market approach, which leverages comparable company revenue and earnings multiples, is weighted with the income approach to estimate fair value. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability). Significant judgment by management is required to estimate the impact of macroeconomic and other factors on future cash flows. Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. \nWe believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record additional non-cash impairment charges in the future. \nDuring the fiscal year ended June 30, 2024, we determined that the fair value of the Gillette indefinite-lived intangible asset was less than its carrying amount. As a result, we recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) to reduce the carrying amount to be equivalent to the estimated fair value as of December 31, 2023. Following the impairment charge, the carrying value of the Gillette indefinite-lived intangible asset is $12.8 billion. The impairment charge arose due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of a new restructuring program focused primarily in certain Enterprise Markets, including Argentina and Nigeria.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n","context_html_with_headers":"PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 27: \nThe Procter & Gamble Company 27\n\n\nregarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.\nRealization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.\nWe operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment.\nA core operating principle is that our tax structure is based on our business operating model, such that profits are earned in line with the business substance and functions of the various legal entities in the jurisdictions where those functions are performed. However, because of the complexity of transfer pricing concepts, we may have income tax uncertainty related to the determination of intercompany transfer prices for our various cross-border transactions. We have obtained and continue to prioritize the strategy of seeking advance rulings with tax authorities to reduce this uncertainty. We estimate that our current portfolio of advance rulings reduces this uncertainty with respect to over 70% of our global earnings. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties considering changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have several audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.\nBecause there are several estimates and assumptions inherent in calculating the various components of our tax provision, certain future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate. See Note 5 to the Consolidated Financial Statements for additional details on the Company's income taxes.\n\nEmployee Benefits\n\nWe sponsor various postretirement benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other postretirement benefit (OPRB) plans consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPRB plans require assumptions to estimate the net projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets; and health care cost trend rates. These and other assumptions affect the annual expense and net obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management's best judgment regarding future expectations. As permitted by U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.\nThe expected return on plan assets assumption impacts our defined benefit expense since many of our defined benefit pension plans and our primary OPRB plan are partially funded. The process for setting the expected rates of return is described in Note 8 to the Consolidated Financial Statements. For 2024, the average return on assets assumptions for pension plan assets and OPRB assets was 6.0% and 8.5%, respectively. A change in the rate of return of 100 basis points for both pension and OPRB assets would impact annual after-tax benefit\/expense by approximately $145 million.\nSince pension and OPRB liabilities are measured on a discounted basis, the discount rate impacts our plan obligations and expenses. Discount rates used for our U.S. defined benefit pension and OPRB plans are based on a yield curve constructed from a portfolio of high-quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 4.2% represents a weighted average of local rates in countries where such plans exist. A 100 basis-point change in the discount rate would impact annual after-tax benefit expense by approximately $85 million. The average discount rate on the OPRB plan of 5.8% reflects the higher interest rates generally applicable in the U.S., which is where most of the plan participants receive benefits. A 100 basis-point change in the discount rate would impact annual after-tax OPRB expense by approximately $30 million. See Note 8 to the Consolidated Financial Statements for additional details on our defined benefit pension and OPRB plans.\n\nGoodwill and Intangible Assets\n\nSignificant judgment is required to estimate the fair value of our goodwill reporting units and intangible assets. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant goodwill reporting units and intangible assets. Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have \n\n\n, PROCTER & GAMBLE Co 10-K form for the fiscal year ended 2024-06-30, page 47: \nThe Procter & Gamble Company 47\n\n\n\nNOTE 4\n\n\nGOODWILL AND INTANGIBLE ASSETS\n\nThe change in the net carrying amount of goodwill by reportable segment was as follows:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">Beauty<\/td><td colspan=\"3\">Grooming<\/td><td colspan=\"3\">Health Care<\/td><td colspan=\"3\">Fabric &amp; Home Care<\/td><td colspan=\"3\">Baby, Feminine &amp; Family Care<\/td><td colspan=\"3\">TOTAL<\/td><\/tr><tr><td colspan=\"3\">BALANCE AT JUNE 30, 2022 - NET (1)<\/td><td>$<\/td><td>13,296 <\/td><td><\/td><td>$<\/td><td>12,571 <\/td><td><\/td><td>$<\/td><td>7,589 <\/td><td><\/td><td>$<\/td><td>1,808 <\/td><td><\/td><td>$<\/td><td>4,436 <\/td><td><\/td><td>$<\/td><td>39,700 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Acquisitions and divestitures<\/td><td colspan=\"2\">405 <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">33 <\/td><td><\/td><td colspan=\"2\">438 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Translation and other<\/td><td colspan=\"2\">187 <\/td><td><\/td><td colspan=\"2\">132 <\/td><td><\/td><td colspan=\"2\">129 <\/td><td><\/td><td colspan=\"2\">13 <\/td><td><\/td><td colspan=\"2\">60 <\/td><td><\/td><td colspan=\"2\">521 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">BALANCE AT JUNE 30, 2023 - NET (1)<\/td><td colspan=\"2\">13,888 <\/td><td><\/td><td colspan=\"2\">12,703 <\/td><td><\/td><td colspan=\"2\">7,718 <\/td><td><\/td><td colspan=\"2\">1,821 <\/td><td><\/td><td colspan=\"2\">4,529 <\/td><td><\/td><td colspan=\"2\">40,659 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Acquisitions and divestitures<\/td><td colspan=\"2\">(61)<\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">(61)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">Translation and other<\/td><td colspan=\"2\">(104)<\/td><td><\/td><td colspan=\"2\">(71)<\/td><td><\/td><td colspan=\"2\">(80)<\/td><td><\/td><td colspan=\"2\">(10)<\/td><td><\/td><td colspan=\"2\">(30)<\/td><td><\/td><td colspan=\"2\">(295)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">BALANCE AT JUNE 30, 2024 - NET (1)<\/td><td>$<\/td><td>13,723 <\/td><td><\/td><td>$<\/td><td>12,633 <\/td><td><\/td><td>$<\/td><td>7,638 <\/td><td><\/td><td>$<\/td><td>1,810 <\/td><td><\/td><td>$<\/td><td>4,499 <\/td><td><\/td><td>$<\/td><td>40,303 <\/td><td><\/td><\/tr><\/table>\n(1)Grooming goodwill balance is net of $7.9 billion accumulated impairment losses.\nGoodwill decreased during fiscal 2024 primarily due to currency translation across all reportable segments and a brand divestiture in the Beauty reportable segment. Goodwill increased during fiscal 2023 primarily due to an acquisition in the Beauty segment, other minor brand acquisitions in the Baby, Feminine & Family Care segment and currency translation across all reportable segments.\nGoodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and indefinite-lived intangible assets to their respective carrying values. We use the income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. When appropriate, the market approach, which leverages comparable company revenue and earnings multiples, is weighted with the income approach to estimate fair value. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability). Significant judgment by management is required to estimate the impact of macroeconomic and other factors on future cash flows. Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. \nWe believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record additional non-cash impairment charges in the future. \nDuring the fiscal year ended June 30, 2024, we determined that the fair value of the Gillette indefinite-lived intangible asset was less than its carrying amount. As a result, we recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) to reduce the carrying amount to be equivalent to the estimated fair value as of December 31, 2023. Following the impairment charge, the carrying value of the Gillette indefinite-lived intangible asset is $12.8 billion. The impairment charge arose due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of a new restructuring program focused primarily in certain Enterprise Markets, including Argentina and Nigeria.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n","context_html_without_headers":"\nThe Procter & Gamble Company 27\n\n\nregarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.\nRealization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.\nWe operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment.\nA core operating principle is that our tax structure is based on our business operating model, such that profits are earned in line with the business substance and functions of the various legal entities in the jurisdictions where those functions are performed. However, because of the complexity of transfer pricing concepts, we may have income tax uncertainty related to the determination of intercompany transfer prices for our various cross-border transactions. We have obtained and continue to prioritize the strategy of seeking advance rulings with tax authorities to reduce this uncertainty. We estimate that our current portfolio of advance rulings reduces this uncertainty with respect to over 70% of our global earnings. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties considering changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have several audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.\nBecause there are several estimates and assumptions inherent in calculating the various components of our tax provision, certain future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate. See Note 5 to the Consolidated Financial Statements for additional details on the Company's income taxes.\n\nEmployee Benefits\n\nWe sponsor various postretirement benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other postretirement benefit (OPRB) plans consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPRB plans require assumptions to estimate the net projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets; and health care cost trend rates. These and other assumptions affect the annual expense and net obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management's best judgment regarding future expectations. As permitted by U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.\nThe expected return on plan assets assumption impacts our defined benefit expense since many of our defined benefit pension plans and our primary OPRB plan are partially funded. The process for setting the expected rates of return is described in Note 8 to the Consolidated Financial Statements. For 2024, the average return on assets assumptions for pension plan assets and OPRB assets was 6.0% and 8.5%, respectively. A change in the rate of return of 100 basis points for both pension and OPRB assets would impact annual after-tax benefit\/expense by approximately $145 million.\nSince pension and OPRB liabilities are measured on a discounted basis, the discount rate impacts our plan obligations and expenses. Discount rates used for our U.S. defined benefit pension and OPRB plans are based on a yield curve constructed from a portfolio of high-quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 4.2% represents a weighted average of local rates in countries where such plans exist. A 100 basis-point change in the discount rate would impact annual after-tax benefit expense by approximately $85 million. The average discount rate on the OPRB plan of 5.8% reflects the higher interest rates generally applicable in the U.S., which is where most of the plan participants receive benefits. A 100 basis-point change in the discount rate would impact annual after-tax OPRB expense by approximately $30 million. See Note 8 to the Consolidated Financial Statements for additional details on our defined benefit pension and OPRB plans.\n\nGoodwill and Intangible Assets\n\nSignificant judgment is required to estimate the fair value of our goodwill reporting units and intangible assets. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant goodwill reporting units and intangible assets. Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have \n\n\n, \nThe Procter & Gamble Company 47\n\n\n\nNOTE 4\n\n\nGOODWILL AND INTANGIBLE ASSETS\n\nThe change in the net carrying amount of goodwill by reportable segment was as follows:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">Beauty<\/td><td colspan=\"3\">Grooming<\/td><td colspan=\"3\">Health Care<\/td><td colspan=\"3\">Fabric &amp; Home Care<\/td><td colspan=\"3\">Baby, Feminine &amp; Family Care<\/td><td colspan=\"3\">TOTAL<\/td><\/tr><tr><td colspan=\"3\">BALANCE AT JUNE 30, 2022 - NET (1)<\/td><td>$<\/td><td>13,296 <\/td><td><\/td><td>$<\/td><td>12,571 <\/td><td><\/td><td>$<\/td><td>7,589 <\/td><td><\/td><td>$<\/td><td>1,808 <\/td><td><\/td><td>$<\/td><td>4,436 <\/td><td><\/td><td>$<\/td><td>39,700 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Acquisitions and divestitures<\/td><td colspan=\"2\">405 <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">33 <\/td><td><\/td><td colspan=\"2\">438 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Translation and other<\/td><td colspan=\"2\">187 <\/td><td><\/td><td colspan=\"2\">132 <\/td><td><\/td><td colspan=\"2\">129 <\/td><td><\/td><td colspan=\"2\">13 <\/td><td><\/td><td colspan=\"2\">60 <\/td><td><\/td><td colspan=\"2\">521 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">BALANCE AT JUNE 30, 2023 - NET (1)<\/td><td colspan=\"2\">13,888 <\/td><td><\/td><td colspan=\"2\">12,703 <\/td><td><\/td><td colspan=\"2\">7,718 <\/td><td><\/td><td colspan=\"2\">1,821 <\/td><td><\/td><td colspan=\"2\">4,529 <\/td><td><\/td><td colspan=\"2\">40,659 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Acquisitions and divestitures<\/td><td colspan=\"2\">(61)<\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"2\">(61)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">Translation and other<\/td><td colspan=\"2\">(104)<\/td><td><\/td><td colspan=\"2\">(71)<\/td><td><\/td><td colspan=\"2\">(80)<\/td><td><\/td><td colspan=\"2\">(10)<\/td><td><\/td><td colspan=\"2\">(30)<\/td><td><\/td><td colspan=\"2\">(295)<\/td><td><\/td><\/tr><tr><td colspan=\"3\">BALANCE AT JUNE 30, 2024 - NET (1)<\/td><td>$<\/td><td>13,723 <\/td><td><\/td><td>$<\/td><td>12,633 <\/td><td><\/td><td>$<\/td><td>7,638 <\/td><td><\/td><td>$<\/td><td>1,810 <\/td><td><\/td><td>$<\/td><td>4,499 <\/td><td><\/td><td>$<\/td><td>40,303 <\/td><td><\/td><\/tr><\/table>\n(1)Grooming goodwill balance is net of $7.9 billion accumulated impairment losses.\nGoodwill decreased during fiscal 2024 primarily due to currency translation across all reportable segments and a brand divestiture in the Beauty reportable segment. Goodwill increased during fiscal 2023 primarily due to an acquisition in the Beauty segment, other minor brand acquisitions in the Baby, Feminine & Family Care segment and currency translation across all reportable segments.\nGoodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and indefinite-lived intangible assets to their respective carrying values. We use the income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. When appropriate, the market approach, which leverages comparable company revenue and earnings multiples, is weighted with the income approach to estimate fair value. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability). Significant judgment by management is required to estimate the impact of macroeconomic and other factors on future cash flows. Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. \nWe believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record additional non-cash impairment charges in the future. \nDuring the fiscal year ended June 30, 2024, we determined that the fair value of the Gillette indefinite-lived intangible asset was less than its carrying amount. As a result, we recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) to reduce the carrying amount to be equivalent to the estimated fair value as of December 31, 2023. Following the impairment charge, the carrying value of the Gillette indefinite-lived intangible asset is $12.8 billion. The impairment charge arose due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of a new restructuring program focused primarily in certain Enterprise Markets, including Argentina and Nigeria.\nAmounts in millions of dollars except per share amounts or as otherwise specified.\n\n\n\n\n"}
{"QID":"q_Ri045","Question":"What are the key material risks that Johnson & Johnson identifies as potentially impacting its financial condition and operations?","ground_truth_answer":"Johnson & Johnson faces several material risks that could impact its financial condition and operations. Regulatory changes or non-compliance could significantly affect its financial performance. The company's global operations expose it to economic and geopolitical risks, including currency fluctuations, trade restrictions, and tensions like those between Russia-Ukraine and the U.S.-China, which can disrupt supply chains and increase costs. Reliance on third-party suppliers adds vulnerability to supply chain disruptions. Legal risks, including violations of anti-bribery laws, could lead to severe penalties.","question_type":"Risk","page_number":"9, 10, 14","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report |  9 |\n\n, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 10: Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n|    |    |\n|---:|---:|\n|  1 | 10 |\n, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_markdown_without_headers":"\nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report |  9 |\n\n, Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n|    |    |\n|---:|---:|\n|  1 | 10 |\n, countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">9<\/td><\/tr><\/table>\n, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 10: Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">9<\/td><\/tr><\/table>\n, Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>, countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>"}
{"QID":"q_Ri046","Question":"What risks does Johnson & Johnson face regarding its reliance on third-party suppliers and manufacturers?","ground_truth_answer":"Johnson & Johnson faces significant risks due to its reliance on third-party suppliers and manufacturers. The company depends on these partners for the production and supply of essential products, including raw materials and components. If a third-party manufacturer fails or is lost, it could cause delays and increased costs, negatively impacting Johnson & Johnson's operations. The company relies on these suppliers to meet quality standards, ensure timely delivery, and offer reasonable pricing, but there is no guarantee they will always meet these expectations, potentially leading to lost sales and disruptions.","question_type":"Risk","page_number":"9, 10","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report |  9 |\n\n, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 10: Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n|    |    |\n|---:|---:|\n|  1 | 10 |\n","context_markdown_without_headers":"\nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report |  9 |\n\n, Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n|    |    |\n|---:|---:|\n|  1 | 10 |\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 9: \nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">9<\/td><\/tr><\/table>\n, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 10: Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>","context_html_without_headers":"\nItem 1A. Risk factors\n\nAn investment in the Company's common stock or debt securities involves risks and uncertainties. The Company seeks to identify, manage and mitigate risks to our business, but uncertainties and risks are difficult to predict and many are outside of the Company's control and cannot therefore be eliminated. In addition to the other information in this report and the Company's other filings with the SEC, investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties. If known or unknown risks or uncertainties materialize, the Company's business, results of operations or financial condition could be adversely affected, potentially in a material way.\nRisks related to our business, industry and operations \nThe Company's businesses operate in highly competitive product markets and competitive pressures could adversely affect the Company's earnings.\nThe Company faces substantial competition in its two operating segments and in all geographic markets. The Company's businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual property rights, product performance, real or perceived product advantages, pricing and availability and rate of reimbursement. The Company also competes with other market participants in securing rights to acquisitions, collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors' development of more effective or less costly products, and\/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company, could negatively impact sales of the Company's existing products as well as its ability to bring new products to market despite significant prior investment in the related product development. The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products, successfully integrate operations and employees, and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management, operations and financial resources.\nFor the Company's Innovative Medicine businesses, loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market. Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company's MedTech businesses, technological innovation, product quality, reputation and customer service are especially important to competitiveness. Development by other companies of new or improved products, processes and technologies could threaten to make the Company's products or technologies less desirable, less economical or obsolete. The Company's business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe, more effective, more effectively marketed or otherwise outperform those of our competitors. \nInterruptions and delays in manufacturing operations could adversely affect the Company's business, sales and reputation.\nThe Company's manufacturing of products requires the timely delivery of sufficient amounts of complex, high-quality components and materials. The Company's subsidiaries operate 61 manufacturing facilities as well as sourcing from thousands of suppliers around the world. The Company has in the past, and may in the future, face unanticipated interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, labor shortages, site-specific incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages, political unrest, terrorist attacks and epidemics or pandemics. Such delays and difficulties in manufacturing can result in product shortages, declines in sales and reputational impact as well as significant remediation and related costs associated with addressing the shortage. \nThe Company relies on third parties to manufacture and supply certain of our products. Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs, which may adversely affect our business.\nThe Company relies on third parties to manufacture and supply certain of our raw materials, component parts and products. We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. However, we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">9<\/td><\/tr><\/table>\n, Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>"}
{"QID":"q_Ri047","Question":"How does Johnson & Johnson distinguish between different types of geopolitical and economic risks in its risk categorization?","ground_truth_answer":"Johnson & Johnson categorizes geopolitical and economic risks into various types based on their nature and potential impact on the Company. These risks are typically classified into categories such as operational, financial, and market risks. Operational risks include disruptions to the supply chain caused by geopolitical tensions or conflicts that may affect the availability and cost of materials and components. Financial risks encompass fluctuations in currency exchange rates and commodity prices that can impact the Company\u2019s financial performance. Market risks involve decreased demand for products in affected regions due to economic instability or political unrest. By categorizing these risks, Johnson & Johnson can better assess their potential effects on its operations, financial health, and strategic goals, allowing for targeted risk management and mitigation strategies.","question_type":"Risk","page_number":"14","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_markdown_without_headers":"countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>","context_html_without_headers":"countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>"}
{"QID":"q_Ri048","Question":"What regulatory risks does Johnson & Johnson face, and how are they classified within its risk management framework?","ground_truth_answer":"Johnson & Johnson faces various regulatory risks, which are categorized under compliance and legal risks within its risk management framework. These include risks related to adherence to local and international regulations governing product safety, manufacturing standards, and marketing practices. The Company must comply with stringent regulations such as the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act 2010, which govern interactions with government officials and prevent corrupt practices.","question_type":"Risk","page_number":"10, 11","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 10: Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n|    |    |\n|---:|---:|\n|  1 | 10 |\n, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 11: We are subject to an increasing number of costly and complex governmental regulations in the countries in which operations are conducted which may materially adversely affect the Company's financial condition and business operations.\nAs described in Item 1. Business, the Company is subject to an increasing number of extensive government laws and regulations, investigations and legal action by national, state and local government agencies in the U.S. and other countries in which it operates. For example, changes to the U.S. FDA's timing or requirements for approval or clearance of our products may have a negative impact on our ability to bring new products to market. New laws and regulations may also impose deadlines on the Company, or its third-party suppliers, manufacturers or other partners and providers, for which there may be insufficient time to implement changes to comply with such new regulations and may result in manufacturing delays or other supply chain constraints. If the Company is unable to identify ways to mitigate these delays or constraints, there may be an adverse effect on sales and access to our products. \nThe Company is subject to significant legal proceedings that can result in significant expenses, fines and reputational damage.\nIn the ordinary course of business, Johnson & Johnson and its subsidiaries are subject to numerous claims and lawsuits involving various issues such as product liability, patent disputes and claims that their product sales, marketing and pricing practices violate various antitrust, unfair trade practices and\/or consumer protection laws. The Company's more significant legal proceedings are described in Note 19 Legal proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. Litigation, in general, and securities, derivative action, class action and multi-district litigation, in particular, can be expensive and disruptive. Some of these matters may include thousands of plaintiffs, may involve parties seeking large and\/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. For example, the Company is a defendant in numerous lawsuits arising out of the use of body powders containing talc, primarily JOHNSON'S Baby Powder, and the Company's sale, manufacturing and marketing of opioids. While the Company believes it has substantial defenses in these matters, it is not feasible to predict the ultimate outcome of litigation. The Company could in the future be required to pay significant amounts as a result of settlements or judgments in these matters, potentially in excess of accruals, including matters where the Company could be held jointly and severally liable among other defendants. The resolution of, or increase in accruals for, one or more of these matters in any reporting period could have a material adverse effect on the Company's results of operations and cash flows for that period. The Company does not purchase third-party product liability insurance; however, the Company utilizes a wholly owned captive insurance company subject to certain limits.\nProduct reliability, safety and effectiveness concerns can have significant negative impacts on sales and results of operations, lead to litigation and cause reputational damage.\nConcerns about product safety, whether raised internally or by litigants, regulators or consumer advocates, and whether or not based on scientific evidence, can result in safety alerts, product recalls, governmental investigations, regulatory action on the part of the U.S. FDA (or its counterpart in other countries), private claims and lawsuits, payment of fines and settlements, declining sales and reputational damage. These circumstances can also result in damage to brand image, brand equity and consumer trust in the Company's products. Product recalls have in the past, and could in the future, prompt government investigations and inspections, the shutdown of manufacturing facilities, continued product shortages and related sales declines, significant remediation costs, reputational damage, possible civil penalties and criminal prosecution. \nThe Company faces significant regulatory scrutiny, which imposes significant compliance costs and exposes the Company to government investigations, legal actions and penalties.\nThe rapid increase in new government laws and regulations imposes significant compliance costs to the Company and a failure of the Company to timely implement changes to comply with these new laws may expose the Company to investigations, legal actions or penalties. Regulatory issues regarding compliance with current Good Manufacturing Practices (cGMP) (and comparable quality regulations in foreign countries) by manufacturers of drugs and devices can lead to fines and penalties, product recalls, product shortages, interruptions in production, delays in new product approvals and litigation. In addition, the marketing, pricing and sale of the Company's products are subject to regulation, investigations and legal actions including under the Federal Food, Drug, and Cosmetic Act, the Medicaid Rebate Program, federal and state false claims acts, state unfair trade practices acts and consumer protection laws. Scrutiny of healthcare industry business practices by government agencies and state attorneys general in the U.S., and any resulting investigations and prosecutions, carry risk of significant civil and criminal penalties including, but not limited to, debarment from participation in government healthcare programs. Any such debarment could have a material adverse effect on the Company's business and results of operations. The most significant current investigations and litigation brought by government agencies are described in Note 19 Legal proceedings-Government proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. \n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report | 11 |\n\n","context_markdown_without_headers":"Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n|    |    |\n|---:|---:|\n|  1 | 10 |\n, We are subject to an increasing number of costly and complex governmental regulations in the countries in which operations are conducted which may materially adversely affect the Company's financial condition and business operations.\nAs described in Item 1. Business, the Company is subject to an increasing number of extensive government laws and regulations, investigations and legal action by national, state and local government agencies in the U.S. and other countries in which it operates. For example, changes to the U.S. FDA's timing or requirements for approval or clearance of our products may have a negative impact on our ability to bring new products to market. New laws and regulations may also impose deadlines on the Company, or its third-party suppliers, manufacturers or other partners and providers, for which there may be insufficient time to implement changes to comply with such new regulations and may result in manufacturing delays or other supply chain constraints. If the Company is unable to identify ways to mitigate these delays or constraints, there may be an adverse effect on sales and access to our products. \nThe Company is subject to significant legal proceedings that can result in significant expenses, fines and reputational damage.\nIn the ordinary course of business, Johnson & Johnson and its subsidiaries are subject to numerous claims and lawsuits involving various issues such as product liability, patent disputes and claims that their product sales, marketing and pricing practices violate various antitrust, unfair trade practices and\/or consumer protection laws. The Company's more significant legal proceedings are described in Note 19 Legal proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. Litigation, in general, and securities, derivative action, class action and multi-district litigation, in particular, can be expensive and disruptive. Some of these matters may include thousands of plaintiffs, may involve parties seeking large and\/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. For example, the Company is a defendant in numerous lawsuits arising out of the use of body powders containing talc, primarily JOHNSON'S Baby Powder, and the Company's sale, manufacturing and marketing of opioids. While the Company believes it has substantial defenses in these matters, it is not feasible to predict the ultimate outcome of litigation. The Company could in the future be required to pay significant amounts as a result of settlements or judgments in these matters, potentially in excess of accruals, including matters where the Company could be held jointly and severally liable among other defendants. The resolution of, or increase in accruals for, one or more of these matters in any reporting period could have a material adverse effect on the Company's results of operations and cash flows for that period. The Company does not purchase third-party product liability insurance; however, the Company utilizes a wholly owned captive insurance company subject to certain limits.\nProduct reliability, safety and effectiveness concerns can have significant negative impacts on sales and results of operations, lead to litigation and cause reputational damage.\nConcerns about product safety, whether raised internally or by litigants, regulators or consumer advocates, and whether or not based on scientific evidence, can result in safety alerts, product recalls, governmental investigations, regulatory action on the part of the U.S. FDA (or its counterpart in other countries), private claims and lawsuits, payment of fines and settlements, declining sales and reputational damage. These circumstances can also result in damage to brand image, brand equity and consumer trust in the Company's products. Product recalls have in the past, and could in the future, prompt government investigations and inspections, the shutdown of manufacturing facilities, continued product shortages and related sales declines, significant remediation costs, reputational damage, possible civil penalties and criminal prosecution. \nThe Company faces significant regulatory scrutiny, which imposes significant compliance costs and exposes the Company to government investigations, legal actions and penalties.\nThe rapid increase in new government laws and regulations imposes significant compliance costs to the Company and a failure of the Company to timely implement changes to comply with these new laws may expose the Company to investigations, legal actions or penalties. Regulatory issues regarding compliance with current Good Manufacturing Practices (cGMP) (and comparable quality regulations in foreign countries) by manufacturers of drugs and devices can lead to fines and penalties, product recalls, product shortages, interruptions in production, delays in new product approvals and litigation. In addition, the marketing, pricing and sale of the Company's products are subject to regulation, investigations and legal actions including under the Federal Food, Drug, and Cosmetic Act, the Medicaid Rebate Program, federal and state false claims acts, state unfair trade practices acts and consumer protection laws. Scrutiny of healthcare industry business practices by government agencies and state attorneys general in the U.S., and any resulting investigations and prosecutions, carry risk of significant civil and criminal penalties including, but not limited to, debarment from participation in government healthcare programs. Any such debarment could have a material adverse effect on the Company's business and results of operations. The most significant current investigations and litigation brought by government agencies are described in Note 19 Legal proceedings-Government proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. \n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report | 11 |\n\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 10: Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>, JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 11: We are subject to an increasing number of costly and complex governmental regulations in the countries in which operations are conducted which may materially adversely affect the Company's financial condition and business operations.\nAs described in Item 1. Business, the Company is subject to an increasing number of extensive government laws and regulations, investigations and legal action by national, state and local government agencies in the U.S. and other countries in which it operates. For example, changes to the U.S. FDA's timing or requirements for approval or clearance of our products may have a negative impact on our ability to bring new products to market. New laws and regulations may also impose deadlines on the Company, or its third-party suppliers, manufacturers or other partners and providers, for which there may be insufficient time to implement changes to comply with such new regulations and may result in manufacturing delays or other supply chain constraints. If the Company is unable to identify ways to mitigate these delays or constraints, there may be an adverse effect on sales and access to our products. \nThe Company is subject to significant legal proceedings that can result in significant expenses, fines and reputational damage.\nIn the ordinary course of business, Johnson & Johnson and its subsidiaries are subject to numerous claims and lawsuits involving various issues such as product liability, patent disputes and claims that their product sales, marketing and pricing practices violate various antitrust, unfair trade practices and\/or consumer protection laws. The Company's more significant legal proceedings are described in Note 19 Legal proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. Litigation, in general, and securities, derivative action, class action and multi-district litigation, in particular, can be expensive and disruptive. Some of these matters may include thousands of plaintiffs, may involve parties seeking large and\/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. For example, the Company is a defendant in numerous lawsuits arising out of the use of body powders containing talc, primarily JOHNSON'S Baby Powder, and the Company's sale, manufacturing and marketing of opioids. While the Company believes it has substantial defenses in these matters, it is not feasible to predict the ultimate outcome of litigation. The Company could in the future be required to pay significant amounts as a result of settlements or judgments in these matters, potentially in excess of accruals, including matters where the Company could be held jointly and severally liable among other defendants. The resolution of, or increase in accruals for, one or more of these matters in any reporting period could have a material adverse effect on the Company's results of operations and cash flows for that period. The Company does not purchase third-party product liability insurance; however, the Company utilizes a wholly owned captive insurance company subject to certain limits.\nProduct reliability, safety and effectiveness concerns can have significant negative impacts on sales and results of operations, lead to litigation and cause reputational damage.\nConcerns about product safety, whether raised internally or by litigants, regulators or consumer advocates, and whether or not based on scientific evidence, can result in safety alerts, product recalls, governmental investigations, regulatory action on the part of the U.S. FDA (or its counterpart in other countries), private claims and lawsuits, payment of fines and settlements, declining sales and reputational damage. These circumstances can also result in damage to brand image, brand equity and consumer trust in the Company's products. Product recalls have in the past, and could in the future, prompt government investigations and inspections, the shutdown of manufacturing facilities, continued product shortages and related sales declines, significant remediation costs, reputational damage, possible civil penalties and criminal prosecution. \nThe Company faces significant regulatory scrutiny, which imposes significant compliance costs and exposes the Company to government investigations, legal actions and penalties.\nThe rapid increase in new government laws and regulations imposes significant compliance costs to the Company and a failure of the Company to timely implement changes to comply with these new laws may expose the Company to investigations, legal actions or penalties. Regulatory issues regarding compliance with current Good Manufacturing Practices (cGMP) (and comparable quality regulations in foreign countries) by manufacturers of drugs and devices can lead to fines and penalties, product recalls, product shortages, interruptions in production, delays in new product approvals and litigation. In addition, the marketing, pricing and sale of the Company's products are subject to regulation, investigations and legal actions including under the Federal Food, Drug, and Cosmetic Act, the Medicaid Rebate Program, federal and state false claims acts, state unfair trade practices acts and consumer protection laws. Scrutiny of healthcare industry business practices by government agencies and state attorneys general in the U.S., and any resulting investigations and prosecutions, carry risk of significant civil and criminal penalties including, but not limited to, debarment from participation in government healthcare programs. Any such debarment could have a material adverse effect on the Company's business and results of operations. The most significant current investigations and litigation brought by government agencies are described in Note 19 Legal proceedings-Government proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. \n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">11<\/td><\/tr><\/table>\n","context_html_without_headers":"Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance, misappropriation of the Company's intellectual property, limited ability to manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if any of our third-party manufacturers suffers any damage to facilities, loses benefits under material agreements, experiences power outages, encounters financial difficulties, is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such disruption, the Company would need to seek and source other qualified third-party manufacturers, likely resulting in further delays and increased costs which could affect our business adversely.\nCounterfeit versions of our products could harm our patients and have a negative impact on our revenues, earnings, reputation and business. \nOur industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured \u2013 often in unregulated, unlicensed, uninspected and unsanitary sites \u2013 as well as the lack of regulation of their contents.\nThe industry's failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.\nGlobal health crises, pandemics, epidemics, or other outbreaks could adversely disrupt or impact certain aspects of the Company's business, results of operations and financial condition.\nWe are subject to risks associated with global health crises, epidemics, pandemics and other outbreaks (such incident(s), a health crisis or health crises). For example, the COVID-19 pandemic adversely impacted certain aspects of the Company's business, results of operations and financial condition, including lower sales and reduced customer demand and usage of certain of our products. The spread of any health crises may cause the Company to modify its business practices, and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients, customers, employees and business partners under such circumstances. While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises, these efforts may not completely prevent our business from being adversely affected in the event of a health crisis. Health crises could adversely impact the Company's operations, including, among other things, our manufacturing operations, supply chain, third-party suppliers, sales and marketing, and clinical trial operations. Any of these factors could adversely affect the Company's business, financial results, and global economic conditions generally.\nRisks related to government regulation and legal proceedings\nGlobal sales in the Company's Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.\nSales of the Company's Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs, private insurance plans and managed care organizations. As part of various efforts to contain healthcare costs, these payors are putting downward pressure on prices at which products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, in part due to continued consolidation among healthcare providers, could result in further pricing pressures. In addition, recent legislation and ongoing political scrutiny on pricing, coverage and reimbursement could result in additional pricing pressures. Specifically, the Inflation Reduction Act of 2022 (IRA) may subject certain products to government-established pricing, potentially impose rebates, and subject manufacturers who fail to adhere to the government's interpretations of the law to penalties. Further, increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute may have a negative impact on the Company's financial performance. Outside the U.S., numerous major markets, including the EU, United Kingdom, Japan and China, have pervasive government involvement in funding healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the Company's products, or reduce the value of its intellectual property protection. \n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">10<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>, We are subject to an increasing number of costly and complex governmental regulations in the countries in which operations are conducted which may materially adversely affect the Company's financial condition and business operations.\nAs described in Item 1. Business, the Company is subject to an increasing number of extensive government laws and regulations, investigations and legal action by national, state and local government agencies in the U.S. and other countries in which it operates. For example, changes to the U.S. FDA's timing or requirements for approval or clearance of our products may have a negative impact on our ability to bring new products to market. New laws and regulations may also impose deadlines on the Company, or its third-party suppliers, manufacturers or other partners and providers, for which there may be insufficient time to implement changes to comply with such new regulations and may result in manufacturing delays or other supply chain constraints. If the Company is unable to identify ways to mitigate these delays or constraints, there may be an adverse effect on sales and access to our products. \nThe Company is subject to significant legal proceedings that can result in significant expenses, fines and reputational damage.\nIn the ordinary course of business, Johnson & Johnson and its subsidiaries are subject to numerous claims and lawsuits involving various issues such as product liability, patent disputes and claims that their product sales, marketing and pricing practices violate various antitrust, unfair trade practices and\/or consumer protection laws. The Company's more significant legal proceedings are described in Note 19 Legal proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. Litigation, in general, and securities, derivative action, class action and multi-district litigation, in particular, can be expensive and disruptive. Some of these matters may include thousands of plaintiffs, may involve parties seeking large and\/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. For example, the Company is a defendant in numerous lawsuits arising out of the use of body powders containing talc, primarily JOHNSON'S Baby Powder, and the Company's sale, manufacturing and marketing of opioids. While the Company believes it has substantial defenses in these matters, it is not feasible to predict the ultimate outcome of litigation. The Company could in the future be required to pay significant amounts as a result of settlements or judgments in these matters, potentially in excess of accruals, including matters where the Company could be held jointly and severally liable among other defendants. The resolution of, or increase in accruals for, one or more of these matters in any reporting period could have a material adverse effect on the Company's results of operations and cash flows for that period. The Company does not purchase third-party product liability insurance; however, the Company utilizes a wholly owned captive insurance company subject to certain limits.\nProduct reliability, safety and effectiveness concerns can have significant negative impacts on sales and results of operations, lead to litigation and cause reputational damage.\nConcerns about product safety, whether raised internally or by litigants, regulators or consumer advocates, and whether or not based on scientific evidence, can result in safety alerts, product recalls, governmental investigations, regulatory action on the part of the U.S. FDA (or its counterpart in other countries), private claims and lawsuits, payment of fines and settlements, declining sales and reputational damage. These circumstances can also result in damage to brand image, brand equity and consumer trust in the Company's products. Product recalls have in the past, and could in the future, prompt government investigations and inspections, the shutdown of manufacturing facilities, continued product shortages and related sales declines, significant remediation costs, reputational damage, possible civil penalties and criminal prosecution. \nThe Company faces significant regulatory scrutiny, which imposes significant compliance costs and exposes the Company to government investigations, legal actions and penalties.\nThe rapid increase in new government laws and regulations imposes significant compliance costs to the Company and a failure of the Company to timely implement changes to comply with these new laws may expose the Company to investigations, legal actions or penalties. Regulatory issues regarding compliance with current Good Manufacturing Practices (cGMP) (and comparable quality regulations in foreign countries) by manufacturers of drugs and devices can lead to fines and penalties, product recalls, product shortages, interruptions in production, delays in new product approvals and litigation. In addition, the marketing, pricing and sale of the Company's products are subject to regulation, investigations and legal actions including under the Federal Food, Drug, and Cosmetic Act, the Medicaid Rebate Program, federal and state false claims acts, state unfair trade practices acts and consumer protection laws. Scrutiny of healthcare industry business practices by government agencies and state attorneys general in the U.S., and any resulting investigations and prosecutions, carry risk of significant civil and criminal penalties including, but not limited to, debarment from participation in government healthcare programs. Any such debarment could have a material adverse effect on the Company's business and results of operations. The most significant current investigations and litigation brought by government agencies are described in Note 19 Legal proceedings-Government proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report. \n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">11<\/td><\/tr><\/table>\n"}
{"QID":"q_Ri049","Question":"How could changes in global tax laws, including the implementation of a global minimum tax, potentially impact Johnson & Johnson's effective tax rate, financial performance, and strategic financial planning?","ground_truth_answer":"Changes in global tax laws, such as the implementation of a global minimum tax, could significantly impact Johnson & Johnson's effective tax rate and financial performance. The company closely monitors tax law proposals in the countries where it operates, as these changes could result in the revaluation of deferred tax assets and liabilities. Such revaluation could lead to a substantial expense or benefit recorded in the Company's Consolidated Statement of Earnings during the fiscal period when the new tax law is enacted. Additionally, Johnson & Johnson is involved in tax audits and disputes with numerous tax authorities across different countries.","question_type":"Risk","page_number":"12","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 12: Changes in tax laws or exposures to additional tax liabilities could negatively impact the Company's operating results.\nChanges in tax laws or regulations around the world, including in the U.S. and as led by the Organization for Economic Cooperation and Development, such as the recent enactment by certain EU and non-EU countries, and the anticipated enactment by additional countries, of a global minimum tax, could negatively impact the Company's effective tax rate and results of operations. A change in statutory tax rate or certain international tax provisions in any country would result in the revaluation of the Company's deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company's Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to tax laws or regulations may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted. \n\nSee Note 8 Income taxes under Notes to the Consolidated Financial Statements included in Item 8 of this Report for additional information. \n\nThe Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes with many tax authorities. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company's expectations, which could result in tax liabilities in excess of reserves.\nRisks related to our intellectual property \nThe Company faces increased challenges to intellectual property rights central to its business.\nThe Company owns or licenses a significant number of patents and other proprietary rights relating to its products and manufacturing processes. These rights are essential to the Company's businesses and materially important to the Company's results of operations. Public policy, both within and outside the U.S., has become increasingly unfavorable toward intellectual property rights. The Company cannot be certain that it will obtain adequate patent protection for new products and technologies in the United States and other important markets or that such protections, once granted, will last as long as originally anticipated.\nCompetitors routinely challenge the validity or extent of the Company's owned or licensed patents and proprietary rights through litigation, interferences, oppositions and other proceedings, such as inter partes review (IPR) proceedings before the United States Patent & Trademark Office (USPTO). These proceedings absorb resources and can be protracted as well as unpredictable. In addition, challenges that the Company's products infringe the patents of third parties could result in an injunction and\/or the need to pay past damages and future royalties and adversely affect the competitive position and sales of the products in question. \nThe Company has faced increasing patent challenges from third parties seeking to manufacture and market generic and biosimilar versions of the Company's key pharmaceutical products prior to expiration of the applicable patents covering those products. In the U.S., manufacturers of generic versions of innovative human pharmaceutical products may challenge the validity, or claim non-infringement, of innovator products through the Abbreviated New Drug Application, or ANDA, process with the U.S. FDA and related ANDA litigation. The Biologics Price Competition and Innovation Act (BPCIA), enacted in 2010, which created a new regulatory pathway for the approval by the U.S. FDA of biosimilar alternatives to innovator-developed biological products, also created mechanisms for biosimilar applicants to challenge the patents on the innovator biologics. The IPR process with the USPTO is also being used by competitors to challenge patents asserted in litigation. \nIn the event the Company is not successful in defending its patents against such challenges, or upon the \"at-risk\" launch by the generic or biosimilar firm of its product, the Company can lose a major portion of revenues for the referenced product in a very short period of time. Current legal proceedings involving the Company's patents and other intellectual property rights are described in Note 19 Legal proceedings-Intellectual property under Notes to the Consolidated Financial Statements included in Item 8 of this Report.\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_markdown_without_headers":"Changes in tax laws or exposures to additional tax liabilities could negatively impact the Company's operating results.\nChanges in tax laws or regulations around the world, including in the U.S. and as led by the Organization for Economic Cooperation and Development, such as the recent enactment by certain EU and non-EU countries, and the anticipated enactment by additional countries, of a global minimum tax, could negatively impact the Company's effective tax rate and results of operations. A change in statutory tax rate or certain international tax provisions in any country would result in the revaluation of the Company's deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company's Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to tax laws or regulations may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted. \n\nSee Note 8 Income taxes under Notes to the Consolidated Financial Statements included in Item 8 of this Report for additional information. \n\nThe Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes with many tax authorities. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company's expectations, which could result in tax liabilities in excess of reserves.\nRisks related to our intellectual property \nThe Company faces increased challenges to intellectual property rights central to its business.\nThe Company owns or licenses a significant number of patents and other proprietary rights relating to its products and manufacturing processes. These rights are essential to the Company's businesses and materially important to the Company's results of operations. Public policy, both within and outside the U.S., has become increasingly unfavorable toward intellectual property rights. The Company cannot be certain that it will obtain adequate patent protection for new products and technologies in the United States and other important markets or that such protections, once granted, will last as long as originally anticipated.\nCompetitors routinely challenge the validity or extent of the Company's owned or licensed patents and proprietary rights through litigation, interferences, oppositions and other proceedings, such as inter partes review (IPR) proceedings before the United States Patent & Trademark Office (USPTO). These proceedings absorb resources and can be protracted as well as unpredictable. In addition, challenges that the Company's products infringe the patents of third parties could result in an injunction and\/or the need to pay past damages and future royalties and adversely affect the competitive position and sales of the products in question. \nThe Company has faced increasing patent challenges from third parties seeking to manufacture and market generic and biosimilar versions of the Company's key pharmaceutical products prior to expiration of the applicable patents covering those products. In the U.S., manufacturers of generic versions of innovative human pharmaceutical products may challenge the validity, or claim non-infringement, of innovator products through the Abbreviated New Drug Application, or ANDA, process with the U.S. FDA and related ANDA litigation. The Biologics Price Competition and Innovation Act (BPCIA), enacted in 2010, which created a new regulatory pathway for the approval by the U.S. FDA of biosimilar alternatives to innovator-developed biological products, also created mechanisms for biosimilar applicants to challenge the patents on the innovator biologics. The IPR process with the USPTO is also being used by competitors to challenge patents asserted in litigation. \nIn the event the Company is not successful in defending its patents against such challenges, or upon the \"at-risk\" launch by the generic or biosimilar firm of its product, the Company can lose a major portion of revenues for the referenced product in a very short period of time. Current legal proceedings involving the Company's patents and other intellectual property rights are described in Note 19 Legal proceedings-Intellectual property under Notes to the Consolidated Financial Statements included in Item 8 of this Report.\n|    |    |\n|---:|---:|\n|  1 | 12 |\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 12: Changes in tax laws or exposures to additional tax liabilities could negatively impact the Company's operating results.\nChanges in tax laws or regulations around the world, including in the U.S. and as led by the Organization for Economic Cooperation and Development, such as the recent enactment by certain EU and non-EU countries, and the anticipated enactment by additional countries, of a global minimum tax, could negatively impact the Company's effective tax rate and results of operations. A change in statutory tax rate or certain international tax provisions in any country would result in the revaluation of the Company's deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company's Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to tax laws or regulations may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted. \n\nSee Note 8 Income taxes under Notes to the Consolidated Financial Statements included in Item 8 of this Report for additional information. \n\nThe Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes with many tax authorities. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company's expectations, which could result in tax liabilities in excess of reserves.\nRisks related to our intellectual property \nThe Company faces increased challenges to intellectual property rights central to its business.\nThe Company owns or licenses a significant number of patents and other proprietary rights relating to its products and manufacturing processes. These rights are essential to the Company's businesses and materially important to the Company's results of operations. Public policy, both within and outside the U.S., has become increasingly unfavorable toward intellectual property rights. The Company cannot be certain that it will obtain adequate patent protection for new products and technologies in the United States and other important markets or that such protections, once granted, will last as long as originally anticipated.\nCompetitors routinely challenge the validity or extent of the Company's owned or licensed patents and proprietary rights through litigation, interferences, oppositions and other proceedings, such as inter partes review (IPR) proceedings before the United States Patent & Trademark Office (USPTO). These proceedings absorb resources and can be protracted as well as unpredictable. In addition, challenges that the Company's products infringe the patents of third parties could result in an injunction and\/or the need to pay past damages and future royalties and adversely affect the competitive position and sales of the products in question. \nThe Company has faced increasing patent challenges from third parties seeking to manufacture and market generic and biosimilar versions of the Company's key pharmaceutical products prior to expiration of the applicable patents covering those products. In the U.S., manufacturers of generic versions of innovative human pharmaceutical products may challenge the validity, or claim non-infringement, of innovator products through the Abbreviated New Drug Application, or ANDA, process with the U.S. FDA and related ANDA litigation. The Biologics Price Competition and Innovation Act (BPCIA), enacted in 2010, which created a new regulatory pathway for the approval by the U.S. FDA of biosimilar alternatives to innovator-developed biological products, also created mechanisms for biosimilar applicants to challenge the patents on the innovator biologics. The IPR process with the USPTO is also being used by competitors to challenge patents asserted in litigation. \nIn the event the Company is not successful in defending its patents against such challenges, or upon the \"at-risk\" launch by the generic or biosimilar firm of its product, the Company can lose a major portion of revenues for the referenced product in a very short period of time. Current legal proceedings involving the Company's patents and other intellectual property rights are described in Note 19 Legal proceedings-Intellectual property under Notes to the Consolidated Financial Statements included in Item 8 of this Report.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>","context_html_without_headers":"Changes in tax laws or exposures to additional tax liabilities could negatively impact the Company's operating results.\nChanges in tax laws or regulations around the world, including in the U.S. and as led by the Organization for Economic Cooperation and Development, such as the recent enactment by certain EU and non-EU countries, and the anticipated enactment by additional countries, of a global minimum tax, could negatively impact the Company's effective tax rate and results of operations. A change in statutory tax rate or certain international tax provisions in any country would result in the revaluation of the Company's deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company's Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to tax laws or regulations may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted. \n\nSee Note 8 Income taxes under Notes to the Consolidated Financial Statements included in Item 8 of this Report for additional information. \n\nThe Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes with many tax authorities. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company's expectations, which could result in tax liabilities in excess of reserves.\nRisks related to our intellectual property \nThe Company faces increased challenges to intellectual property rights central to its business.\nThe Company owns or licenses a significant number of patents and other proprietary rights relating to its products and manufacturing processes. These rights are essential to the Company's businesses and materially important to the Company's results of operations. Public policy, both within and outside the U.S., has become increasingly unfavorable toward intellectual property rights. The Company cannot be certain that it will obtain adequate patent protection for new products and technologies in the United States and other important markets or that such protections, once granted, will last as long as originally anticipated.\nCompetitors routinely challenge the validity or extent of the Company's owned or licensed patents and proprietary rights through litigation, interferences, oppositions and other proceedings, such as inter partes review (IPR) proceedings before the United States Patent & Trademark Office (USPTO). These proceedings absorb resources and can be protracted as well as unpredictable. In addition, challenges that the Company's products infringe the patents of third parties could result in an injunction and\/or the need to pay past damages and future royalties and adversely affect the competitive position and sales of the products in question. \nThe Company has faced increasing patent challenges from third parties seeking to manufacture and market generic and biosimilar versions of the Company's key pharmaceutical products prior to expiration of the applicable patents covering those products. In the U.S., manufacturers of generic versions of innovative human pharmaceutical products may challenge the validity, or claim non-infringement, of innovator products through the Abbreviated New Drug Application, or ANDA, process with the U.S. FDA and related ANDA litigation. The Biologics Price Competition and Innovation Act (BPCIA), enacted in 2010, which created a new regulatory pathway for the approval by the U.S. FDA of biosimilar alternatives to innovator-developed biological products, also created mechanisms for biosimilar applicants to challenge the patents on the innovator biologics. The IPR process with the USPTO is also being used by competitors to challenge patents asserted in litigation. \nIn the event the Company is not successful in defending its patents against such challenges, or upon the \"at-risk\" launch by the generic or biosimilar firm of its product, the Company can lose a major portion of revenues for the referenced product in a very short period of time. Current legal proceedings involving the Company's patents and other intellectual property rights are described in Note 19 Legal proceedings-Intellectual property under Notes to the Consolidated Financial Statements included in Item 8 of this Report.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">12<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>"}
{"QID":"q_Ri050","Question":"In the event of a significant downgrade in Johnson & Johnson\u2019s credit rating, what would be the likely effects on its borrowing costs, liquidity, and capital position, and how severe could these effects be on its long-term strategic goals?","ground_truth_answer":"A significant downgrade in Johnson & Johnson\u2019s credit rating would likely lead to increased borrowing costs, reduced liquidity, and a weakened capital position. With current investment-grade ratings from Moody's and Standard & Poor's, the Company enjoys favorable financing conditions. However, a downgrade could raise borrowing costs, limit market capacity for its commercial paper, and require additional collateral for derivative contracts. This would strain liquidity and capital, restricting access to capital markets and financial flexibility. Such financial constraints could hinder Johnson & Johnson\u2019s ability to achieve its long-term strategic goals, impacting growth and investment strategies. The potential adverse effects of a credit rating downgrade highlight the importance of maintaining strong credit ratings to ensure financial stability and support strategic objectives.","question_type":"Risk","page_number":"15","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 15: Weak financial performance, failure to maintain a satisfactory credit rating or disruptions in the financial markets could adversely affect our liquidity, capital position, borrowing costs and access to capital markets.\nWe currently maintain investment grade credit ratings with Moody's Investors Service and Standard & Poor's Ratings Services. Rating agencies routinely evaluate us, and their ratings of our long-term and short-term debt are based on a number of factors. Any downgrade of our credit ratings by a credit rating agency, whether as a result of our actions or factors which are beyond our control, can increase the cost of borrowing under any indebtedness we may incur, reduce market capacity for our commercial paper or require the posting of additional collateral under our derivative contracts. There can be no assurance that we will be able to maintain our credit ratings, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position and access to capital markets. \nOther risks \nOur business depends on our ability to recruit and retain talented, highly skilled employees and a diverse workforce. \nOur continued growth requires us to recruit and retain talented employees representing diverse backgrounds, experiences, and skill sets. The market for highly skilled workers and leaders in our industry is extremely competitive and our ability to compete depends on our ability to hire, develop and motivate highly skilled personnel in all areas of our organization. Maintaining our brand and reputation, as well as a diverse, equitable and inclusive work environment enables us to attract top talent. If we are less successful in our recruiting efforts, or if we cannot retain highly skilled workers and key leaders, our ability to develop and deliver successful products and services may be adversely affected. In addition, effective succession planning is important to our long-term success. Any unsuccessful implementation of our succession plans or failure to ensure effective transfer of knowledge and smooth transitions involving key employees could adversely affect our business, financial condition, or results of operations.\nClimate change or legal, regulatory or market measures to address climate change may negatively affect our business and results of operations.\nClimate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations, including an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Natural disasters and extreme weather conditions, such as a hurricane, tornado, earthquake, wildfire or flooding, may pose physical risks to our facilities and disrupt the operation of our supply chain. The impacts of the changing climate on water resources may result in water scarcity, limiting our ability to access sufficient high-quality water in certain locations, which may increase operational costs. \nConcern over climate change may also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and\/or mitigate the effects of climate change on the environment. If such laws or regulations are more stringent than current legal or regulatory obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and distribution of our products, which may adversely affect our business, results of operations or financial condition. Further, the impacts of climate change have an influence on customer preferences, and failure to provide climate-friendly products could potentially result in loss of market share.\nAn information security incident, including a cybersecurity breach, could have a negative impact on the Company's business or reputation.\nTo meet business objectives, the Company relies on both internal information technology (IT) systems and networks, and those of third parties and their vendors, to process and store sensitive data, including confidential research, business plans, financial information, intellectual property, and personal data that may be subject to legal protection, and ensure the continuity of the Company's supply chain and operations. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these systems and networks, including customer products that are connected to or rely on such systems and networks, and the confidentiality, integrity, and availability of the Company's sensitive data. The Company assesses these threats and makes investments to increase internal protection, detection, and response capabilities, as well as ensure the Company's third-party providers have required capabilities and controls, to address this risk. Because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for the Company to be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. Also, increasing use of AI could increase these risks. The Company maintains cybersecurity insurance in the event of an information security or cyber incident; however, the coverage may not be sufficient to cover all financial, legal, business or reputational losses.\n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report | 15 |\n\n","context_markdown_without_headers":"Weak financial performance, failure to maintain a satisfactory credit rating or disruptions in the financial markets could adversely affect our liquidity, capital position, borrowing costs and access to capital markets.\nWe currently maintain investment grade credit ratings with Moody's Investors Service and Standard & Poor's Ratings Services. Rating agencies routinely evaluate us, and their ratings of our long-term and short-term debt are based on a number of factors. Any downgrade of our credit ratings by a credit rating agency, whether as a result of our actions or factors which are beyond our control, can increase the cost of borrowing under any indebtedness we may incur, reduce market capacity for our commercial paper or require the posting of additional collateral under our derivative contracts. There can be no assurance that we will be able to maintain our credit ratings, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position and access to capital markets. \nOther risks \nOur business depends on our ability to recruit and retain talented, highly skilled employees and a diverse workforce. \nOur continued growth requires us to recruit and retain talented employees representing diverse backgrounds, experiences, and skill sets. The market for highly skilled workers and leaders in our industry is extremely competitive and our ability to compete depends on our ability to hire, develop and motivate highly skilled personnel in all areas of our organization. Maintaining our brand and reputation, as well as a diverse, equitable and inclusive work environment enables us to attract top talent. If we are less successful in our recruiting efforts, or if we cannot retain highly skilled workers and key leaders, our ability to develop and deliver successful products and services may be adversely affected. In addition, effective succession planning is important to our long-term success. Any unsuccessful implementation of our succession plans or failure to ensure effective transfer of knowledge and smooth transitions involving key employees could adversely affect our business, financial condition, or results of operations.\nClimate change or legal, regulatory or market measures to address climate change may negatively affect our business and results of operations.\nClimate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations, including an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Natural disasters and extreme weather conditions, such as a hurricane, tornado, earthquake, wildfire or flooding, may pose physical risks to our facilities and disrupt the operation of our supply chain. The impacts of the changing climate on water resources may result in water scarcity, limiting our ability to access sufficient high-quality water in certain locations, which may increase operational costs. \nConcern over climate change may also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and\/or mitigate the effects of climate change on the environment. If such laws or regulations are more stringent than current legal or regulatory obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and distribution of our products, which may adversely affect our business, results of operations or financial condition. Further, the impacts of climate change have an influence on customer preferences, and failure to provide climate-friendly products could potentially result in loss of market share.\nAn information security incident, including a cybersecurity breach, could have a negative impact on the Company's business or reputation.\nTo meet business objectives, the Company relies on both internal information technology (IT) systems and networks, and those of third parties and their vendors, to process and store sensitive data, including confidential research, business plans, financial information, intellectual property, and personal data that may be subject to legal protection, and ensure the continuity of the Company's supply chain and operations. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these systems and networks, including customer products that are connected to or rely on such systems and networks, and the confidentiality, integrity, and availability of the Company's sensitive data. The Company assesses these threats and makes investments to increase internal protection, detection, and response capabilities, as well as ensure the Company's third-party providers have required capabilities and controls, to address this risk. Because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for the Company to be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. Also, increasing use of AI could increase these risks. The Company maintains cybersecurity insurance in the event of an information security or cyber incident; however, the coverage may not be sufficient to cover all financial, legal, business or reputational losses.\n\n|    |                    |    |\n|---:|:-------------------|---:|\n|  1 | 2023 Annual Report | 15 |\n\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 15: Weak financial performance, failure to maintain a satisfactory credit rating or disruptions in the financial markets could adversely affect our liquidity, capital position, borrowing costs and access to capital markets.\nWe currently maintain investment grade credit ratings with Moody's Investors Service and Standard & Poor's Ratings Services. Rating agencies routinely evaluate us, and their ratings of our long-term and short-term debt are based on a number of factors. Any downgrade of our credit ratings by a credit rating agency, whether as a result of our actions or factors which are beyond our control, can increase the cost of borrowing under any indebtedness we may incur, reduce market capacity for our commercial paper or require the posting of additional collateral under our derivative contracts. There can be no assurance that we will be able to maintain our credit ratings, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position and access to capital markets. \nOther risks \nOur business depends on our ability to recruit and retain talented, highly skilled employees and a diverse workforce. \nOur continued growth requires us to recruit and retain talented employees representing diverse backgrounds, experiences, and skill sets. The market for highly skilled workers and leaders in our industry is extremely competitive and our ability to compete depends on our ability to hire, develop and motivate highly skilled personnel in all areas of our organization. Maintaining our brand and reputation, as well as a diverse, equitable and inclusive work environment enables us to attract top talent. If we are less successful in our recruiting efforts, or if we cannot retain highly skilled workers and key leaders, our ability to develop and deliver successful products and services may be adversely affected. In addition, effective succession planning is important to our long-term success. Any unsuccessful implementation of our succession plans or failure to ensure effective transfer of knowledge and smooth transitions involving key employees could adversely affect our business, financial condition, or results of operations.\nClimate change or legal, regulatory or market measures to address climate change may negatively affect our business and results of operations.\nClimate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations, including an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Natural disasters and extreme weather conditions, such as a hurricane, tornado, earthquake, wildfire or flooding, may pose physical risks to our facilities and disrupt the operation of our supply chain. The impacts of the changing climate on water resources may result in water scarcity, limiting our ability to access sufficient high-quality water in certain locations, which may increase operational costs. \nConcern over climate change may also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and\/or mitigate the effects of climate change on the environment. If such laws or regulations are more stringent than current legal or regulatory obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and distribution of our products, which may adversely affect our business, results of operations or financial condition. Further, the impacts of climate change have an influence on customer preferences, and failure to provide climate-friendly products could potentially result in loss of market share.\nAn information security incident, including a cybersecurity breach, could have a negative impact on the Company's business or reputation.\nTo meet business objectives, the Company relies on both internal information technology (IT) systems and networks, and those of third parties and their vendors, to process and store sensitive data, including confidential research, business plans, financial information, intellectual property, and personal data that may be subject to legal protection, and ensure the continuity of the Company's supply chain and operations. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these systems and networks, including customer products that are connected to or rely on such systems and networks, and the confidentiality, integrity, and availability of the Company's sensitive data. The Company assesses these threats and makes investments to increase internal protection, detection, and response capabilities, as well as ensure the Company's third-party providers have required capabilities and controls, to address this risk. Because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for the Company to be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. Also, increasing use of AI could increase these risks. The Company maintains cybersecurity insurance in the event of an information security or cyber incident; however, the coverage may not be sufficient to cover all financial, legal, business or reputational losses.\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">15<\/td><\/tr><\/table>\n","context_html_without_headers":"Weak financial performance, failure to maintain a satisfactory credit rating or disruptions in the financial markets could adversely affect our liquidity, capital position, borrowing costs and access to capital markets.\nWe currently maintain investment grade credit ratings with Moody's Investors Service and Standard & Poor's Ratings Services. Rating agencies routinely evaluate us, and their ratings of our long-term and short-term debt are based on a number of factors. Any downgrade of our credit ratings by a credit rating agency, whether as a result of our actions or factors which are beyond our control, can increase the cost of borrowing under any indebtedness we may incur, reduce market capacity for our commercial paper or require the posting of additional collateral under our derivative contracts. There can be no assurance that we will be able to maintain our credit ratings, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position and access to capital markets. \nOther risks \nOur business depends on our ability to recruit and retain talented, highly skilled employees and a diverse workforce. \nOur continued growth requires us to recruit and retain talented employees representing diverse backgrounds, experiences, and skill sets. The market for highly skilled workers and leaders in our industry is extremely competitive and our ability to compete depends on our ability to hire, develop and motivate highly skilled personnel in all areas of our organization. Maintaining our brand and reputation, as well as a diverse, equitable and inclusive work environment enables us to attract top talent. If we are less successful in our recruiting efforts, or if we cannot retain highly skilled workers and key leaders, our ability to develop and deliver successful products and services may be adversely affected. In addition, effective succession planning is important to our long-term success. Any unsuccessful implementation of our succession plans or failure to ensure effective transfer of knowledge and smooth transitions involving key employees could adversely affect our business, financial condition, or results of operations.\nClimate change or legal, regulatory or market measures to address climate change may negatively affect our business and results of operations.\nClimate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations, including an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Natural disasters and extreme weather conditions, such as a hurricane, tornado, earthquake, wildfire or flooding, may pose physical risks to our facilities and disrupt the operation of our supply chain. The impacts of the changing climate on water resources may result in water scarcity, limiting our ability to access sufficient high-quality water in certain locations, which may increase operational costs. \nConcern over climate change may also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and\/or mitigate the effects of climate change on the environment. If such laws or regulations are more stringent than current legal or regulatory obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and distribution of our products, which may adversely affect our business, results of operations or financial condition. Further, the impacts of climate change have an influence on customer preferences, and failure to provide climate-friendly products could potentially result in loss of market share.\nAn information security incident, including a cybersecurity breach, could have a negative impact on the Company's business or reputation.\nTo meet business objectives, the Company relies on both internal information technology (IT) systems and networks, and those of third parties and their vendors, to process and store sensitive data, including confidential research, business plans, financial information, intellectual property, and personal data that may be subject to legal protection, and ensure the continuity of the Company's supply chain and operations. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these systems and networks, including customer products that are connected to or rely on such systems and networks, and the confidentiality, integrity, and availability of the Company's sensitive data. The Company assesses these threats and makes investments to increase internal protection, detection, and response capabilities, as well as ensure the Company's third-party providers have required capabilities and controls, to address this risk. Because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for the Company to be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. Also, increasing use of AI could increase these risks. The Company maintains cybersecurity insurance in the event of an information security or cyber incident; however, the coverage may not be sufficient to cover all financial, legal, business or reputational losses.\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">2023 Annual Report<\/td><td colspan=\"3\">15<\/td><\/tr><\/table>\n"}
{"QID":"q_Ri051","Question":"How does Johnson & Johnson summarize the risks associated with illegal pharmaceutical imports and their impact on profitability?","ground_truth_answer":"Johnson & Johnson summarizes the risks associated with illegal pharmaceutical imports as a significant threat to its profitability. The Company faces challenges from the increasing volume of illegal imports of pharmaceutical products, which are often sold at lower prices due to government price controls or other market dynamics in the exporting countries. These imports can undermine the Company\u2019s sales and profitability by creating pricing pressures and competitive disadvantages in markets where Johnson & Johnson operates. The summary highlights that while U.S. law restricts most foreign imports, the rise in illegal imports continues to escalate, impacting the Company\u2019s financial performance and market share, and necessitating ongoing efforts to address this issue and protect its business interests.","question_type":"Risk","page_number":"14","accession_number":"0000200406-24-000013","item":"Item 1A. Risk factors","context_markdown_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_markdown_without_headers":"countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n|    |    |\n|---:|---:|\n|  1 | 14 |\n","context_html_with_headers":"JOHNSON & JOHNSON 10-K form for the fiscal year ended 2023-12-31, page 14: countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>","context_html_without_headers":"countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Company's operating results. \nIllegal importation of pharmaceutical products: The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Company's sales and profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.\nAnti-bribery and other regulations: The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage. The Company's business is heavily regulated and therefore involves significant interaction with foreign officials. Also, in many countries outside the U.S., the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, the Company's interactions with these prescribers and purchasers are subject to regulation under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the Company operates have laws and regulations, including the U.K. Bribery Act 2010, aimed at preventing and penalizing corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and administrative remedies, including exclusion from healthcare programs.\nOther financial, economic, legal, social and political risks. Other risks inherent in conducting business globally include:\n\u2022local and regional economic environments and policies in the markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, and currency controls or other limitations on the ability to expatriate cash; \n\u2022protective economic policies taken by governments, such as trade protection measures, increased antitrust reporting requirements and enforcement activity, and import\/export licensing requirements; \n\u2022compliance with local regulations and laws including, in some countries, regulatory requirements restricting the Company's ability to manufacture or sell its products in the relevant market; \n\u2022diminished protection of intellectual property and contractual rights in certain jurisdictions;\n\u2022potential nationalization or expropriation of the Company's foreign assets; \n\u2022political or social upheavals, economic instability, repression, or human rights issues; and \n\u2022geopolitical events, including natural disasters, disruptions to markets due to war, armed conflict, terrorism, epidemics or pandemics.\nDue to the international nature of the Company's business, geopolitical or economic changes or events, including global tensions and war, could adversely affect our business, results of operations or financial condition.\nAs described above, the Company has extensive operations and business activity throughout the world. Global tensions, conflict and\/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility, decreased demand for our products in affected countries, and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers. Most recently, we have experienced, and expect to continue to experience, impacts to the Company's business resulting from the Russia-Ukraine war, rising conflict in the Middle East as well as increasing tensions between the U.S. and China. In response to heightened conflict, such as the Russia-Ukraine war, governments may impose export controls and broad financial and economic sanctions. Our business and operations may be further impacted by the imposition of trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors. Additional sanctions or other measures may be imposed by the global community, including but not limited to limitations on our ability to file, prosecute and maintain patents, trademarks and other intellectual property rights. Furthermore, in some countries, such as in Russia, action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Company's inventions in Russia or from selling or importing products in and into Russia.\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">14<\/td><td colspan=\"3\">  <\/td><\/tr><\/table>"}
{"QID":"q_Ri052","Question":" What potential impact could the implementation of the EU's Digital Markets Act (DMA) have on Apple's business practices?","ground_truth_answer":"The EU's Digital Markets Act (DMA) could significantly affect Apple's business practices, particularly regarding the App Store. The European Commission's investigations focus on Apple's rules for app developers, including how they communicate with users and handle contractual agreements. Issues related to default app settings, app uninstallation, and browser choice could force Apple to adjust its iOS system. Non-compliance could lead to substantial penalties, including fines of up to 10% of Apple's global net sales.","question_type":"Risk","page_number":"19","accession_number":"0000320193-24-000081","item":"Item 1.    Legal Proceedings","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 19: \nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_markdown_without_headers":"\nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 19: \nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_html_without_headers":"\nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n"}
{"QID":"q_Ri053","Question":"How does Apple anticipate the ongoing antitrust lawsuit with the U.S. Department of Justice affecting its market positioning?","ground_truth_answer":"Apple anticipates that the ongoing antitrust lawsuit filed by the U.S. Department of Justice, which alleges monopolistic practices in the smartphone market, could lead to potential legal and operational challenges. The lawsuit seeks equitable relief to address alleged anti-competitive behavior, and Apple plans to vigorously defend itself. The company believes it has substantial defenses against these claims but acknowledges the uncertainty and potential adverse effects on its market positioning depending on the lawsuit's outcome. Any resolution above management's expectations could materially impact Apple's financial condition and operations.","question_type":"Risk","page_number":"19","accession_number":"0000320193-24-000081","item":"Item 1.    Legal Proceedings","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 19: \nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_markdown_without_headers":"\nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 19: \nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_html_without_headers":"\nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n"}
{"QID":"q_Ri054","Question":"How does Apple manage its exposure to fluctuations in currency values through its hedging strategies?","ground_truth_answer":"Apple manages its exposure to currency value fluctuations through a comprehensive hedging strategy involving the use of derivative instruments such as forwards, options, and cross-currency swaps. These tools help mitigate risks associated with foreign exchange rate changes, protecting the company\u2019s financial performance. To safeguard its forecasted revenue and inventory purchases, Apple employs cash flow hedges, typically covering a 12-month period. Additionally, for foreign currency-denominated term debt and marketable securities, the company uses forwards and cross-currency swaps designated as cash flow or fair value hedges, with some positions extending up to 18 years. Beyond designated hedges, Apple also utilizes other derivative instruments to shield its gross margins from certain currency fluctuations and to offset foreign currency gains or losses from remeasuring assets and liabilities denominated in non-functional currencies. Despite these strategies, Apple acknowledges that its hedges may only partially offset the financial impacts of foreign exchange and interest rate movements\u200b.","question_type":"Risk","page_number":"8","accession_number":"0000320193-24-000081","item":"Item 1.    Financial Statements","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 8: |    |                                           |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|---:|:------------------------------------------|:-------------------|:--------|:----------------|:---|:-----------------|:---|:----------|:------------------------|:---------|:----------------------------|:--------------------------------|:--------|:-------|:---|:-------|:--------|:---|:-------|:---|:--------|\n|  1 |                                           | September 30, 2023 |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  2 |                                           | AdjustedCost       |         | UnrealizedGains |    | UnrealizedLosses |    | FairValue | Cash andCashEquivalents |          | CurrentMarketableSecurities | Non-CurrentMarketableSecurities |         |        |    |        |         |    |        |    |         |\n|  3 | Cash                                      | $                  | 28,359  |                 |    | $                | -  |           | $                       | -        |                             | $                               | 28,359  |        | $  | 28,359 |         | $  | -      | $  | -       |\n|  4 | Level 1:                                  |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  5 | Money market funds                        | 481                |         |                 | -  |                  |    | -         |                         | 481      |                             | 481                             |         | -      |    |        | -       |    |        |    |         |\n|  6 | Mutual funds and equity securities        | 442                |         |                 | 12 |                  |    | (26)      |                         | 428      |                             | -                               |         | 428    |    |        | -       |    |        |    |         |\n|  7 | Subtotal                                  | 923                |         |                 | 12 |                  |    | (26)      |                         | 909      |                             | 481                             |         | 428    |    |        | -       |    |        |    |         |\n|  8 | Level 2 (1):                              |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  9 | U.S. Treasury securities                  | 19,406             |         |                 | -  |                  |    | (1,292)   |                         | 18,114   |                             | 35                              |         | 5,468  |    |        | 12,611  |    |        |    |         |\n| 10 | U.S. agency securities                    | 5,736              |         |                 | -  |                  |    | (600)     |                         | 5,136    |                             | 36                              |         | 271    |    |        | 4,829   |    |        |    |         |\n| 11 | Non-U.S. government securities            | 17,533             |         |                 | 6  |                  |    | (1,048)   |                         | 16,491   |                             | -                               |         | 11,332 |    |        | 5,159   |    |        |    |         |\n| 12 | Certificates of deposit and time deposits | 1,354              |         |                 | -  |                  |    | -         |                         | 1,354    |                             | 1,034                           |         | 320    |    |        | -       |    |        |    |         |\n| 13 | Commercial paper                          | 608                |         |                 | -  |                  |    | -         |                         | 608      |                             | -                               |         | 608    |    |        | -       |    |        |    |         |\n| 14 | Corporate debt securities                 | 76,840             |         |                 | 6  |                  |    | (5,956)   |                         | 70,890   |                             | 20                              |         | 12,627 |    |        | 58,243  |    |        |    |         |\n| 15 | Municipal securities                      | 628                |         |                 | -  |                  |    | (26)      |                         | 602      |                             | -                               |         | 192    |    |        | 410     |    |        |    |         |\n| 16 | Mortgage- and asset-backed securities     | 22,365             |         |                 | 6  |                  |    | (2,735)   |                         | 19,636   |                             | -                               |         | 344    |    |        | 19,292  |    |        |    |         |\n| 17 | Subtotal                                  | 144,470            |         |                 | 18 |                  |    | (11,657)  |                         | 132,831  |                             | 1,125                           |         | 31,162 |    |        | 100,544 |    |        |    |         |\n| 18 | Total (2)                                 | $                  | 173,752 |                 |    | $                | 30 |           | $                       | (11,683) |                             | $                               | 162,099 |        | $  | 29,965 |         | $  | 31,590 | $  | 100,544 |\n(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n|    |                                    |        |        |\n|---:|:-----------------------------------|:-------|:-------|\n|  1 | Due after 1 year through 5 years   | $      | 64,209 |\n|  2 | Due after 5 years through 10 years | 8,660  |        |\n|  3 | Due after 10 years                 | 18,371 |        |\n|  4 | Total fair value                   | $      | 91,240 |\n\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_markdown_without_headers":"|    |                                           |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|---:|:------------------------------------------|:-------------------|:--------|:----------------|:---|:-----------------|:---|:----------|:------------------------|:---------|:----------------------------|:--------------------------------|:--------|:-------|:---|:-------|:--------|:---|:-------|:---|:--------|\n|  1 |                                           | September 30, 2023 |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  2 |                                           | AdjustedCost       |         | UnrealizedGains |    | UnrealizedLosses |    | FairValue | Cash andCashEquivalents |          | CurrentMarketableSecurities | Non-CurrentMarketableSecurities |         |        |    |        |         |    |        |    |         |\n|  3 | Cash                                      | $                  | 28,359  |                 |    | $                | -  |           | $                       | -        |                             | $                               | 28,359  |        | $  | 28,359 |         | $  | -      | $  | -       |\n|  4 | Level 1:                                  |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  5 | Money market funds                        | 481                |         |                 | -  |                  |    | -         |                         | 481      |                             | 481                             |         | -      |    |        | -       |    |        |    |         |\n|  6 | Mutual funds and equity securities        | 442                |         |                 | 12 |                  |    | (26)      |                         | 428      |                             | -                               |         | 428    |    |        | -       |    |        |    |         |\n|  7 | Subtotal                                  | 923                |         |                 | 12 |                  |    | (26)      |                         | 909      |                             | 481                             |         | 428    |    |        | -       |    |        |    |         |\n|  8 | Level 2 (1):                              |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  9 | U.S. Treasury securities                  | 19,406             |         |                 | -  |                  |    | (1,292)   |                         | 18,114   |                             | 35                              |         | 5,468  |    |        | 12,611  |    |        |    |         |\n| 10 | U.S. agency securities                    | 5,736              |         |                 | -  |                  |    | (600)     |                         | 5,136    |                             | 36                              |         | 271    |    |        | 4,829   |    |        |    |         |\n| 11 | Non-U.S. government securities            | 17,533             |         |                 | 6  |                  |    | (1,048)   |                         | 16,491   |                             | -                               |         | 11,332 |    |        | 5,159   |    |        |    |         |\n| 12 | Certificates of deposit and time deposits | 1,354              |         |                 | -  |                  |    | -         |                         | 1,354    |                             | 1,034                           |         | 320    |    |        | -       |    |        |    |         |\n| 13 | Commercial paper                          | 608                |         |                 | -  |                  |    | -         |                         | 608      |                             | -                               |         | 608    |    |        | -       |    |        |    |         |\n| 14 | Corporate debt securities                 | 76,840             |         |                 | 6  |                  |    | (5,956)   |                         | 70,890   |                             | 20                              |         | 12,627 |    |        | 58,243  |    |        |    |         |\n| 15 | Municipal securities                      | 628                |         |                 | -  |                  |    | (26)      |                         | 602      |                             | -                               |         | 192    |    |        | 410     |    |        |    |         |\n| 16 | Mortgage- and asset-backed securities     | 22,365             |         |                 | 6  |                  |    | (2,735)   |                         | 19,636   |                             | -                               |         | 344    |    |        | 19,292  |    |        |    |         |\n| 17 | Subtotal                                  | 144,470            |         |                 | 18 |                  |    | (11,657)  |                         | 132,831  |                             | 1,125                           |         | 31,162 |    |        | 100,544 |    |        |    |         |\n| 18 | Total (2)                                 | $                  | 173,752 |                 |    | $                | 30 |           | $                       | (11,683) |                             | $                               | 162,099 |        | $  | 29,965 |         | $  | 31,590 | $  | 100,544 |\n(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n|    |                                    |        |        |\n|---:|:-----------------------------------|:-------|:-------|\n|  1 | Due after 1 year through 5 years   | $      | 64,209 |\n|  2 | Due after 5 years through 10 years | 8,660  |        |\n|  3 | Due after 10 years                 | 18,371 |        |\n|  4 | Total fair value                   | $      | 91,240 |\n\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 8: <table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"39\">September 30, 2023<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">AdjustedCost<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedGains<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedLosses<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">FairValue<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Cash andCashEquivalents<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">CurrentMarketableSecurities<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Non-CurrentMarketableSecurities<\/td><\/tr><tr><td colspan=\"3\">Cash<\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 1:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Money market funds<\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mutual funds and equity securities<\/td><td colspan=\"2\">442 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">923 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">909 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 2 (1):<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">U.S. Treasury securities<\/td><td colspan=\"2\">19,406 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,292)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,114 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">35 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,468 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,611 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. agency securities<\/td><td colspan=\"2\">5,736 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(600)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,136 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">36 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">271 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,829 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Non-U.S. government securities<\/td><td colspan=\"2\">17,533 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,048)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,491 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">11,332 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,159 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Certificates of deposit and time deposits<\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,034 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">320 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Commercial paper<\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate debt securities<\/td><td colspan=\"2\">76,840 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(5,956)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">70,890 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,627 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">58,243 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Municipal securities<\/td><td colspan=\"2\">628 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">602 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">192 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">410 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mortgage- and asset-backed securities<\/td><td colspan=\"2\">22,365 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(2,735)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,636 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">344 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,292 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">144,470 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(11,657)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">132,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,125 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">31,162 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">100,544 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total (2)<\/td><td>$<\/td><td>173,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>30 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>(11,683)<\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>162,099 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>29,965 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>31,590 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>100,544 <\/td><td><\/td><\/tr><\/table>(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 1 year through 5 years<\/td><td>$<\/td><td>64,209 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 5 years through 10 years<\/td><td colspan=\"2\">8,660 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 10 years<\/td><td colspan=\"2\">18,371 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total fair value<\/td><td>$<\/td><td>91,240 <\/td><td><\/td><\/tr><\/table>\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_html_without_headers":"<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"39\">September 30, 2023<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">AdjustedCost<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedGains<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedLosses<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">FairValue<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Cash andCashEquivalents<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">CurrentMarketableSecurities<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Non-CurrentMarketableSecurities<\/td><\/tr><tr><td colspan=\"3\">Cash<\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 1:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Money market funds<\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mutual funds and equity securities<\/td><td colspan=\"2\">442 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">923 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">909 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 2 (1):<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">U.S. Treasury securities<\/td><td colspan=\"2\">19,406 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,292)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,114 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">35 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,468 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,611 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. agency securities<\/td><td colspan=\"2\">5,736 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(600)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,136 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">36 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">271 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,829 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Non-U.S. government securities<\/td><td colspan=\"2\">17,533 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,048)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,491 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">11,332 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,159 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Certificates of deposit and time deposits<\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,034 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">320 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Commercial paper<\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate debt securities<\/td><td colspan=\"2\">76,840 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(5,956)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">70,890 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,627 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">58,243 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Municipal securities<\/td><td colspan=\"2\">628 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">602 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">192 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">410 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mortgage- and asset-backed securities<\/td><td colspan=\"2\">22,365 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(2,735)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,636 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">344 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,292 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">144,470 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(11,657)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">132,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,125 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">31,162 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">100,544 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total (2)<\/td><td>$<\/td><td>173,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>30 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>(11,683)<\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>162,099 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>29,965 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>31,590 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>100,544 <\/td><td><\/td><\/tr><\/table>(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 1 year through 5 years<\/td><td>$<\/td><td>64,209 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 5 years through 10 years<\/td><td colspan=\"2\">8,660 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 10 years<\/td><td colspan=\"2\">18,371 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total fair value<\/td><td>$<\/td><td>91,240 <\/td><td><\/td><\/tr><\/table>\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n"}
{"QID":"q_Ri055","Question":"How does the seasonality of product launches impact Apple's operational and inventory management strategies?","ground_truth_answer":"The seasonality of Apple's product launches, particularly during the holiday season in the first fiscal quarter, significantly impacts its operational and inventory management strategies. This seasonal demand results in higher net sales during this period. Additionally, the introduction of new products influences sales patterns, operating expenses, and inventory levels as distribution channels adjust to stock new products while depleting older inventories. The anticipation of new launches also affects consumer and distributor behavior, potentially altering sales timing and inventory requirements\u200b.","question_type":"Risk","page_number":"13","accession_number":"0000320193-24-000081","item":"Item 2.    Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 13: \nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n","context_markdown_without_headers":"\nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 13: \nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n","context_html_without_headers":"\nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n"}
{"QID":"q_Ri056","Question":"How does Apple address risks related to interest rate fluctuations impacting its debt and marketable securities?","ground_truth_answer":"Apple addresses risks related to interest rate fluctuations by employing interest rate swaps, options, or other derivative instruments. These instruments are designated as either cash flow or fair value hedges to manage the impact on its term debt and marketable securities. This strategy helps Apple mitigate the financial impact of changing interest rates on its debt obligations and investment portfolio.","question_type":"Risk","page_number":"8","accession_number":"0000320193-24-000081","item":"Item 1.    Financial Statements","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 8: |    |                                           |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|---:|:------------------------------------------|:-------------------|:--------|:----------------|:---|:-----------------|:---|:----------|:------------------------|:---------|:----------------------------|:--------------------------------|:--------|:-------|:---|:-------|:--------|:---|:-------|:---|:--------|\n|  1 |                                           | September 30, 2023 |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  2 |                                           | AdjustedCost       |         | UnrealizedGains |    | UnrealizedLosses |    | FairValue | Cash andCashEquivalents |          | CurrentMarketableSecurities | Non-CurrentMarketableSecurities |         |        |    |        |         |    |        |    |         |\n|  3 | Cash                                      | $                  | 28,359  |                 |    | $                | -  |           | $                       | -        |                             | $                               | 28,359  |        | $  | 28,359 |         | $  | -      | $  | -       |\n|  4 | Level 1:                                  |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  5 | Money market funds                        | 481                |         |                 | -  |                  |    | -         |                         | 481      |                             | 481                             |         | -      |    |        | -       |    |        |    |         |\n|  6 | Mutual funds and equity securities        | 442                |         |                 | 12 |                  |    | (26)      |                         | 428      |                             | -                               |         | 428    |    |        | -       |    |        |    |         |\n|  7 | Subtotal                                  | 923                |         |                 | 12 |                  |    | (26)      |                         | 909      |                             | 481                             |         | 428    |    |        | -       |    |        |    |         |\n|  8 | Level 2 (1):                              |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  9 | U.S. Treasury securities                  | 19,406             |         |                 | -  |                  |    | (1,292)   |                         | 18,114   |                             | 35                              |         | 5,468  |    |        | 12,611  |    |        |    |         |\n| 10 | U.S. agency securities                    | 5,736              |         |                 | -  |                  |    | (600)     |                         | 5,136    |                             | 36                              |         | 271    |    |        | 4,829   |    |        |    |         |\n| 11 | Non-U.S. government securities            | 17,533             |         |                 | 6  |                  |    | (1,048)   |                         | 16,491   |                             | -                               |         | 11,332 |    |        | 5,159   |    |        |    |         |\n| 12 | Certificates of deposit and time deposits | 1,354              |         |                 | -  |                  |    | -         |                         | 1,354    |                             | 1,034                           |         | 320    |    |        | -       |    |        |    |         |\n| 13 | Commercial paper                          | 608                |         |                 | -  |                  |    | -         |                         | 608      |                             | -                               |         | 608    |    |        | -       |    |        |    |         |\n| 14 | Corporate debt securities                 | 76,840             |         |                 | 6  |                  |    | (5,956)   |                         | 70,890   |                             | 20                              |         | 12,627 |    |        | 58,243  |    |        |    |         |\n| 15 | Municipal securities                      | 628                |         |                 | -  |                  |    | (26)      |                         | 602      |                             | -                               |         | 192    |    |        | 410     |    |        |    |         |\n| 16 | Mortgage- and asset-backed securities     | 22,365             |         |                 | 6  |                  |    | (2,735)   |                         | 19,636   |                             | -                               |         | 344    |    |        | 19,292  |    |        |    |         |\n| 17 | Subtotal                                  | 144,470            |         |                 | 18 |                  |    | (11,657)  |                         | 132,831  |                             | 1,125                           |         | 31,162 |    |        | 100,544 |    |        |    |         |\n| 18 | Total (2)                                 | $                  | 173,752 |                 |    | $                | 30 |           | $                       | (11,683) |                             | $                               | 162,099 |        | $  | 29,965 |         | $  | 31,590 | $  | 100,544 |\n(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n|    |                                    |        |        |\n|---:|:-----------------------------------|:-------|:-------|\n|  1 | Due after 1 year through 5 years   | $      | 64,209 |\n|  2 | Due after 5 years through 10 years | 8,660  |        |\n|  3 | Due after 10 years                 | 18,371 |        |\n|  4 | Total fair value                   | $      | 91,240 |\n\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_markdown_without_headers":"|    |                                           |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|---:|:------------------------------------------|:-------------------|:--------|:----------------|:---|:-----------------|:---|:----------|:------------------------|:---------|:----------------------------|:--------------------------------|:--------|:-------|:---|:-------|:--------|:---|:-------|:---|:--------|\n|  1 |                                           | September 30, 2023 |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  2 |                                           | AdjustedCost       |         | UnrealizedGains |    | UnrealizedLosses |    | FairValue | Cash andCashEquivalents |          | CurrentMarketableSecurities | Non-CurrentMarketableSecurities |         |        |    |        |         |    |        |    |         |\n|  3 | Cash                                      | $                  | 28,359  |                 |    | $                | -  |           | $                       | -        |                             | $                               | 28,359  |        | $  | 28,359 |         | $  | -      | $  | -       |\n|  4 | Level 1:                                  |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  5 | Money market funds                        | 481                |         |                 | -  |                  |    | -         |                         | 481      |                             | 481                             |         | -      |    |        | -       |    |        |    |         |\n|  6 | Mutual funds and equity securities        | 442                |         |                 | 12 |                  |    | (26)      |                         | 428      |                             | -                               |         | 428    |    |        | -       |    |        |    |         |\n|  7 | Subtotal                                  | 923                |         |                 | 12 |                  |    | (26)      |                         | 909      |                             | 481                             |         | 428    |    |        | -       |    |        |    |         |\n|  8 | Level 2 (1):                              |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  9 | U.S. Treasury securities                  | 19,406             |         |                 | -  |                  |    | (1,292)   |                         | 18,114   |                             | 35                              |         | 5,468  |    |        | 12,611  |    |        |    |         |\n| 10 | U.S. agency securities                    | 5,736              |         |                 | -  |                  |    | (600)     |                         | 5,136    |                             | 36                              |         | 271    |    |        | 4,829   |    |        |    |         |\n| 11 | Non-U.S. government securities            | 17,533             |         |                 | 6  |                  |    | (1,048)   |                         | 16,491   |                             | -                               |         | 11,332 |    |        | 5,159   |    |        |    |         |\n| 12 | Certificates of deposit and time deposits | 1,354              |         |                 | -  |                  |    | -         |                         | 1,354    |                             | 1,034                           |         | 320    |    |        | -       |    |        |    |         |\n| 13 | Commercial paper                          | 608                |         |                 | -  |                  |    | -         |                         | 608      |                             | -                               |         | 608    |    |        | -       |    |        |    |         |\n| 14 | Corporate debt securities                 | 76,840             |         |                 | 6  |                  |    | (5,956)   |                         | 70,890   |                             | 20                              |         | 12,627 |    |        | 58,243  |    |        |    |         |\n| 15 | Municipal securities                      | 628                |         |                 | -  |                  |    | (26)      |                         | 602      |                             | -                               |         | 192    |    |        | 410     |    |        |    |         |\n| 16 | Mortgage- and asset-backed securities     | 22,365             |         |                 | 6  |                  |    | (2,735)   |                         | 19,636   |                             | -                               |         | 344    |    |        | 19,292  |    |        |    |         |\n| 17 | Subtotal                                  | 144,470            |         |                 | 18 |                  |    | (11,657)  |                         | 132,831  |                             | 1,125                           |         | 31,162 |    |        | 100,544 |    |        |    |         |\n| 18 | Total (2)                                 | $                  | 173,752 |                 |    | $                | 30 |           | $                       | (11,683) |                             | $                               | 162,099 |        | $  | 29,965 |         | $  | 31,590 | $  | 100,544 |\n(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n|    |                                    |        |        |\n|---:|:-----------------------------------|:-------|:-------|\n|  1 | Due after 1 year through 5 years   | $      | 64,209 |\n|  2 | Due after 5 years through 10 years | 8,660  |        |\n|  3 | Due after 10 years                 | 18,371 |        |\n|  4 | Total fair value                   | $      | 91,240 |\n\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 8: <table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"39\">September 30, 2023<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">AdjustedCost<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedGains<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedLosses<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">FairValue<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Cash andCashEquivalents<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">CurrentMarketableSecurities<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Non-CurrentMarketableSecurities<\/td><\/tr><tr><td colspan=\"3\">Cash<\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 1:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Money market funds<\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mutual funds and equity securities<\/td><td colspan=\"2\">442 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">923 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">909 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 2 (1):<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">U.S. Treasury securities<\/td><td colspan=\"2\">19,406 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,292)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,114 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">35 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,468 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,611 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. agency securities<\/td><td colspan=\"2\">5,736 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(600)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,136 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">36 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">271 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,829 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Non-U.S. government securities<\/td><td colspan=\"2\">17,533 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,048)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,491 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">11,332 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,159 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Certificates of deposit and time deposits<\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,034 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">320 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Commercial paper<\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate debt securities<\/td><td colspan=\"2\">76,840 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(5,956)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">70,890 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,627 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">58,243 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Municipal securities<\/td><td colspan=\"2\">628 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">602 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">192 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">410 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mortgage- and asset-backed securities<\/td><td colspan=\"2\">22,365 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(2,735)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,636 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">344 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,292 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">144,470 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(11,657)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">132,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,125 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">31,162 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">100,544 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total (2)<\/td><td>$<\/td><td>173,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>30 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>(11,683)<\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>162,099 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>29,965 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>31,590 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>100,544 <\/td><td><\/td><\/tr><\/table>(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 1 year through 5 years<\/td><td>$<\/td><td>64,209 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 5 years through 10 years<\/td><td colspan=\"2\">8,660 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 10 years<\/td><td colspan=\"2\">18,371 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total fair value<\/td><td>$<\/td><td>91,240 <\/td><td><\/td><\/tr><\/table>\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_html_without_headers":"<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"39\">September 30, 2023<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">AdjustedCost<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedGains<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedLosses<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">FairValue<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Cash andCashEquivalents<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">CurrentMarketableSecurities<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Non-CurrentMarketableSecurities<\/td><\/tr><tr><td colspan=\"3\">Cash<\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 1:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Money market funds<\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mutual funds and equity securities<\/td><td colspan=\"2\">442 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">923 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">909 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 2 (1):<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">U.S. Treasury securities<\/td><td colspan=\"2\">19,406 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,292)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,114 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">35 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,468 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,611 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. agency securities<\/td><td colspan=\"2\">5,736 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(600)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,136 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">36 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">271 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,829 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Non-U.S. government securities<\/td><td colspan=\"2\">17,533 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,048)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,491 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">11,332 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,159 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Certificates of deposit and time deposits<\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,034 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">320 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Commercial paper<\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate debt securities<\/td><td colspan=\"2\">76,840 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(5,956)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">70,890 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,627 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">58,243 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Municipal securities<\/td><td colspan=\"2\">628 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">602 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">192 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">410 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mortgage- and asset-backed securities<\/td><td colspan=\"2\">22,365 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(2,735)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,636 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">344 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,292 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">144,470 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(11,657)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">132,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,125 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">31,162 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">100,544 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total (2)<\/td><td>$<\/td><td>173,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>30 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>(11,683)<\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>162,099 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>29,965 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>31,590 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>100,544 <\/td><td><\/td><\/tr><\/table>(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 1 year through 5 years<\/td><td>$<\/td><td>64,209 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 5 years through 10 years<\/td><td colspan=\"2\">8,660 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 10 years<\/td><td colspan=\"2\">18,371 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total fair value<\/td><td>$<\/td><td>91,240 <\/td><td><\/td><\/tr><\/table>\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n"}
{"QID":"q_Ri057","Question":"What are the potential impacts of inflation and changes in consumer spending on Apple's revenue streams?","ground_truth_answer":"Inflation and changes in consumer spending could significantly impact Apple\u2019s revenue streams by affecting the affordability and demand for its products and services. Higher inflation can lead to increased costs for materials and labor, potentially impacting product pricing and profitability. Simultaneously, a decrease in consumer spending could reduce demand for discretionary items, including Apple's products. These macroeconomic factors could result in fluctuations in sales volumes and revenue across different regions and product categories, posing challenges to maintaining growth and profitability\u200b.","question_type":"Risk","page_number":"13","accession_number":"0000320193-24-000081","item":"Item 2.    Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 13: \nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n","context_markdown_without_headers":"\nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 13: \nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n","context_html_without_headers":"\nItem 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations\n\nThis Item and other sections of this Quarterly Report on Form 10-Q (\"Form 10-Q\") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company's business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as \"future,\" \"anticipates,\" \"believes,\" \"estimates,\" \"expects,\" \"intends,\" \"plans,\" \"predicts,\" \"will,\" \"would,\" \"could,\" \"can,\" \"may,\" and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading \"Risk Factors.\" The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.\nUnless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended in September and the associated quarters, months and periods of those fiscal years.\nThe following discussion should be read in conjunction with the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission (the \"SEC\") and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.\n\nAvailable Information\n\nThe Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.\n\nBusiness Seasonality and Product Introductions\n\nThe Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.\nDuring the third quarter of 2024, the Company announced the following product and operating system updates:\n\u2022iPad Air\u00ae;\n\u2022iPad Pro\u00ae;\n\n\u2022iOS 18, macOS\u00ae Sequoia, iPadOS\u00ae 18, watchOS\u00ae 11, visionOS\u2122 2 and tvOS\u00ae 18.\n\nThe Company also announced Apple Intelligence\u2122, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices. Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.\n\nFiscal Period\n\nThe Company's fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company's fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company's fiscal years 2024 and 2023 span 52 and 53 weeks, respectively.\n\nMacroeconomic Conditions\n\nMacroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company's results of operations and financial condition.\n\nApple Inc. | Q3 2024 Form 10-Q | 13\n\n\n\n\n\n"}
{"QID":"q_Ri058","Question":"How could geopolitical tensions, particularly in Greater China, affect Apple's operations and sales?","ground_truth_answer":"Geopolitical tensions and economic conditions in Greater China could negatively impact Apple\u2019s operations and sales. Specifically, the report highlights that net sales in Greater China decreased in the third quarter and first nine months of 2024, primarily due to lower iPhone sales. Additionally, the weakness of the renminbi relative to the U.S. dollar had an unfavorable impact on sales, illustrating the region's sensitivity to external geopolitical and economic factors\u200b.","question_type":"Risk","page_number":"14","accession_number":"0000320193-24-000081","item":"Item 2.    Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 14: \nSegment Operating Performance\n\nThe following table shows net sales by reportable segment for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 (dollars in millions):\n\n|    |                                  |                    |        |                   |        |        |        |              |    |             |        |        |    |         |      |         |    |    |\n|---:|:---------------------------------|:-------------------|:-------|:------------------|:-------|:-------|:-------|:-------------|:---|:------------|:-------|:-------|:---|:--------|:-----|:--------|:---|:---|\n|  1 |                                  | Three Months Ended |        | Nine Months Ended |        |        |        |              |    |             |        |        |    |         |      |         |    |    |\n|  2 |                                  | June 29,2024       |        | July 1,2023       |        | Change |        | June 29,2024 |    | July 1,2023 |        | Change |    |         |      |         |    |    |\n|  3 | Net sales by reportable segment: |                    |        |                   |        |        |        |              |    |             |        |        |    |         |      |         |    |    |\n|  4 | Americas                         | $                  | 37,678 |                   |        | $      | 35,383 |              |    | 6           | %      |        | $  | 125,381 | $    | 122,445 | 2  | %  |\n|  5 | Europe                           | 21,884             |        |                   | 20,205 |        |        | 8            | %  |             | 76,404 |        |    | 71,831  | 6    | %       |    |    |\n|  6 | Greater China                    | 14,728             |        |                   | 15,758 |        |        | (7)          | %  |             | 51,919 |        |    | 57,475  | (10) | %       |    |    |\n|  7 | Japan                            | 5,097              |        |                   | 4,821  |        |        | 6            | %  |             | 19,126 |        |    | 18,752  | 2    | %       |    |    |\n|  8 | Rest of Asia Pacific             | 6,390              |        |                   | 5,630  |        |        | 13           | %  |             | 23,275 |        |    | 23,284  | -    | %       |    |    |\n|  9 | Total net sales                  | $                  | 85,777 |                   |        | $      | 81,797 |              |    | 5           | %      |        | $  | 296,105 | $    | 293,787 | 1  | %  |\n\n\nAmericas\n\nAmericas net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. Year-over-year Americas net sales increased during the first nine months of 2024 due primarily to higher net sales of Services, partially offset by lower net sales of iPhone and Wearables, Home and Accessories. The strength in foreign currencies relative to the U.S. dollar had a net favorable year-over-year impact on Americas net sales during the first nine months of 2024.\n\nEurope\n\nEurope net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Europe net sales during the third quarter of 2024. Year-over-year Europe net sales increased during the first nine months of 2024 due primarily to higher net sales of Services and iPhone, partially offset by lower net sales of Wearables, Home and Accessories.\n\nGreater China\n\nGreater China net sales decreased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to lower net sales of iPhone. Year-over-year Greater China net sales decreased during the first nine months of 2024 due primarily to lower net sales of iPhone and iPad. The weakness in the renminbi relative to the U.S. dollar had an unfavorable year-over-year impact on Greater China net sales during the third quarter and first nine months of 2024.\n\nJapan\n\nJapan net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of iPhone and iPad. Year-over-year Japan net sales increased during the first nine months of 2024 due primarily to higher net sales of iPhone, partially offset by lower net sales of Wearables, Home and Accessories. The weakness in the yen relative to the U.S. dollar had an unfavorable year-over-year impact on Japan net sales during the third quarter and first nine months of 2024.\n\nRest of Asia Pacific\n\nRest of Asia Pacific net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services, iPhone and iPad. Year-over-year Rest of Asia Pacific net sales were relatively flat during the first nine months of 2024. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Rest of Asia Pacific net sales during the third quarter and first nine months of 2024.\n\nApple Inc. | Q3 2024 Form 10-Q | 14\n\n\n\n\n\n","context_markdown_without_headers":"\nSegment Operating Performance\n\nThe following table shows net sales by reportable segment for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 (dollars in millions):\n\n|    |                                  |                    |        |                   |        |        |        |              |    |             |        |        |    |         |      |         |    |    |\n|---:|:---------------------------------|:-------------------|:-------|:------------------|:-------|:-------|:-------|:-------------|:---|:------------|:-------|:-------|:---|:--------|:-----|:--------|:---|:---|\n|  1 |                                  | Three Months Ended |        | Nine Months Ended |        |        |        |              |    |             |        |        |    |         |      |         |    |    |\n|  2 |                                  | June 29,2024       |        | July 1,2023       |        | Change |        | June 29,2024 |    | July 1,2023 |        | Change |    |         |      |         |    |    |\n|  3 | Net sales by reportable segment: |                    |        |                   |        |        |        |              |    |             |        |        |    |         |      |         |    |    |\n|  4 | Americas                         | $                  | 37,678 |                   |        | $      | 35,383 |              |    | 6           | %      |        | $  | 125,381 | $    | 122,445 | 2  | %  |\n|  5 | Europe                           | 21,884             |        |                   | 20,205 |        |        | 8            | %  |             | 76,404 |        |    | 71,831  | 6    | %       |    |    |\n|  6 | Greater China                    | 14,728             |        |                   | 15,758 |        |        | (7)          | %  |             | 51,919 |        |    | 57,475  | (10) | %       |    |    |\n|  7 | Japan                            | 5,097              |        |                   | 4,821  |        |        | 6            | %  |             | 19,126 |        |    | 18,752  | 2    | %       |    |    |\n|  8 | Rest of Asia Pacific             | 6,390              |        |                   | 5,630  |        |        | 13           | %  |             | 23,275 |        |    | 23,284  | -    | %       |    |    |\n|  9 | Total net sales                  | $                  | 85,777 |                   |        | $      | 81,797 |              |    | 5           | %      |        | $  | 296,105 | $    | 293,787 | 1  | %  |\n\n\nAmericas\n\nAmericas net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. Year-over-year Americas net sales increased during the first nine months of 2024 due primarily to higher net sales of Services, partially offset by lower net sales of iPhone and Wearables, Home and Accessories. The strength in foreign currencies relative to the U.S. dollar had a net favorable year-over-year impact on Americas net sales during the first nine months of 2024.\n\nEurope\n\nEurope net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Europe net sales during the third quarter of 2024. Year-over-year Europe net sales increased during the first nine months of 2024 due primarily to higher net sales of Services and iPhone, partially offset by lower net sales of Wearables, Home and Accessories.\n\nGreater China\n\nGreater China net sales decreased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to lower net sales of iPhone. Year-over-year Greater China net sales decreased during the first nine months of 2024 due primarily to lower net sales of iPhone and iPad. The weakness in the renminbi relative to the U.S. dollar had an unfavorable year-over-year impact on Greater China net sales during the third quarter and first nine months of 2024.\n\nJapan\n\nJapan net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of iPhone and iPad. Year-over-year Japan net sales increased during the first nine months of 2024 due primarily to higher net sales of iPhone, partially offset by lower net sales of Wearables, Home and Accessories. The weakness in the yen relative to the U.S. dollar had an unfavorable year-over-year impact on Japan net sales during the third quarter and first nine months of 2024.\n\nRest of Asia Pacific\n\nRest of Asia Pacific net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services, iPhone and iPad. Year-over-year Rest of Asia Pacific net sales were relatively flat during the first nine months of 2024. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Rest of Asia Pacific net sales during the third quarter and first nine months of 2024.\n\nApple Inc. | Q3 2024 Form 10-Q | 14\n\n\n\n\n\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 14: \nSegment Operating Performance\n\nThe following table shows net sales by reportable segment for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 (dollars in millions):\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"15\">Three Months Ended<\/td><td colspan=\"3\"><\/td><td colspan=\"15\">Nine Months Ended<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change<\/td><\/tr><tr><td colspan=\"3\">Net sales by reportable segment:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Americas<\/td><td>$<\/td><td>37,678 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>35,383 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>125,381 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>122,445 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Europe<\/td><td colspan=\"2\">21,884 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20,205 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">8 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">76,404 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">71,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Greater China<\/td><td colspan=\"2\">14,728 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">15,758 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(7)<\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">51,919 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">57,475 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(10)<\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Japan<\/td><td colspan=\"2\">5,097 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,821 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,126 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Rest of Asia Pacific<\/td><td colspan=\"2\">6,390 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,630 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">13 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">23,275 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">23,284 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Total net sales<\/td><td>$<\/td><td>85,777 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>81,797 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>296,105 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>293,787 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1 <\/td><td>%<\/td><\/tr><\/table>\n\nAmericas\n\nAmericas net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. Year-over-year Americas net sales increased during the first nine months of 2024 due primarily to higher net sales of Services, partially offset by lower net sales of iPhone and Wearables, Home and Accessories. The strength in foreign currencies relative to the U.S. dollar had a net favorable year-over-year impact on Americas net sales during the first nine months of 2024.\n\nEurope\n\nEurope net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Europe net sales during the third quarter of 2024. Year-over-year Europe net sales increased during the first nine months of 2024 due primarily to higher net sales of Services and iPhone, partially offset by lower net sales of Wearables, Home and Accessories.\n\nGreater China\n\nGreater China net sales decreased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to lower net sales of iPhone. Year-over-year Greater China net sales decreased during the first nine months of 2024 due primarily to lower net sales of iPhone and iPad. The weakness in the renminbi relative to the U.S. dollar had an unfavorable year-over-year impact on Greater China net sales during the third quarter and first nine months of 2024.\n\nJapan\n\nJapan net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of iPhone and iPad. Year-over-year Japan net sales increased during the first nine months of 2024 due primarily to higher net sales of iPhone, partially offset by lower net sales of Wearables, Home and Accessories. The weakness in the yen relative to the U.S. dollar had an unfavorable year-over-year impact on Japan net sales during the third quarter and first nine months of 2024.\n\nRest of Asia Pacific\n\nRest of Asia Pacific net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services, iPhone and iPad. Year-over-year Rest of Asia Pacific net sales were relatively flat during the first nine months of 2024. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Rest of Asia Pacific net sales during the third quarter and first nine months of 2024.\n\nApple Inc. | Q3 2024 Form 10-Q | 14\n\n\n\n\n\n","context_html_without_headers":"\nSegment Operating Performance\n\nThe following table shows net sales by reportable segment for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 (dollars in millions):\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"15\">Three Months Ended<\/td><td colspan=\"3\"><\/td><td colspan=\"15\">Nine Months Ended<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 29,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">July 1,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Change<\/td><\/tr><tr><td colspan=\"3\">Net sales by reportable segment:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Americas<\/td><td>$<\/td><td>37,678 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>35,383 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>125,381 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>122,445 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Europe<\/td><td colspan=\"2\">21,884 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20,205 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">8 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">76,404 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">71,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Greater China<\/td><td colspan=\"2\">14,728 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">15,758 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(7)<\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">51,919 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">57,475 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(10)<\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Japan<\/td><td colspan=\"2\">5,097 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,821 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,126 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2 <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Rest of Asia Pacific<\/td><td colspan=\"2\">6,390 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,630 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">13 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">23,275 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">23,284 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td>%<\/td><\/tr><tr><td colspan=\"3\">Total net sales<\/td><td>$<\/td><td>85,777 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>81,797 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5 <\/td><td>%<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>296,105 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>293,787 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1 <\/td><td>%<\/td><\/tr><\/table>\n\nAmericas\n\nAmericas net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. Year-over-year Americas net sales increased during the first nine months of 2024 due primarily to higher net sales of Services, partially offset by lower net sales of iPhone and Wearables, Home and Accessories. The strength in foreign currencies relative to the U.S. dollar had a net favorable year-over-year impact on Americas net sales during the first nine months of 2024.\n\nEurope\n\nEurope net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Europe net sales during the third quarter of 2024. Year-over-year Europe net sales increased during the first nine months of 2024 due primarily to higher net sales of Services and iPhone, partially offset by lower net sales of Wearables, Home and Accessories.\n\nGreater China\n\nGreater China net sales decreased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to lower net sales of iPhone. Year-over-year Greater China net sales decreased during the first nine months of 2024 due primarily to lower net sales of iPhone and iPad. The weakness in the renminbi relative to the U.S. dollar had an unfavorable year-over-year impact on Greater China net sales during the third quarter and first nine months of 2024.\n\nJapan\n\nJapan net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of iPhone and iPad. Year-over-year Japan net sales increased during the first nine months of 2024 due primarily to higher net sales of iPhone, partially offset by lower net sales of Wearables, Home and Accessories. The weakness in the yen relative to the U.S. dollar had an unfavorable year-over-year impact on Japan net sales during the third quarter and first nine months of 2024.\n\nRest of Asia Pacific\n\nRest of Asia Pacific net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services, iPhone and iPad. Year-over-year Rest of Asia Pacific net sales were relatively flat during the first nine months of 2024. The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Rest of Asia Pacific net sales during the third quarter and first nine months of 2024.\n\nApple Inc. | Q3 2024 Form 10-Q | 14\n\n\n\n\n\n"}
{"QID":"q_Ri059","Question":"In what ways do fluctuations in foreign exchange rates pose risks to Apple's global financial results?","ground_truth_answer":"Fluctuations in foreign exchange rates pose risks to Apple\u2019s global financial results by potentially reducing the dollar value of revenues and expenses generated in foreign currencies. This exposure could impact both net sales and operating expenses. Apple manages these risks using foreign exchange derivative instruments to hedge a portion of its forecasted foreign currency exposure associated with revenue and inventory purchases\u200b.","question_type":"Risk","page_number":"8","accession_number":"0000320193-24-000081","item":"Item 1.    Financial Statements","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 8: |    |                                           |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|---:|:------------------------------------------|:-------------------|:--------|:----------------|:---|:-----------------|:---|:----------|:------------------------|:---------|:----------------------------|:--------------------------------|:--------|:-------|:---|:-------|:--------|:---|:-------|:---|:--------|\n|  1 |                                           | September 30, 2023 |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  2 |                                           | AdjustedCost       |         | UnrealizedGains |    | UnrealizedLosses |    | FairValue | Cash andCashEquivalents |          | CurrentMarketableSecurities | Non-CurrentMarketableSecurities |         |        |    |        |         |    |        |    |         |\n|  3 | Cash                                      | $                  | 28,359  |                 |    | $                | -  |           | $                       | -        |                             | $                               | 28,359  |        | $  | 28,359 |         | $  | -      | $  | -       |\n|  4 | Level 1:                                  |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  5 | Money market funds                        | 481                |         |                 | -  |                  |    | -         |                         | 481      |                             | 481                             |         | -      |    |        | -       |    |        |    |         |\n|  6 | Mutual funds and equity securities        | 442                |         |                 | 12 |                  |    | (26)      |                         | 428      |                             | -                               |         | 428    |    |        | -       |    |        |    |         |\n|  7 | Subtotal                                  | 923                |         |                 | 12 |                  |    | (26)      |                         | 909      |                             | 481                             |         | 428    |    |        | -       |    |        |    |         |\n|  8 | Level 2 (1):                              |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  9 | U.S. Treasury securities                  | 19,406             |         |                 | -  |                  |    | (1,292)   |                         | 18,114   |                             | 35                              |         | 5,468  |    |        | 12,611  |    |        |    |         |\n| 10 | U.S. agency securities                    | 5,736              |         |                 | -  |                  |    | (600)     |                         | 5,136    |                             | 36                              |         | 271    |    |        | 4,829   |    |        |    |         |\n| 11 | Non-U.S. government securities            | 17,533             |         |                 | 6  |                  |    | (1,048)   |                         | 16,491   |                             | -                               |         | 11,332 |    |        | 5,159   |    |        |    |         |\n| 12 | Certificates of deposit and time deposits | 1,354              |         |                 | -  |                  |    | -         |                         | 1,354    |                             | 1,034                           |         | 320    |    |        | -       |    |        |    |         |\n| 13 | Commercial paper                          | 608                |         |                 | -  |                  |    | -         |                         | 608      |                             | -                               |         | 608    |    |        | -       |    |        |    |         |\n| 14 | Corporate debt securities                 | 76,840             |         |                 | 6  |                  |    | (5,956)   |                         | 70,890   |                             | 20                              |         | 12,627 |    |        | 58,243  |    |        |    |         |\n| 15 | Municipal securities                      | 628                |         |                 | -  |                  |    | (26)      |                         | 602      |                             | -                               |         | 192    |    |        | 410     |    |        |    |         |\n| 16 | Mortgage- and asset-backed securities     | 22,365             |         |                 | 6  |                  |    | (2,735)   |                         | 19,636   |                             | -                               |         | 344    |    |        | 19,292  |    |        |    |         |\n| 17 | Subtotal                                  | 144,470            |         |                 | 18 |                  |    | (11,657)  |                         | 132,831  |                             | 1,125                           |         | 31,162 |    |        | 100,544 |    |        |    |         |\n| 18 | Total (2)                                 | $                  | 173,752 |                 |    | $                | 30 |           | $                       | (11,683) |                             | $                               | 162,099 |        | $  | 29,965 |         | $  | 31,590 | $  | 100,544 |\n(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n|    |                                    |        |        |\n|---:|:-----------------------------------|:-------|:-------|\n|  1 | Due after 1 year through 5 years   | $      | 64,209 |\n|  2 | Due after 5 years through 10 years | 8,660  |        |\n|  3 | Due after 10 years                 | 18,371 |        |\n|  4 | Total fair value                   | $      | 91,240 |\n\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_markdown_without_headers":"|    |                                           |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|---:|:------------------------------------------|:-------------------|:--------|:----------------|:---|:-----------------|:---|:----------|:------------------------|:---------|:----------------------------|:--------------------------------|:--------|:-------|:---|:-------|:--------|:---|:-------|:---|:--------|\n|  1 |                                           | September 30, 2023 |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  2 |                                           | AdjustedCost       |         | UnrealizedGains |    | UnrealizedLosses |    | FairValue | Cash andCashEquivalents |          | CurrentMarketableSecurities | Non-CurrentMarketableSecurities |         |        |    |        |         |    |        |    |         |\n|  3 | Cash                                      | $                  | 28,359  |                 |    | $                | -  |           | $                       | -        |                             | $                               | 28,359  |        | $  | 28,359 |         | $  | -      | $  | -       |\n|  4 | Level 1:                                  |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  5 | Money market funds                        | 481                |         |                 | -  |                  |    | -         |                         | 481      |                             | 481                             |         | -      |    |        | -       |    |        |    |         |\n|  6 | Mutual funds and equity securities        | 442                |         |                 | 12 |                  |    | (26)      |                         | 428      |                             | -                               |         | 428    |    |        | -       |    |        |    |         |\n|  7 | Subtotal                                  | 923                |         |                 | 12 |                  |    | (26)      |                         | 909      |                             | 481                             |         | 428    |    |        | -       |    |        |    |         |\n|  8 | Level 2 (1):                              |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |\n|  9 | U.S. Treasury securities                  | 19,406             |         |                 | -  |                  |    | (1,292)   |                         | 18,114   |                             | 35                              |         | 5,468  |    |        | 12,611  |    |        |    |         |\n| 10 | U.S. agency securities                    | 5,736              |         |                 | -  |                  |    | (600)     |                         | 5,136    |                             | 36                              |         | 271    |    |        | 4,829   |    |        |    |         |\n| 11 | Non-U.S. government securities            | 17,533             |         |                 | 6  |                  |    | (1,048)   |                         | 16,491   |                             | -                               |         | 11,332 |    |        | 5,159   |    |        |    |         |\n| 12 | Certificates of deposit and time deposits | 1,354              |         |                 | -  |                  |    | -         |                         | 1,354    |                             | 1,034                           |         | 320    |    |        | -       |    |        |    |         |\n| 13 | Commercial paper                          | 608                |         |                 | -  |                  |    | -         |                         | 608      |                             | -                               |         | 608    |    |        | -       |    |        |    |         |\n| 14 | Corporate debt securities                 | 76,840             |         |                 | 6  |                  |    | (5,956)   |                         | 70,890   |                             | 20                              |         | 12,627 |    |        | 58,243  |    |        |    |         |\n| 15 | Municipal securities                      | 628                |         |                 | -  |                  |    | (26)      |                         | 602      |                             | -                               |         | 192    |    |        | 410     |    |        |    |         |\n| 16 | Mortgage- and asset-backed securities     | 22,365             |         |                 | 6  |                  |    | (2,735)   |                         | 19,636   |                             | -                               |         | 344    |    |        | 19,292  |    |        |    |         |\n| 17 | Subtotal                                  | 144,470            |         |                 | 18 |                  |    | (11,657)  |                         | 132,831  |                             | 1,125                           |         | 31,162 |    |        | 100,544 |    |        |    |         |\n| 18 | Total (2)                                 | $                  | 173,752 |                 |    | $                | 30 |           | $                       | (11,683) |                             | $                               | 162,099 |        | $  | 29,965 |         | $  | 31,590 | $  | 100,544 |\n(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n|    |                                    |        |        |\n|---:|:-----------------------------------|:-------|:-------|\n|  1 | Due after 1 year through 5 years   | $      | 64,209 |\n|  2 | Due after 5 years through 10 years | 8,660  |        |\n|  3 | Due after 10 years                 | 18,371 |        |\n|  4 | Total fair value                   | $      | 91,240 |\n\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 8: <table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"39\">September 30, 2023<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">AdjustedCost<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedGains<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedLosses<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">FairValue<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Cash andCashEquivalents<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">CurrentMarketableSecurities<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Non-CurrentMarketableSecurities<\/td><\/tr><tr><td colspan=\"3\">Cash<\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 1:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Money market funds<\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mutual funds and equity securities<\/td><td colspan=\"2\">442 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">923 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">909 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 2 (1):<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">U.S. Treasury securities<\/td><td colspan=\"2\">19,406 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,292)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,114 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">35 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,468 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,611 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. agency securities<\/td><td colspan=\"2\">5,736 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(600)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,136 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">36 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">271 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,829 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Non-U.S. government securities<\/td><td colspan=\"2\">17,533 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,048)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,491 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">11,332 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,159 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Certificates of deposit and time deposits<\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,034 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">320 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Commercial paper<\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate debt securities<\/td><td colspan=\"2\">76,840 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(5,956)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">70,890 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,627 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">58,243 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Municipal securities<\/td><td colspan=\"2\">628 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">602 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">192 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">410 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mortgage- and asset-backed securities<\/td><td colspan=\"2\">22,365 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(2,735)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,636 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">344 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,292 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">144,470 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(11,657)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">132,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,125 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">31,162 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">100,544 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total (2)<\/td><td>$<\/td><td>173,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>30 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>(11,683)<\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>162,099 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>29,965 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>31,590 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>100,544 <\/td><td><\/td><\/tr><\/table>(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 1 year through 5 years<\/td><td>$<\/td><td>64,209 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 5 years through 10 years<\/td><td colspan=\"2\">8,660 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 10 years<\/td><td colspan=\"2\">18,371 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total fair value<\/td><td>$<\/td><td>91,240 <\/td><td><\/td><\/tr><\/table>\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n","context_html_without_headers":"<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"39\">September 30, 2023<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">AdjustedCost<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedGains<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">UnrealizedLosses<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">FairValue<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Cash andCashEquivalents<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">CurrentMarketableSecurities<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Non-CurrentMarketableSecurities<\/td><\/tr><tr><td colspan=\"3\">Cash<\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>28,359 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 1:<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Money market funds<\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mutual funds and equity securities<\/td><td colspan=\"2\">442 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">923 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">909 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">481 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">428 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Level 2 (1):<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">U.S. Treasury securities<\/td><td colspan=\"2\">19,406 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,292)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18,114 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">35 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,468 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,611 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">U.S. agency securities<\/td><td colspan=\"2\">5,736 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(600)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,136 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">36 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">271 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">4,829 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Non-U.S. government securities<\/td><td colspan=\"2\">17,533 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(1,048)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">16,491 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">11,332 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">5,159 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Certificates of deposit and time deposits<\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,354 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,034 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">320 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Commercial paper<\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">608 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Corporate debt securities<\/td><td colspan=\"2\">76,840 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(5,956)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">70,890 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">20 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">12,627 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">58,243 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Municipal securities<\/td><td colspan=\"2\">628 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(26)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">602 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">192 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">410 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Mortgage- and asset-backed securities<\/td><td colspan=\"2\">22,365 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(2,735)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,636 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">344 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">19,292 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Subtotal<\/td><td colspan=\"2\">144,470 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">18 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">(11,657)<\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">132,831 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,125 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">31,162 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">100,544 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total (2)<\/td><td>$<\/td><td>173,752 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>30 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>(11,683)<\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>162,099 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>29,965 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>31,590 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>100,544 <\/td><td><\/td><\/tr><\/table>(1)The valuation techniques used to measure the fair values of the Company's Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.\n(2)As of June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, \"Income Taxes\") and other agreements.\nThe following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 1 year through 5 years<\/td><td>$<\/td><td>64,209 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 5 years through 10 years<\/td><td colspan=\"2\">8,660 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Due after 10 years<\/td><td colspan=\"2\">18,371 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total fair value<\/td><td>$<\/td><td>91,240 <\/td><td><\/td><\/tr><\/table>\nDerivative Instruments and Hedging\n\nThe Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.\n\nForeign Exchange Rate Risk\n\nTo protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.\nTo protect the Company's foreign currency\u2013denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of June 29, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt\u2013related foreign currency transactions is 18 years.\nThe Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.\n\nApple Inc. | Q3 2024 Form 10-Q | 8\n\n\n\n\n\n"}
{"QID":"q_Ri060","Question":"What legal risks does Apple face related to ongoing litigation, such as those involving Epic Games or antitrust allegations?","ground_truth_answer":"Apple faces several legal risks related to ongoing litigation, including antitrust allegations from the U.S. Department of Justice (DOJ) and a lawsuit from Epic Games. The DOJ lawsuit accuses Apple of monopolistic practices in the smartphone market, seeking equitable relief to address alleged anticompetitive behavior. Meanwhile, the Epic Games lawsuit challenges Apple's App Store policies, leading to an injunction requiring Apple to allow developers to include external links in their apps. Apple believes it has substantial defenses and intends to vigorously defend itself in these matters.","question_type":"Risk","page_number":"19","accession_number":"0000320193-24-000081","item":"Item 1.    Legal Proceedings","context_markdown_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 19: \nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_markdown_without_headers":"\nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_html_with_headers":"Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 19: \nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n","context_html_without_headers":"\nPART II - OTHER INFORMATION\n\n\nItem 1.    Legal Proceedings\n\n\nDigital Markets Act Investigations\n\nOn March 25, 2024, the Commission announced that it had opened two formal noncompliance investigations against the Company under the European Union (\"EU\") Digital Markets Act (the \"DMA\"). The Commission's investigations concern (1) Article 5(4) of the DMA, which relates to how developers may communicate and promote offers to end users for apps distributed through the App Store as well as how developers may conclude contracts with those end users; and (2) Article 6(3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS. On June 24, 2024, the Commission announced its preliminary findings in the Article 5(4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA. If the Commission makes a final determination that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's order would apply immediately while the appeal is pending, unless a stay of the order is granted. The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.\n\nDepartment of Justice Lawsuit\n\nOn March 21, 2024, the U.S. Department of Justice (the \"DOJ\") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for \"performance smartphones\" and \"smartphones\" in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nEpic Games\n\nEpic Games, Inc. (\"Epic\") filed a lawsuit in the U.S. District Court for the Northern District of California (the \"California District Court\") against the Company alleging violations of federal and state antitrust laws and California's unfair competition law based upon the Company's operation of its App Store. The California District Court found that certain provisions of the Company's App Store Review Guidelines violate California's unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On January 16, 2024, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the California District Court. A motion by Epic disputing the Company's compliance plan and seeking to enforce the injunction, which the Company has opposed, is pending before the California District Court. The Company believes it has substantial defenses and intends to vigorously defend itself.\n\nOther Legal Proceedings\n\nThe Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the third quarter of 2024 that did not individually or in the aggregate have a material impact on the Company's financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected.\n"}
{"QID":"q_Ri061","Question":"What is the nature of Coca-Cola\u2019s current tax dispute with the IRS?","ground_truth_answer":"The dispute revolves around the IRS's decision to reallocate over $9 billion of income from Coca-Cola\u2019s foreign affiliates to its U.S. parent for the 2007-2009 tax years. This reallocation challenges the transfer pricing methodology agreed upon in a 1996 Closing Agreement, which had been upheld through multiple audit cycles from 1996 to 2006. The IRS retroactively applied a new methodology without prior notice, leading to a proposed additional tax liability of $3.3 billion for those years\u200b.","question_type":"Risk","page_number":"17, 18","accession_number":"0000021344-24-000044","item":"Item 1. Financial Statements","context_markdown_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_markdown_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n"}
{"QID":"q_Ri062","Question":"What broader implications does this dispute have for Coca-Cola\u2019s strategic and operational planning?","ground_truth_answer":"The dispute highlights significant risks associated with retroactive tax regulation changes, introducing uncertainty into Coca-Cola\u2019s long-term strategic planning. This could lead to reevaluation of its global operations, supply chain management, and investment strategies. The company may need to adjust its operational structure to mitigate tax risks, potentially affecting its presence in certain jurisdictions.","question_type":"Risk","page_number":"17, 18","accession_number":"0000021344-24-000044","item":"Item 1. Financial Statements","context_markdown_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_markdown_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n"}
{"QID":"q_Ri063","Question":"What is the potential financial impact if Coca-Cola loses the tax dispute?","ground_truth_answer":"If Coca-Cola\u2019s appeal is unsuccessful, the company could face a total liability of approximately $16 billion, including taxes and interest for 2007-2009 and subsequent years. For the 2007-2009 period alone, the estimated payment is $6 billion. This would materially affect the company\u2019s financial position, potentially reducing available cash for operations, capital expenditures, dividends, and debt servicing,","question_type":"Risk","page_number":"17, 18","accession_number":"0000021344-24-000044","item":"Item 1. Financial Statements","context_markdown_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_markdown_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n"}
{"QID":"q_Ri064","Question":"How might this tax dispute affect Coca-Cola\u2019s effective tax rate and future financial performance?","ground_truth_answer":"The application of the Tax Court\u2019s methodology is projected to increase Coca-Cola\u2019s effective tax rate by approximately 3.5% annually. This would directly reduce the company\u2019s net income and could impact financial metrics, shareholder returns, and future profitability. The increased tax burden could also limit Coca-Cola\u2019s ability to compete effectively in global markets\u200b.","question_type":"Risk","page_number":"17, 18","accession_number":"0000021344-24-000044","item":"Item 1. Financial Statements","context_markdown_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_markdown_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n"}
{"QID":"q_Ri065","Question":"What steps has Coca-Cola taken to manage the financial risks associated with this dispute?","ground_truth_answer":"Coca-Cola has set aside a tax reserve of $456 million as of June 28, 2024, to account for potential liabilities. The company is also closely monitoring legal developments and preparing for the appeals process. Additionally, it has recalculated potential liabilities using alternative methodologies to better estimate the financial impact, including interest accruals\u200b.","question_type":"Risk","page_number":"17, 18","accession_number":"0000021344-24-000044","item":"Item 1. Financial Statements","context_markdown_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_markdown_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n"}
{"QID":"q_Ri066","Question":" How has Coca-Cola responded to the IRS\u2019s proposed tax adjustments?","ground_truth_answer":"Coca-Cola filed a petition in the U.S. Tax Court in December 2015, contesting the IRS's adjustments. The company argues that the IRS\u2019s retroactive application of a different transfer pricing methodology contradicts the previously agreed framework and is unconstitutional. Coca-Cola intends to appeal unfavorable rulings and leverage recent U.S. Supreme Court decisions that challenge deference to agency interpretations, which could strengthen its case on appeal\u200b.","question_type":"Risk","page_number":"17, 18","accession_number":"0000021344-24-000044","item":"Item 1. Financial Statements","context_markdown_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_markdown_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 17: estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 18: claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n","context_html_without_headers":"estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.\n\nTax Audits\n\nThe Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.\nOn September 17, 2015, the Company received a Statutory Notice of Deficiency (\"Notice\") from the United States Internal Revenue Service (\"IRS\") seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets. \nThe Notice concerned the Company's transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm's-length pricing of transactions between related parties such as the Company's U.S. parent and its foreign affiliates. \nTo resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm's-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (\"Closing Agreement\"). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company's income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years. \nThe IRS audited and confirmed the Company's compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006. \nThe September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so. \nThe IRS designated the Company's matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS' designation of the Company's matter for litigation, the Company was forced to either accept the IRS' newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS' litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.\nThe Company consequently initiated litigation by filing a petition in the U.S. Tax Court (\"Tax Court\") in December 2015, challenging the tax adjustments enumerated in the Notice. \nPrior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS' potential tax adjustment by $138 million.\nThe trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.\nOn November 18, 2020, the Tax Court issued an opinion (\"Opinion\") in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations.\nThe Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company's foreign licensees to increase the Company's U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its \n17\n\n\n\n\n, claims on appeal and vigorously defend its position. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company is currently evaluating the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (\"Chevron\"). Since 1984, Chevron had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by Chevron.\nIn determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company's tax positions, that it is more likely than not the Company's tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (\"Tax Court Methodology\"), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company's analysis.\nThe Company's conclusion that it is more likely than not the Company's tax positions will ultimately be sustained on appeal is unchanged as of June 28, 2024. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company's tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of June 28, 2024 to $456 million.\nWhile the Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.\nThe Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company's effective tax rate by approximately 3.5%. \nThe Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. \n18\n\n\n\n\n"}
{"QID":"q_Ri067","Question":"What is Coca-Cola\u2019s approach to managing liquidity and debt?","ground_truth_answer":"Coca-Cola manages its liquidity and debt through various strategies. The company maintains significant cash, cash equivalents, and short-term investments, totaling $19 billion as of June 28, 2024. It also utilizes a commercial paper program and issues long-term debt to finance its operations and maintain financial flexibility. Additionally, Coca-Cola has $4.6 billion in unused backup lines of credit expiring through 2028, providing further liquidity for general corporate purposes. These measures collectively ensure the company can meet its financial obligations and fund its operations effectively\u200b.","question_type":"Risk","page_number":"45, 46","accession_number":"0000021344-24-000044","item":"Item 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations","context_markdown_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 45: The Company's effective tax rates for the three and six months ended June 28, 2024 and June 30, 2023 vary from the statutory U.S. federal tax rate of 21.0% primarily due to the tax impact of significant operating and nonoperating items, as described in Note 12 of Notes to Consolidated Financial Statements, along with the tax benefits of having significant earnings generated outside of the United States and significant earnings generated in investments accounted for under the equity method, both of which are generally taxed at rates lower than the statutory U.S. federal tax rate. \nThe Company's effective tax rates for the three and six months ended June 28, 2024 included $119 million and $60 million, respectively, of net tax expense related to various discrete tax items, including the resolution of certain foreign tax matters.\nThe Company's effective tax rates for the three and six months ended June 30, 2023 included $120 million and $125 million, respectively, of net tax benefits related to various discrete tax items, including a change in tax law in a certain foreign jurisdiction.\n\nOn November 18, 2020, the U.S. Tax Court (\"Tax Court\") issued an opinion (\"Opinion\") regarding the Company's 2015 litigation with the United States Internal Revenue Service (\"IRS\") involving transfer pricing tax adjustments in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that the blocked-income regulations apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the Opinions and intends to vigorously defend its position. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation.\n\nAt the end of each quarter, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year. This estimate reflects, among other items, our best estimate of operating results and foreign currency exchange rates. Based on enacted tax laws, as well as our current interpretation of recently issued regulations, the Company's effective tax rate in 2024 is expected to be 19.0% before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate. This rate does not include the impact of the ongoing tax litigation with the IRS, if the Company were not to prevail.\nMany jurisdictions have enacted legislation and adopted policies resulting from the Organization for Economic Co-operation and Development's (\"OECD\") Anti-Base Erosion and Profit Shifting project. The OECD is currently coordinating a two-pillared project on behalf of the G20 and other participating countries which would grant additional taxing rights over profits earned by multinational enterprises to the countries in which their products are sold and services rendered. Pillar One would allow countries to reallocate a portion of profits earned by multinational businesses with an annual global revenue exceeding \u20ac20 billion and a profit margin of over 10% to applicable market jurisdictions. While the OECD issued draft language for the international implementation of Pillar One in October 2023, both the substantive rules and implementation process remain under discussion at the OECD so the timetable for any implementation remains uncertain.\nIn December 2021, the OECD issued Pillar Two model rules which would establish a global per-country minimum tax of 15%, and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws. The directive requires the rules to initially become effective for fiscal years starting on or after December 31, 2023. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement certain aspects of Pillar Two effective January 1, 2024, with general implementation of the remaining global minimum tax rules by January 1, 2025. The OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional guidance. The Company will continue to monitor developments to determine any potential impact in the countries in which we operate.\n\nLIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION\n\nWe believe our ability to generate cash flows from operating activities is one of the fundamental strengths of our business. Refer to the heading \"Cash Flows from Operating Activities\" below. The Company does not typically raise capital through the issuance of stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners' equity. Refer to the heading \"Cash Flows from Financing Activities\" below. We have a history of borrowing funds both domestically and internationally at reasonable interest rates, and we expect to be able to continue to borrow funds at reasonable rates over the long term. Our debt financing also includes the use of a commercial paper program. We currently have the ability to borrow funds in this market at levels that are consistent with our debt financing strategy, and we expect to continue to be able to do so in the future. The Company regularly reviews its optimal mix of short-term and long-term debt.\nThe Company's cash, cash equivalents, short-term investments and marketable securities totaled $19.0 billion as of June 28, 2024. In addition to these funds, our commercial paper program, and our ability to issue long-term debt, we had $4.6 billion in unused backup lines of credit for general corporate purposes as of June 28, 2024. These backup lines of credit expire at various times through 2028. \n45\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 46: Our current payment terms with the majority of our suppliers are 120 days. Two global financial institutions offer a voluntary supply chain finance program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on a non-recourse basis at a rate that leverages our credit rating and thus may be more beneficial to them. We do not believe there is a risk that our payment terms will be shortened in the near future. Refer to Note 7 of Notes to Consolidated Financial Statements for additional information.\nThe Company has a trade accounts receivable factoring program in certain countries. Under this program, we can elect to sell trade accounts receivables to unaffiliated financial institutions at a discount. In these factoring arrangements, for ease of administration, the Company collects customer payments related to the factored receivables and remits those payments to the financial institutions. The Company sold $10,021 million and $7,197 million of trade accounts receivables under this program during the six months ended June 28, 2024 and June 30, 2023, respectively. The costs of factoring such receivables were $51 million and $31 million for the six months ended June 28, 2024 and June 30, 2023, respectively. The cash received from the financial institutions is reflected within the operating activities section of our consolidated statement of cash flows. \nOur current capital allocation priorities are as follows: investing wisely to support our business operations, continuing to grow our dividend payment, enhancing our beverage portfolio and capabilities through consumer-centric acquisitions, and using excess cash to repurchase shares over time. We currently expect 2024 capital expenditures to be approximately $2.2 billion. During 2024, we expect to repurchase shares to offset dilution resulting from employee stock-based compensation. During 2025, we expect to pay the remaining milestone payment related to the acquisition of fairlife. Refer to Note 16 of Notes to Consolidated Financial Statements for additional information on the milestone payment for fairlife.\nWe are currently in litigation with the IRS for tax years 2007 through 2009. On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion, siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions and intends to vigorously defend our positions utilizing every available avenue of appeal. While the Company believes that it is more likely than not that we will ultimately prevail in this litigation upon appeal, it is possible that all, or some portion of, the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In the event that all of the adjustments proposed by the IRS were to be ultimately upheld for tax years 2007 through 2009 and the IRS, with the consent of the federal courts, were to decide to apply the underlying methodology (\"Tax Court Methodology\") to the subsequent years up to and including 2023, the Company currently estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. The Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS and expects this to occur by the end of 2024. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation. \nWhile we believe it is more likely than not that we will prevail in the tax litigation discussed above, we are confident that, between our ability to generate cash flows from operating activities and our ability to borrow funds at reasonable interest rates, we can manage the range of possible outcomes in the final resolution of the matter.\nBased on all of the aforementioned factors, the Company believes its current liquidity position is strong and will continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for the foreseeable future. \n46\n\n\n\n\n","context_markdown_without_headers":"The Company's effective tax rates for the three and six months ended June 28, 2024 and June 30, 2023 vary from the statutory U.S. federal tax rate of 21.0% primarily due to the tax impact of significant operating and nonoperating items, as described in Note 12 of Notes to Consolidated Financial Statements, along with the tax benefits of having significant earnings generated outside of the United States and significant earnings generated in investments accounted for under the equity method, both of which are generally taxed at rates lower than the statutory U.S. federal tax rate. \nThe Company's effective tax rates for the three and six months ended June 28, 2024 included $119 million and $60 million, respectively, of net tax expense related to various discrete tax items, including the resolution of certain foreign tax matters.\nThe Company's effective tax rates for the three and six months ended June 30, 2023 included $120 million and $125 million, respectively, of net tax benefits related to various discrete tax items, including a change in tax law in a certain foreign jurisdiction.\n\nOn November 18, 2020, the U.S. Tax Court (\"Tax Court\") issued an opinion (\"Opinion\") regarding the Company's 2015 litigation with the United States Internal Revenue Service (\"IRS\") involving transfer pricing tax adjustments in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that the blocked-income regulations apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the Opinions and intends to vigorously defend its position. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation.\n\nAt the end of each quarter, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year. This estimate reflects, among other items, our best estimate of operating results and foreign currency exchange rates. Based on enacted tax laws, as well as our current interpretation of recently issued regulations, the Company's effective tax rate in 2024 is expected to be 19.0% before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate. This rate does not include the impact of the ongoing tax litigation with the IRS, if the Company were not to prevail.\nMany jurisdictions have enacted legislation and adopted policies resulting from the Organization for Economic Co-operation and Development's (\"OECD\") Anti-Base Erosion and Profit Shifting project. The OECD is currently coordinating a two-pillared project on behalf of the G20 and other participating countries which would grant additional taxing rights over profits earned by multinational enterprises to the countries in which their products are sold and services rendered. Pillar One would allow countries to reallocate a portion of profits earned by multinational businesses with an annual global revenue exceeding \u20ac20 billion and a profit margin of over 10% to applicable market jurisdictions. While the OECD issued draft language for the international implementation of Pillar One in October 2023, both the substantive rules and implementation process remain under discussion at the OECD so the timetable for any implementation remains uncertain.\nIn December 2021, the OECD issued Pillar Two model rules which would establish a global per-country minimum tax of 15%, and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws. The directive requires the rules to initially become effective for fiscal years starting on or after December 31, 2023. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement certain aspects of Pillar Two effective January 1, 2024, with general implementation of the remaining global minimum tax rules by January 1, 2025. The OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional guidance. The Company will continue to monitor developments to determine any potential impact in the countries in which we operate.\n\nLIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION\n\nWe believe our ability to generate cash flows from operating activities is one of the fundamental strengths of our business. Refer to the heading \"Cash Flows from Operating Activities\" below. The Company does not typically raise capital through the issuance of stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners' equity. Refer to the heading \"Cash Flows from Financing Activities\" below. We have a history of borrowing funds both domestically and internationally at reasonable interest rates, and we expect to be able to continue to borrow funds at reasonable rates over the long term. Our debt financing also includes the use of a commercial paper program. We currently have the ability to borrow funds in this market at levels that are consistent with our debt financing strategy, and we expect to continue to be able to do so in the future. The Company regularly reviews its optimal mix of short-term and long-term debt.\nThe Company's cash, cash equivalents, short-term investments and marketable securities totaled $19.0 billion as of June 28, 2024. In addition to these funds, our commercial paper program, and our ability to issue long-term debt, we had $4.6 billion in unused backup lines of credit for general corporate purposes as of June 28, 2024. These backup lines of credit expire at various times through 2028. \n45\n\n\n\n\n, Our current payment terms with the majority of our suppliers are 120 days. Two global financial institutions offer a voluntary supply chain finance program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on a non-recourse basis at a rate that leverages our credit rating and thus may be more beneficial to them. We do not believe there is a risk that our payment terms will be shortened in the near future. Refer to Note 7 of Notes to Consolidated Financial Statements for additional information.\nThe Company has a trade accounts receivable factoring program in certain countries. Under this program, we can elect to sell trade accounts receivables to unaffiliated financial institutions at a discount. In these factoring arrangements, for ease of administration, the Company collects customer payments related to the factored receivables and remits those payments to the financial institutions. The Company sold $10,021 million and $7,197 million of trade accounts receivables under this program during the six months ended June 28, 2024 and June 30, 2023, respectively. The costs of factoring such receivables were $51 million and $31 million for the six months ended June 28, 2024 and June 30, 2023, respectively. The cash received from the financial institutions is reflected within the operating activities section of our consolidated statement of cash flows. \nOur current capital allocation priorities are as follows: investing wisely to support our business operations, continuing to grow our dividend payment, enhancing our beverage portfolio and capabilities through consumer-centric acquisitions, and using excess cash to repurchase shares over time. We currently expect 2024 capital expenditures to be approximately $2.2 billion. During 2024, we expect to repurchase shares to offset dilution resulting from employee stock-based compensation. During 2025, we expect to pay the remaining milestone payment related to the acquisition of fairlife. Refer to Note 16 of Notes to Consolidated Financial Statements for additional information on the milestone payment for fairlife.\nWe are currently in litigation with the IRS for tax years 2007 through 2009. On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion, siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions and intends to vigorously defend our positions utilizing every available avenue of appeal. While the Company believes that it is more likely than not that we will ultimately prevail in this litigation upon appeal, it is possible that all, or some portion of, the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In the event that all of the adjustments proposed by the IRS were to be ultimately upheld for tax years 2007 through 2009 and the IRS, with the consent of the federal courts, were to decide to apply the underlying methodology (\"Tax Court Methodology\") to the subsequent years up to and including 2023, the Company currently estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. The Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS and expects this to occur by the end of 2024. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation. \nWhile we believe it is more likely than not that we will prevail in the tax litigation discussed above, we are confident that, between our ability to generate cash flows from operating activities and our ability to borrow funds at reasonable interest rates, we can manage the range of possible outcomes in the final resolution of the matter.\nBased on all of the aforementioned factors, the Company believes its current liquidity position is strong and will continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for the foreseeable future. \n46\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 45: The Company's effective tax rates for the three and six months ended June 28, 2024 and June 30, 2023 vary from the statutory U.S. federal tax rate of 21.0% primarily due to the tax impact of significant operating and nonoperating items, as described in Note 12 of Notes to Consolidated Financial Statements, along with the tax benefits of having significant earnings generated outside of the United States and significant earnings generated in investments accounted for under the equity method, both of which are generally taxed at rates lower than the statutory U.S. federal tax rate. \nThe Company's effective tax rates for the three and six months ended June 28, 2024 included $119 million and $60 million, respectively, of net tax expense related to various discrete tax items, including the resolution of certain foreign tax matters.\nThe Company's effective tax rates for the three and six months ended June 30, 2023 included $120 million and $125 million, respectively, of net tax benefits related to various discrete tax items, including a change in tax law in a certain foreign jurisdiction.\n\nOn November 18, 2020, the U.S. Tax Court (\"Tax Court\") issued an opinion (\"Opinion\") regarding the Company's 2015 litigation with the United States Internal Revenue Service (\"IRS\") involving transfer pricing tax adjustments in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that the blocked-income regulations apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the Opinions and intends to vigorously defend its position. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation.\n\nAt the end of each quarter, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year. This estimate reflects, among other items, our best estimate of operating results and foreign currency exchange rates. Based on enacted tax laws, as well as our current interpretation of recently issued regulations, the Company's effective tax rate in 2024 is expected to be 19.0% before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate. This rate does not include the impact of the ongoing tax litigation with the IRS, if the Company were not to prevail.\nMany jurisdictions have enacted legislation and adopted policies resulting from the Organization for Economic Co-operation and Development's (\"OECD\") Anti-Base Erosion and Profit Shifting project. The OECD is currently coordinating a two-pillared project on behalf of the G20 and other participating countries which would grant additional taxing rights over profits earned by multinational enterprises to the countries in which their products are sold and services rendered. Pillar One would allow countries to reallocate a portion of profits earned by multinational businesses with an annual global revenue exceeding \u20ac20 billion and a profit margin of over 10% to applicable market jurisdictions. While the OECD issued draft language for the international implementation of Pillar One in October 2023, both the substantive rules and implementation process remain under discussion at the OECD so the timetable for any implementation remains uncertain.\nIn December 2021, the OECD issued Pillar Two model rules which would establish a global per-country minimum tax of 15%, and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws. The directive requires the rules to initially become effective for fiscal years starting on or after December 31, 2023. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement certain aspects of Pillar Two effective January 1, 2024, with general implementation of the remaining global minimum tax rules by January 1, 2025. The OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional guidance. The Company will continue to monitor developments to determine any potential impact in the countries in which we operate.\n\nLIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION\n\nWe believe our ability to generate cash flows from operating activities is one of the fundamental strengths of our business. Refer to the heading \"Cash Flows from Operating Activities\" below. The Company does not typically raise capital through the issuance of stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners' equity. Refer to the heading \"Cash Flows from Financing Activities\" below. We have a history of borrowing funds both domestically and internationally at reasonable interest rates, and we expect to be able to continue to borrow funds at reasonable rates over the long term. Our debt financing also includes the use of a commercial paper program. We currently have the ability to borrow funds in this market at levels that are consistent with our debt financing strategy, and we expect to continue to be able to do so in the future. The Company regularly reviews its optimal mix of short-term and long-term debt.\nThe Company's cash, cash equivalents, short-term investments and marketable securities totaled $19.0 billion as of June 28, 2024. In addition to these funds, our commercial paper program, and our ability to issue long-term debt, we had $4.6 billion in unused backup lines of credit for general corporate purposes as of June 28, 2024. These backup lines of credit expire at various times through 2028. \n45\n\n\n\n\n, COCA COLA CO 10-Q form for quarterly period ended 2024-06-28, page 46: Our current payment terms with the majority of our suppliers are 120 days. Two global financial institutions offer a voluntary supply chain finance program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on a non-recourse basis at a rate that leverages our credit rating and thus may be more beneficial to them. We do not believe there is a risk that our payment terms will be shortened in the near future. Refer to Note 7 of Notes to Consolidated Financial Statements for additional information.\nThe Company has a trade accounts receivable factoring program in certain countries. Under this program, we can elect to sell trade accounts receivables to unaffiliated financial institutions at a discount. In these factoring arrangements, for ease of administration, the Company collects customer payments related to the factored receivables and remits those payments to the financial institutions. The Company sold $10,021 million and $7,197 million of trade accounts receivables under this program during the six months ended June 28, 2024 and June 30, 2023, respectively. The costs of factoring such receivables were $51 million and $31 million for the six months ended June 28, 2024 and June 30, 2023, respectively. The cash received from the financial institutions is reflected within the operating activities section of our consolidated statement of cash flows. \nOur current capital allocation priorities are as follows: investing wisely to support our business operations, continuing to grow our dividend payment, enhancing our beverage portfolio and capabilities through consumer-centric acquisitions, and using excess cash to repurchase shares over time. We currently expect 2024 capital expenditures to be approximately $2.2 billion. During 2024, we expect to repurchase shares to offset dilution resulting from employee stock-based compensation. During 2025, we expect to pay the remaining milestone payment related to the acquisition of fairlife. Refer to Note 16 of Notes to Consolidated Financial Statements for additional information on the milestone payment for fairlife.\nWe are currently in litigation with the IRS for tax years 2007 through 2009. On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion, siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions and intends to vigorously defend our positions utilizing every available avenue of appeal. While the Company believes that it is more likely than not that we will ultimately prevail in this litigation upon appeal, it is possible that all, or some portion of, the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In the event that all of the adjustments proposed by the IRS were to be ultimately upheld for tax years 2007 through 2009 and the IRS, with the consent of the federal courts, were to decide to apply the underlying methodology (\"Tax Court Methodology\") to the subsequent years up to and including 2023, the Company currently estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. The Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS and expects this to occur by the end of 2024. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation. \nWhile we believe it is more likely than not that we will prevail in the tax litigation discussed above, we are confident that, between our ability to generate cash flows from operating activities and our ability to borrow funds at reasonable interest rates, we can manage the range of possible outcomes in the final resolution of the matter.\nBased on all of the aforementioned factors, the Company believes its current liquidity position is strong and will continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for the foreseeable future. \n46\n\n\n\n\n","context_html_without_headers":"The Company's effective tax rates for the three and six months ended June 28, 2024 and June 30, 2023 vary from the statutory U.S. federal tax rate of 21.0% primarily due to the tax impact of significant operating and nonoperating items, as described in Note 12 of Notes to Consolidated Financial Statements, along with the tax benefits of having significant earnings generated outside of the United States and significant earnings generated in investments accounted for under the equity method, both of which are generally taxed at rates lower than the statutory U.S. federal tax rate. \nThe Company's effective tax rates for the three and six months ended June 28, 2024 included $119 million and $60 million, respectively, of net tax expense related to various discrete tax items, including the resolution of certain foreign tax matters.\nThe Company's effective tax rates for the three and six months ended June 30, 2023 included $120 million and $125 million, respectively, of net tax benefits related to various discrete tax items, including a change in tax law in a certain foreign jurisdiction.\n\nOn November 18, 2020, the U.S. Tax Court (\"Tax Court\") issued an opinion (\"Opinion\") regarding the Company's 2015 litigation with the United States Internal Revenue Service (\"IRS\") involving transfer pricing tax adjustments in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, \"Opinions\"), siding with the IRS in concluding both that the blocked-income regulations apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the Opinions and intends to vigorously defend its position. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation.\n\nAt the end of each quarter, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year. This estimate reflects, among other items, our best estimate of operating results and foreign currency exchange rates. Based on enacted tax laws, as well as our current interpretation of recently issued regulations, the Company's effective tax rate in 2024 is expected to be 19.0% before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate. This rate does not include the impact of the ongoing tax litigation with the IRS, if the Company were not to prevail.\nMany jurisdictions have enacted legislation and adopted policies resulting from the Organization for Economic Co-operation and Development's (\"OECD\") Anti-Base Erosion and Profit Shifting project. The OECD is currently coordinating a two-pillared project on behalf of the G20 and other participating countries which would grant additional taxing rights over profits earned by multinational enterprises to the countries in which their products are sold and services rendered. Pillar One would allow countries to reallocate a portion of profits earned by multinational businesses with an annual global revenue exceeding \u20ac20 billion and a profit margin of over 10% to applicable market jurisdictions. While the OECD issued draft language for the international implementation of Pillar One in October 2023, both the substantive rules and implementation process remain under discussion at the OECD so the timetable for any implementation remains uncertain.\nIn December 2021, the OECD issued Pillar Two model rules which would establish a global per-country minimum tax of 15%, and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws. The directive requires the rules to initially become effective for fiscal years starting on or after December 31, 2023. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement certain aspects of Pillar Two effective January 1, 2024, with general implementation of the remaining global minimum tax rules by January 1, 2025. The OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional guidance. The Company will continue to monitor developments to determine any potential impact in the countries in which we operate.\n\nLIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION\n\nWe believe our ability to generate cash flows from operating activities is one of the fundamental strengths of our business. Refer to the heading \"Cash Flows from Operating Activities\" below. The Company does not typically raise capital through the issuance of stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners' equity. Refer to the heading \"Cash Flows from Financing Activities\" below. We have a history of borrowing funds both domestically and internationally at reasonable interest rates, and we expect to be able to continue to borrow funds at reasonable rates over the long term. Our debt financing also includes the use of a commercial paper program. We currently have the ability to borrow funds in this market at levels that are consistent with our debt financing strategy, and we expect to continue to be able to do so in the future. The Company regularly reviews its optimal mix of short-term and long-term debt.\nThe Company's cash, cash equivalents, short-term investments and marketable securities totaled $19.0 billion as of June 28, 2024. In addition to these funds, our commercial paper program, and our ability to issue long-term debt, we had $4.6 billion in unused backup lines of credit for general corporate purposes as of June 28, 2024. These backup lines of credit expire at various times through 2028. \n45\n\n\n\n\n, Our current payment terms with the majority of our suppliers are 120 days. Two global financial institutions offer a voluntary supply chain finance program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on a non-recourse basis at a rate that leverages our credit rating and thus may be more beneficial to them. We do not believe there is a risk that our payment terms will be shortened in the near future. Refer to Note 7 of Notes to Consolidated Financial Statements for additional information.\nThe Company has a trade accounts receivable factoring program in certain countries. Under this program, we can elect to sell trade accounts receivables to unaffiliated financial institutions at a discount. In these factoring arrangements, for ease of administration, the Company collects customer payments related to the factored receivables and remits those payments to the financial institutions. The Company sold $10,021 million and $7,197 million of trade accounts receivables under this program during the six months ended June 28, 2024 and June 30, 2023, respectively. The costs of factoring such receivables were $51 million and $31 million for the six months ended June 28, 2024 and June 30, 2023, respectively. The cash received from the financial institutions is reflected within the operating activities section of our consolidated statement of cash flows. \nOur current capital allocation priorities are as follows: investing wisely to support our business operations, continuing to grow our dividend payment, enhancing our beverage portfolio and capabilities through consumer-centric acquisitions, and using excess cash to repurchase shares over time. We currently expect 2024 capital expenditures to be approximately $2.2 billion. During 2024, we expect to repurchase shares to offset dilution resulting from employee stock-based compensation. During 2025, we expect to pay the remaining milestone payment related to the acquisition of fairlife. Refer to Note 16 of Notes to Consolidated Financial Statements for additional information on the milestone payment for fairlife.\nWe are currently in litigation with the IRS for tax years 2007 through 2009. On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion, siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company's licensee in Brazil apply to the Company's operations and that the Tax Court opinion in 3M Co. & Subs. v. Commissioner (February 9, 2023) controlled as to the validity of those regulations. The Company strongly disagrees with the IRS' positions and the portions of the Opinions affirming such positions and intends to vigorously defend our positions utilizing every available avenue of appeal. While the Company believes that it is more likely than not that we will ultimately prevail in this litigation upon appeal, it is possible that all, or some portion of, the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In the event that all of the adjustments proposed by the IRS were to be ultimately upheld for tax years 2007 through 2009 and the IRS, with the consent of the federal courts, were to decide to apply the underlying methodology (\"Tax Court Methodology\") to the subsequent years up to and including 2023, the Company currently estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 28, 2024 would increase the potential aggregate incremental tax and interest liability by approximately $500 million and $1.0 billion, respectively. The Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions. Subsequent to the completion of this process, the Tax Court will render a decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. The IRS will then seek to collect any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon). The Company expects to pay such amounts at some point between the issuance of the Tax Court decision and the date the amounts are due pursuant to the notice of collection from the IRS and expects this to occur by the end of 2024. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $6.0 billion (including interest accrued through June 28, 2024), plus any additional interest accrued through the time of payment. Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation. \nWhile we believe it is more likely than not that we will prevail in the tax litigation discussed above, we are confident that, between our ability to generate cash flows from operating activities and our ability to borrow funds at reasonable interest rates, we can manage the range of possible outcomes in the final resolution of the matter.\nBased on all of the aforementioned factors, the Company believes its current liquidity position is strong and will continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for the foreseeable future. \n46\n\n\n\n\n"}
{"QID":"q_Ri068","Question":"How does Consumers plan to achieve its long-term clean energy goals?","ground_truth_answer":"Consumers Energy\u2019s Clean Energy Plan outlines a comprehensive strategy to achieve its long-term sustainability and clean energy objectives. The plan includes a significant transition away from coal, aiming to cease coal-fueled generation by 2025, which is 15 years earlier than initially planned. To meet customer demands and support environmental goals, the company intends to expand its renewable energy portfolio, targeting the addition of nearly 8,000 MW of solar energy by 2040. This would bring renewable capacity to 30% by 2025, 43% by 2030, and 61% by 2040. Additionally, Consumers plans to deploy substantial battery storage, starting with 75 MW by 2027 and increasing to 475 MW by 2040. To ensure reliable energy delivery, Consumers has purchased the Covert Generating Station, a 1,200 MW natural gas-fueled facility, and will also secure up to 700 MW of capacity through competitively bid Power Purchase Agreements (PPAs) beginning in 2025.","question_type":"Risk","page_number":"17, 18","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 17: Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 18: Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n","context_markdown_without_headers":"Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 17: Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 18: Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n","context_html_without_headers":"Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n"}
{"QID":"q_Ri069","Question":" How does Consumers address regulatory changes impacting clean energy initiatives?","ground_truth_answer":"Consumers Energy addresses regulatory changes impacting its clean energy initiatives through continuous evaluation of evolving regulations and proactive planning. Notable regulatory frameworks include the EPA\u2019s Good Neighbor Plan under CSAPR, the NAAQS for ozone and particulate matter, and Michigan\u2019s Healthy Climate Plan. The company reviews these regulations in conjunction with other rulemakings by EPA, EGLE, and other bodies, ensuring alignment with environmental compliance and operational objectives. This ongoing assessment includes potential adjustments in fuel mix, operational strategies, and investments in emission control equipment or alternative energy sources.","question_type":"Risk","page_number":"34, 35","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 34: MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 35: strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n","context_markdown_without_headers":"MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 34: MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 35: strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n","context_html_without_headers":"MPSC Distribution System Audit: In 2022, the MPSC ordered the state's two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities' response to outages and downed lines. Consumers responded to the MPSC's order as directed. \nAdditionally, as directed by the MPSC, the MPSC Staff has engaged a third\u2011party auditor to review all equipment and operations of the two utilities' distribution systems; this audit began in August 2023. The MPSC Staff released a report prepared by the third-party auditor to summarize the audit's progress in December 2023, and a final report is expected in late summer 2024. Consumers is committed to working with the third\u2011party auditor and the MPSC to continue improving electric reliability and safety in Michigan.\nRetention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $10 million of retention benefit costs in 2024. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements-Note 12, Exit Activities.\nElectric Environmental Outlook: Consumers' electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $240 million from 2024 through 2028 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers' primary environmental compliance focus includes, but is not limited to, the following matters.\nAir Quality: Multiple air quality regulations apply, or may apply, to Consumers' electric utility.\nMATS, emission standards for electric generating units published by the EPA based on Section 112 of the Clean Air Act, continue to apply to Consumers. The company has complied, and continues to comply, with the MATS regulation and does not expect MATS to materially impact its environmental strategy.\nCSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the Good Neighbor Plan, a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers' initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.\nIn 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. None of Consumers' fossil-fuel-fired generating units are located in these areas. \nAdditionally, in March 2024, the EPA published a lower fine particulate matter NAAQS, which will likely result in newly designated nonattainment areas in Michigan starting in 2026. Consumers does not expect this rule to have significant impacts on its fossil-fuel-fired generating assets or its clean energy \n34\n\n\n\n\n, strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n"}
{"QID":"q_Ri070","Question":"What customer-focused programs support Consumers' clean energy goals?","ground_truth_answer":"Consumers Energy\u2019s customer-focused programs play a crucial role in supporting its Clean Energy Plan and achieving long-term sustainability objectives. Among these programs are energy waste reduction initiatives, which aim to improve energy efficiency and decrease overall consumption, helping to lower carbon emissions. Additionally, the company offers demand response programs that encourage customers to reduce or shift their electricity usage during peak demand periods, which supports grid stability and reduces reliance on non-renewable energy sources. Another key initiative is the Conservation Voltage Reduction (CVR) program, which optimizes voltage levels on the electric grid to minimize energy usage while maintaining service quality. These programs collectively enable Consumers to enhance grid efficiency, integrate renewable energy sources, and engage customers in the transition to clean energy.","question_type":"Risk","page_number":"17, 18","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 17: Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 18: Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n","context_markdown_without_headers":"Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 17: Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 18: Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n","context_html_without_headers":"Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by more than 95 percent and its NOx emissions by nearly 88 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 93 percent.\nIn November 2023, Michigan enacted the 2023 Energy Law, which among other things:\n\u2022raises the renewable energy standard from the present 15-percent requirement to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO may be applied to meeting this standard, with certain limitations\n\u2022sets a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero-carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, are considered clean energy sources under this standard\n\u2022enhances existing incentives for energy efficiency programs and returns earned on competitively bid PPAs\n\u2022creates a new energy storage standard that requires electric utilities to file plans by 2029 to obtain new energy storage that will contribute to a Michigan target of 2,500 MW based on their pro rata share\n\u2022expands the statutory cap on distributed generation resources to ten percent\nConsumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.\nConsumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and was most recently revised and approved by the MPSC in 2022 under Michigan's integrated resource planning process. The Clean Energy Plan outlines Consumers' long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:\n\u2022end the use of coal-fueled generation in 2025, 15 years sooner than initially planned\n\u2022purchase the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023\n\u2022solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025\n\u2022expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040\nUnder the Clean Energy Plan, and as enhanced by the 2023 Energy Law, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\n17\n\n\n\n\n, Presented in the following illustration is Consumers' 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan, which does not yet incorporate the requirements of the 2023 Energy Law. This illustration includes the effects of purchased capacity and customer programs and uses the nameplate capacity for all energy sources:\n1    Does not include RECs.\n2    Includes energy waste reduction, demand response, and conservation voltage reduction programs.\n3    These amounts and fuel sources will vary and are dependent on a one\u2011time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025.\nIn addition to Consumers' plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net\u2011zero emissions goals discussed below.\nNet-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and\/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 25 percent.\nNet-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers' needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures may be used to close the gap to achieving net-zero carbon emissions.\n18\n\n\n\n\n"}
{"QID":"q_Ri071","Question":"What investments are being made to enhance grid reliability?","ground_truth_answer":"Consumers Energy is making substantial investments to enhance grid reliability, focusing on infrastructure upgrades, replacements, and clean generation over the next five years. The company has prioritized these investments based on criteria such as enhancing public safety, increasing reliability, maintaining affordability for customers, and advancing environmental stewardship. Of the $17 billion planned capital expenditures through 2028, Consumers expects to allocate $13.6 billion in the next five years. This includes $7.3 billion for electric distribution projects aimed at strengthening circuits and substations, replacing poles, and facilitating clean energy resource integration. Additionally, $6.3 billion is earmarked for gas infrastructure projects to enhance pipeline integrity and safety, sustain deliverability, and reduce methane emissions. Furthermore, $3.4 billion will be invested in clean generation, covering wind, solar, and hydroelectric resources.","question_type":"Risk","page_number":"20, 21","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 20: \nPerformance: Impacting the Triple Bottom Line\n\nCMS Energy and Consumers remain committed to achieving world class performance while delivering hometown service and positively impacting the triple bottom line of people, planet, and profit. During 2023, CMS Energy met all requirements for inclusion in the MSCI ESG Leaders Indexes; these indexes are designed to represent the performance of companies that have high environmental, social, and governance ratings relative to their sector peers. Additionally, Consumers:\n\u2022was selected to receive a $100 million grant from the U.S. Department of Energy to fund investments in its electric distribution system, improving the reliability of Michigan's electric grid\n\u2022participated in the state's economic development efforts that have resulted in commitments by large third-party manufacturers to construct facilities for electric vehicle batteries and battery components in Michigan\n\u2022announced plans for an 85-MW solar array to be constructed at the former D.E. Karn coal-generating facilities, which were retired earlier in 2023\n\u2022grew its voluntary large customer renewable energy program to approximately 365 MW\n\u2022opened a state-of-the-art natural gas training facility in Flint, Michigan that facilitates employee training that is critical to keeping workers, customers, and the public safe\n\u2022announced plans to install more than 120 automatic transfer reclosers to improve electric reliability and help prevent power outages\n\u2022completed the first phase of its Mid-Michigan Pipeline Project, part of Consumers' commitment to providing safe, reliable, and affordable natural gas to Michigan homes and businesses\n\u2022announced new efforts to install electric vehicle chargers at apartment buildings, condominiums, and overnight community locations across the state of Michigan\n\n\u2022was one of 15 recipients of the U.S. Department of Defense's 2023 Secretary of Defense Employer Support Freedom Award, an honor to employers for support of National Guard and Reserve employees\n\nCMS Energy and Consumers will continue to utilize the CE Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers' investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.\nInvestment Plan: Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades, replacements, and clean generation. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers' investment program, which is subject to approval through general rate case and other MPSC proceedings, is expected to result in annual rate-base growth of more than seven percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer prices.\n20\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 21: Presented in the following illustration are Consumers' planned capital expenditures through 2028 of $17.0 billion: \nOf this amount, Consumers plans to spend $13.6 billion over the next five years primarily to maintain and upgrade its electric distribution systems and gas infrastructure in order to enhance safety and reliability, improve customer satisfaction, reduce energy waste on those systems, and facilitate its clean energy transformation. Electric distribution and other projects comprise $7.3 billion primarily to strengthen circuits and substations, replace poles, and interconnect clean energy resources. The gas infrastructure projects comprise $6.3 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions. Consumers also expects to spend $3.4 billion on clean generation, which includes investments in wind, solar, and hydroelectric generation resources.\nRegulation: Regulatory matters are a key aspect of Consumers' business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.\n2023 Electric Rate Case: In March 2024, the MPSC issued an order authorizing an annual rate increase of $92 million, which is inclusive of a $9 million surcharge for the recovery of select distribution investments made in 2022 that exceeded the rates authorized in accordance with the December 2021 electric rate order. The approved rate increase is based on a 9.9-percent authorized return on equity. The new rates became effective March 15, 2024.\n2023 Gas Rate Case: In December 2023, Consumers filed an application with the MPSC seeking an annual rate increase of $136 million based on a 10.25\u2011percent authorized return on equity for the projected 12\u2011month period ending September 30, 2025. The filing requests authority to recover new infrastructure investment and related costs that are expected to allow Consumers to continue to provide safe, reliable, affordable, and increasingly cleaner natural gas service.\n21\n\n\n\n\n","context_markdown_without_headers":"\nPerformance: Impacting the Triple Bottom Line\n\nCMS Energy and Consumers remain committed to achieving world class performance while delivering hometown service and positively impacting the triple bottom line of people, planet, and profit. During 2023, CMS Energy met all requirements for inclusion in the MSCI ESG Leaders Indexes; these indexes are designed to represent the performance of companies that have high environmental, social, and governance ratings relative to their sector peers. Additionally, Consumers:\n\u2022was selected to receive a $100 million grant from the U.S. Department of Energy to fund investments in its electric distribution system, improving the reliability of Michigan's electric grid\n\u2022participated in the state's economic development efforts that have resulted in commitments by large third-party manufacturers to construct facilities for electric vehicle batteries and battery components in Michigan\n\u2022announced plans for an 85-MW solar array to be constructed at the former D.E. Karn coal-generating facilities, which were retired earlier in 2023\n\u2022grew its voluntary large customer renewable energy program to approximately 365 MW\n\u2022opened a state-of-the-art natural gas training facility in Flint, Michigan that facilitates employee training that is critical to keeping workers, customers, and the public safe\n\u2022announced plans to install more than 120 automatic transfer reclosers to improve electric reliability and help prevent power outages\n\u2022completed the first phase of its Mid-Michigan Pipeline Project, part of Consumers' commitment to providing safe, reliable, and affordable natural gas to Michigan homes and businesses\n\u2022announced new efforts to install electric vehicle chargers at apartment buildings, condominiums, and overnight community locations across the state of Michigan\n\n\u2022was one of 15 recipients of the U.S. Department of Defense's 2023 Secretary of Defense Employer Support Freedom Award, an honor to employers for support of National Guard and Reserve employees\n\nCMS Energy and Consumers will continue to utilize the CE Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers' investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.\nInvestment Plan: Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades, replacements, and clean generation. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers' investment program, which is subject to approval through general rate case and other MPSC proceedings, is expected to result in annual rate-base growth of more than seven percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer prices.\n20\n\n\n\n\n, Presented in the following illustration are Consumers' planned capital expenditures through 2028 of $17.0 billion: \nOf this amount, Consumers plans to spend $13.6 billion over the next five years primarily to maintain and upgrade its electric distribution systems and gas infrastructure in order to enhance safety and reliability, improve customer satisfaction, reduce energy waste on those systems, and facilitate its clean energy transformation. Electric distribution and other projects comprise $7.3 billion primarily to strengthen circuits and substations, replace poles, and interconnect clean energy resources. The gas infrastructure projects comprise $6.3 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions. Consumers also expects to spend $3.4 billion on clean generation, which includes investments in wind, solar, and hydroelectric generation resources.\nRegulation: Regulatory matters are a key aspect of Consumers' business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.\n2023 Electric Rate Case: In March 2024, the MPSC issued an order authorizing an annual rate increase of $92 million, which is inclusive of a $9 million surcharge for the recovery of select distribution investments made in 2022 that exceeded the rates authorized in accordance with the December 2021 electric rate order. The approved rate increase is based on a 9.9-percent authorized return on equity. The new rates became effective March 15, 2024.\n2023 Gas Rate Case: In December 2023, Consumers filed an application with the MPSC seeking an annual rate increase of $136 million based on a 10.25\u2011percent authorized return on equity for the projected 12\u2011month period ending September 30, 2025. The filing requests authority to recover new infrastructure investment and related costs that are expected to allow Consumers to continue to provide safe, reliable, affordable, and increasingly cleaner natural gas service.\n21\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 20: \nPerformance: Impacting the Triple Bottom Line\n\nCMS Energy and Consumers remain committed to achieving world class performance while delivering hometown service and positively impacting the triple bottom line of people, planet, and profit. During 2023, CMS Energy met all requirements for inclusion in the MSCI ESG Leaders Indexes; these indexes are designed to represent the performance of companies that have high environmental, social, and governance ratings relative to their sector peers. Additionally, Consumers:\n\u2022was selected to receive a $100 million grant from the U.S. Department of Energy to fund investments in its electric distribution system, improving the reliability of Michigan's electric grid\n\u2022participated in the state's economic development efforts that have resulted in commitments by large third-party manufacturers to construct facilities for electric vehicle batteries and battery components in Michigan\n\u2022announced plans for an 85-MW solar array to be constructed at the former D.E. Karn coal-generating facilities, which were retired earlier in 2023\n\u2022grew its voluntary large customer renewable energy program to approximately 365 MW\n\u2022opened a state-of-the-art natural gas training facility in Flint, Michigan that facilitates employee training that is critical to keeping workers, customers, and the public safe\n\u2022announced plans to install more than 120 automatic transfer reclosers to improve electric reliability and help prevent power outages\n\u2022completed the first phase of its Mid-Michigan Pipeline Project, part of Consumers' commitment to providing safe, reliable, and affordable natural gas to Michigan homes and businesses\n\u2022announced new efforts to install electric vehicle chargers at apartment buildings, condominiums, and overnight community locations across the state of Michigan\n\n\u2022was one of 15 recipients of the U.S. Department of Defense's 2023 Secretary of Defense Employer Support Freedom Award, an honor to employers for support of National Guard and Reserve employees\n\nCMS Energy and Consumers will continue to utilize the CE Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers' investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.\nInvestment Plan: Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades, replacements, and clean generation. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers' investment program, which is subject to approval through general rate case and other MPSC proceedings, is expected to result in annual rate-base growth of more than seven percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer prices.\n20\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 21: Presented in the following illustration are Consumers' planned capital expenditures through 2028 of $17.0 billion: \nOf this amount, Consumers plans to spend $13.6 billion over the next five years primarily to maintain and upgrade its electric distribution systems and gas infrastructure in order to enhance safety and reliability, improve customer satisfaction, reduce energy waste on those systems, and facilitate its clean energy transformation. Electric distribution and other projects comprise $7.3 billion primarily to strengthen circuits and substations, replace poles, and interconnect clean energy resources. The gas infrastructure projects comprise $6.3 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions. Consumers also expects to spend $3.4 billion on clean generation, which includes investments in wind, solar, and hydroelectric generation resources.\nRegulation: Regulatory matters are a key aspect of Consumers' business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.\n2023 Electric Rate Case: In March 2024, the MPSC issued an order authorizing an annual rate increase of $92 million, which is inclusive of a $9 million surcharge for the recovery of select distribution investments made in 2022 that exceeded the rates authorized in accordance with the December 2021 electric rate order. The approved rate increase is based on a 9.9-percent authorized return on equity. The new rates became effective March 15, 2024.\n2023 Gas Rate Case: In December 2023, Consumers filed an application with the MPSC seeking an annual rate increase of $136 million based on a 10.25\u2011percent authorized return on equity for the projected 12\u2011month period ending September 30, 2025. The filing requests authority to recover new infrastructure investment and related costs that are expected to allow Consumers to continue to provide safe, reliable, affordable, and increasingly cleaner natural gas service.\n21\n\n\n\n\n","context_html_without_headers":"\nPerformance: Impacting the Triple Bottom Line\n\nCMS Energy and Consumers remain committed to achieving world class performance while delivering hometown service and positively impacting the triple bottom line of people, planet, and profit. During 2023, CMS Energy met all requirements for inclusion in the MSCI ESG Leaders Indexes; these indexes are designed to represent the performance of companies that have high environmental, social, and governance ratings relative to their sector peers. Additionally, Consumers:\n\u2022was selected to receive a $100 million grant from the U.S. Department of Energy to fund investments in its electric distribution system, improving the reliability of Michigan's electric grid\n\u2022participated in the state's economic development efforts that have resulted in commitments by large third-party manufacturers to construct facilities for electric vehicle batteries and battery components in Michigan\n\u2022announced plans for an 85-MW solar array to be constructed at the former D.E. Karn coal-generating facilities, which were retired earlier in 2023\n\u2022grew its voluntary large customer renewable energy program to approximately 365 MW\n\u2022opened a state-of-the-art natural gas training facility in Flint, Michigan that facilitates employee training that is critical to keeping workers, customers, and the public safe\n\u2022announced plans to install more than 120 automatic transfer reclosers to improve electric reliability and help prevent power outages\n\u2022completed the first phase of its Mid-Michigan Pipeline Project, part of Consumers' commitment to providing safe, reliable, and affordable natural gas to Michigan homes and businesses\n\u2022announced new efforts to install electric vehicle chargers at apartment buildings, condominiums, and overnight community locations across the state of Michigan\n\n\u2022was one of 15 recipients of the U.S. Department of Defense's 2023 Secretary of Defense Employer Support Freedom Award, an honor to employers for support of National Guard and Reserve employees\n\nCMS Energy and Consumers will continue to utilize the CE Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers' investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.\nInvestment Plan: Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades, replacements, and clean generation. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers' investment program, which is subject to approval through general rate case and other MPSC proceedings, is expected to result in annual rate-base growth of more than seven percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer prices.\n20\n\n\n\n\n, Presented in the following illustration are Consumers' planned capital expenditures through 2028 of $17.0 billion: \nOf this amount, Consumers plans to spend $13.6 billion over the next five years primarily to maintain and upgrade its electric distribution systems and gas infrastructure in order to enhance safety and reliability, improve customer satisfaction, reduce energy waste on those systems, and facilitate its clean energy transformation. Electric distribution and other projects comprise $7.3 billion primarily to strengthen circuits and substations, replace poles, and interconnect clean energy resources. The gas infrastructure projects comprise $6.3 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions. Consumers also expects to spend $3.4 billion on clean generation, which includes investments in wind, solar, and hydroelectric generation resources.\nRegulation: Regulatory matters are a key aspect of Consumers' business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.\n2023 Electric Rate Case: In March 2024, the MPSC issued an order authorizing an annual rate increase of $92 million, which is inclusive of a $9 million surcharge for the recovery of select distribution investments made in 2022 that exceeded the rates authorized in accordance with the December 2021 electric rate order. The approved rate increase is based on a 9.9-percent authorized return on equity. The new rates became effective March 15, 2024.\n2023 Gas Rate Case: In December 2023, Consumers filed an application with the MPSC seeking an annual rate increase of $136 million based on a 10.25\u2011percent authorized return on equity for the projected 12\u2011month period ending September 30, 2025. The filing requests authority to recover new infrastructure investment and related costs that are expected to allow Consumers to continue to provide safe, reliable, affordable, and increasingly cleaner natural gas service.\n21\n\n\n\n\n"}
{"QID":"q_Ri072","Question":"What steps are being taken to improve safety in operations?","ground_truth_answer":"Consumers Energy emphasizes safety as a core component of its operations, reflecting its commitment to employees, customers, and the general public. The company integrates safety principles into its business practices, ensuring compliance with safety, health, and security regulations while fostering a culture of continuous improvement. Over the past decade, Consumers has successfully reduced its OSHA recordable incident rate by 20%.\n\nFurthermore, Consumers has implemented a Reliability Roadmap, a five-year strategy designed to enhance the electric distribution system and improve grid reliability. This plan includes $7 billion in capital expenditures and $1.7 billion in maintenance and operating costs, aimed at reducing the frequency and duration of power outages. These initiatives highlight Consumers' dedication to enhancing operational safety and delivering reliable services.","question_type":"Risk","page_number":"15","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 15: the investment community, and other stakeholders, and it reflects the broader societal impacts of CMS Energy's and Consumers' activities.\nCMS Energy's Sustainability Report, which is available to the public, describes CMS Energy's and Consumers' progress toward world class performance measured in the areas of people, planet, and profit.\nPeople: The people element of the triple bottom line represents CMS Energy's and Consumers' commitment to their employees, their customers, the residents of local communities in which they do business, and other stakeholders.\nThe safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. Over the last ten years, Consumers' Occupational Safety and Health Administration recordable incident rate has decreased by 20 percent.\nCMS Energy and Consumers also place a high priority on customer value and on providing a hometown customer experience. Consumers' customer-driven investment program is aimed at improving safety and increasing electric and gas reliability.\nIn September 2023, Consumers filed its Reliability Roadmap, an update to its previous Electric Distribution Infrastructure Investment Plan filed in 2021, with the MPSC. The Reliability Roadmap outlines a five-year strategy to improve Consumers' electric distribution system and the reliability of the grid. The plan proposes the following spending for projects designed to reduce the number and duration of power outages to customers through investment in infrastructure upgrades, forestry management, and grid modernization:\n\u2022capital expenditures of $7 billion over the next five years; this amount is $3 billion higher than proposed in the previous plan\n\u2022maintenance and operating spending of $1.7 billion over the next five years, reflecting an increase of $300 million over the previous plan\nConsumers will request rate recovery of these proposed expenditures in future electric rate cases. \n15\n\n\n\n\n","context_markdown_without_headers":"the investment community, and other stakeholders, and it reflects the broader societal impacts of CMS Energy's and Consumers' activities.\nCMS Energy's Sustainability Report, which is available to the public, describes CMS Energy's and Consumers' progress toward world class performance measured in the areas of people, planet, and profit.\nPeople: The people element of the triple bottom line represents CMS Energy's and Consumers' commitment to their employees, their customers, the residents of local communities in which they do business, and other stakeholders.\nThe safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. Over the last ten years, Consumers' Occupational Safety and Health Administration recordable incident rate has decreased by 20 percent.\nCMS Energy and Consumers also place a high priority on customer value and on providing a hometown customer experience. Consumers' customer-driven investment program is aimed at improving safety and increasing electric and gas reliability.\nIn September 2023, Consumers filed its Reliability Roadmap, an update to its previous Electric Distribution Infrastructure Investment Plan filed in 2021, with the MPSC. The Reliability Roadmap outlines a five-year strategy to improve Consumers' electric distribution system and the reliability of the grid. The plan proposes the following spending for projects designed to reduce the number and duration of power outages to customers through investment in infrastructure upgrades, forestry management, and grid modernization:\n\u2022capital expenditures of $7 billion over the next five years; this amount is $3 billion higher than proposed in the previous plan\n\u2022maintenance and operating spending of $1.7 billion over the next five years, reflecting an increase of $300 million over the previous plan\nConsumers will request rate recovery of these proposed expenditures in future electric rate cases. \n15\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 15: the investment community, and other stakeholders, and it reflects the broader societal impacts of CMS Energy's and Consumers' activities.\nCMS Energy's Sustainability Report, which is available to the public, describes CMS Energy's and Consumers' progress toward world class performance measured in the areas of people, planet, and profit.\nPeople: The people element of the triple bottom line represents CMS Energy's and Consumers' commitment to their employees, their customers, the residents of local communities in which they do business, and other stakeholders.\nThe safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. Over the last ten years, Consumers' Occupational Safety and Health Administration recordable incident rate has decreased by 20 percent.\nCMS Energy and Consumers also place a high priority on customer value and on providing a hometown customer experience. Consumers' customer-driven investment program is aimed at improving safety and increasing electric and gas reliability.\nIn September 2023, Consumers filed its Reliability Roadmap, an update to its previous Electric Distribution Infrastructure Investment Plan filed in 2021, with the MPSC. The Reliability Roadmap outlines a five-year strategy to improve Consumers' electric distribution system and the reliability of the grid. The plan proposes the following spending for projects designed to reduce the number and duration of power outages to customers through investment in infrastructure upgrades, forestry management, and grid modernization:\n\u2022capital expenditures of $7 billion over the next five years; this amount is $3 billion higher than proposed in the previous plan\n\u2022maintenance and operating spending of $1.7 billion over the next five years, reflecting an increase of $300 million over the previous plan\nConsumers will request rate recovery of these proposed expenditures in future electric rate cases. \n15\n\n\n\n\n","context_html_without_headers":"the investment community, and other stakeholders, and it reflects the broader societal impacts of CMS Energy's and Consumers' activities.\nCMS Energy's Sustainability Report, which is available to the public, describes CMS Energy's and Consumers' progress toward world class performance measured in the areas of people, planet, and profit.\nPeople: The people element of the triple bottom line represents CMS Energy's and Consumers' commitment to their employees, their customers, the residents of local communities in which they do business, and other stakeholders.\nThe safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. Over the last ten years, Consumers' Occupational Safety and Health Administration recordable incident rate has decreased by 20 percent.\nCMS Energy and Consumers also place a high priority on customer value and on providing a hometown customer experience. Consumers' customer-driven investment program is aimed at improving safety and increasing electric and gas reliability.\nIn September 2023, Consumers filed its Reliability Roadmap, an update to its previous Electric Distribution Infrastructure Investment Plan filed in 2021, with the MPSC. The Reliability Roadmap outlines a five-year strategy to improve Consumers' electric distribution system and the reliability of the grid. The plan proposes the following spending for projects designed to reduce the number and duration of power outages to customers through investment in infrastructure upgrades, forestry management, and grid modernization:\n\u2022capital expenditures of $7 billion over the next five years; this amount is $3 billion higher than proposed in the previous plan\n\u2022maintenance and operating spending of $1.7 billion over the next five years, reflecting an increase of $300 million over the previous plan\nConsumers will request rate recovery of these proposed expenditures in future electric rate cases. \n15\n\n\n\n\n"}
{"QID":"q_Ri073","Question":"How does Consumers finance its clean energy investments?","ground_truth_answer":"Consumers Energy finances its clean energy investments through a combination of regulatory-approved mechanisms and strategic acquisitions. The company leverages securitization bonds to recover costs associated with retiring coal-fueled generating units. For instance, it issued bonds in December 2023 to finance the recovery of the D.E. Karn coal units. Additionally, the MPSC has authorized the use of regulatory asset treatment for recovering the remaining book value of the J.H. Campbell units, providing a 9.0% return on equity starting in 2025.\n\nTo further expand its clean energy portfolio, Consumers has purchased the Covert Generating Station and conducted a competitive solicitation process to secure up to 700 MW of capacity through Power Purchase Agreements (PPAs), including dispatchable sources. These steps, combined with plans to increase renewable energy capacity and deploy battery storage, highlight a well-structured approach to financing its transition towards net-zero carbon emissions.","question_type":"Risk","page_number":"30, 31","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 30: Certain of CMS Energy's and Consumers' credit agreements contain covenants that require CMS Energy and Consumers to maintain certain financial ratios, as defined therein. At March 31, 2024, no default had occurred with respect to any financial covenants contained in CMS Energy's and Consumers' credit agreements. CMS Energy and Consumers were each in compliance with these covenants as of March 31, 2024, as presented in the following table:\n\n|    |                         |               |             |\n|---:|:------------------------|:--------------|:------------|\n|  1 |                         | Limit         | Actual      |\n|  2 | CMS Energy, parent only |               |             |\n|  3 | Debt to Capital         | < 0.70 to 1.0 | 0.57 to 1.0 |\n|  4 | Consumers               |               |             |\n|  5 | Debt to Capital         | < 0.65 to 1.0 | 0.50 to 1.0 |\n\nApplies to CMS Energy's revolving credit agreement and letter of credit reimbursement agreement.\nApplies to Consumers' revolving credit agreements.\n\nOutlook\n\nSeveral business trends and uncertainties may affect CMS Energy's and Consumers' financial condition and results of operations. These trends and uncertainties could have a material impact on CMS Energy's and Consumers' consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see Forward-looking Statements and Information; Notes to the Unaudited Consolidated Financial Statements-Note 1, Regulatory Matters and Note 2, Contingencies and Commitments; and Part II-Item 1A. Risk Factors.\n\nConsumers Electric Utility Outlook and Uncertainties\n\nClean Energy Plan: Consumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its electric business by 2040. Under this net-zero goal, Consumers plans to eliminate the impact of carbon emissions created by the electricity it generates or purchases for customers. Additionally, through its Clean Energy Plan, Consumers continues to make progress on expanding its customer programs, namely its demand response, energy efficiency, and conservation voltage reduction programs, as well as increasing its renewable energy generation.\nThe Clean Energy Plan was most recently revised and approved by the MPSC in 2022. Under this plan, Consumers will eliminate the use of coal-fueled generation in 2025 and expects to meet 90 percent of its customers' needs with clean energy sources by 2040. Specifically, the Clean Energy Plan provides for:\n\u2022the retirement of the D.E. Karn coal-fueled generating units, totaling 515 MW of nameplate capacity; these units closed in June 2023\n\u2022the retirement of the J.H. Campbell coal-fueled generating units, totaling 1,407 MW of nameplate capacity, in 2025\n\u2022the retirement of the D.E. Karn oil and gas-fueled generating units, totaling 1,219 MW of nameplate capacity, in 2031 \nThe MPSC authorized Consumers to issue securitization bonds to finance the recovery of and return on the D.E. Karn coal-fueled generating units; Consumers issued these bonds in December 2023. Additionally, the MPSC has authorized regulatory asset treatment for Consumers to recover the remaining book value of the J.H. Campbell coal-fueled generating units, as well as a 9.0\u2011percent return on equity, commencing in 2025.\n30\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 31: \nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n","context_markdown_without_headers":"Certain of CMS Energy's and Consumers' credit agreements contain covenants that require CMS Energy and Consumers to maintain certain financial ratios, as defined therein. At March 31, 2024, no default had occurred with respect to any financial covenants contained in CMS Energy's and Consumers' credit agreements. CMS Energy and Consumers were each in compliance with these covenants as of March 31, 2024, as presented in the following table:\n\n|    |                         |               |             |\n|---:|:------------------------|:--------------|:------------|\n|  1 |                         | Limit         | Actual      |\n|  2 | CMS Energy, parent only |               |             |\n|  3 | Debt to Capital         | < 0.70 to 1.0 | 0.57 to 1.0 |\n|  4 | Consumers               |               |             |\n|  5 | Debt to Capital         | < 0.65 to 1.0 | 0.50 to 1.0 |\n\nApplies to CMS Energy's revolving credit agreement and letter of credit reimbursement agreement.\nApplies to Consumers' revolving credit agreements.\n\nOutlook\n\nSeveral business trends and uncertainties may affect CMS Energy's and Consumers' financial condition and results of operations. These trends and uncertainties could have a material impact on CMS Energy's and Consumers' consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see Forward-looking Statements and Information; Notes to the Unaudited Consolidated Financial Statements-Note 1, Regulatory Matters and Note 2, Contingencies and Commitments; and Part II-Item 1A. Risk Factors.\n\nConsumers Electric Utility Outlook and Uncertainties\n\nClean Energy Plan: Consumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its electric business by 2040. Under this net-zero goal, Consumers plans to eliminate the impact of carbon emissions created by the electricity it generates or purchases for customers. Additionally, through its Clean Energy Plan, Consumers continues to make progress on expanding its customer programs, namely its demand response, energy efficiency, and conservation voltage reduction programs, as well as increasing its renewable energy generation.\nThe Clean Energy Plan was most recently revised and approved by the MPSC in 2022. Under this plan, Consumers will eliminate the use of coal-fueled generation in 2025 and expects to meet 90 percent of its customers' needs with clean energy sources by 2040. Specifically, the Clean Energy Plan provides for:\n\u2022the retirement of the D.E. Karn coal-fueled generating units, totaling 515 MW of nameplate capacity; these units closed in June 2023\n\u2022the retirement of the J.H. Campbell coal-fueled generating units, totaling 1,407 MW of nameplate capacity, in 2025\n\u2022the retirement of the D.E. Karn oil and gas-fueled generating units, totaling 1,219 MW of nameplate capacity, in 2031 \nThe MPSC authorized Consumers to issue securitization bonds to finance the recovery of and return on the D.E. Karn coal-fueled generating units; Consumers issued these bonds in December 2023. Additionally, the MPSC has authorized regulatory asset treatment for Consumers to recover the remaining book value of the J.H. Campbell coal-fueled generating units, as well as a 9.0\u2011percent return on equity, commencing in 2025.\n30\n\n\n\n\n, \nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 30: Certain of CMS Energy's and Consumers' credit agreements contain covenants that require CMS Energy and Consumers to maintain certain financial ratios, as defined therein. At March 31, 2024, no default had occurred with respect to any financial covenants contained in CMS Energy's and Consumers' credit agreements. CMS Energy and Consumers were each in compliance with these covenants as of March 31, 2024, as presented in the following table:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">Limit <\/td><td colspan=\"3\">Actual <\/td><\/tr><tr><td colspan=\"3\">CMS Energy, parent only<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Debt to Capital<\/td><td colspan=\"3\">&lt; 0.70 to 1.0<\/td><td colspan=\"3\">0.57 to 1.0<\/td><\/tr><tr><td colspan=\"3\">Consumers<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Debt to Capital<\/td><td colspan=\"3\">&lt; 0.65 to 1.0<\/td><td colspan=\"3\">0.50 to 1.0<\/td><\/tr><\/table>\nApplies to CMS Energy's revolving credit agreement and letter of credit reimbursement agreement.\nApplies to Consumers' revolving credit agreements.\n\nOutlook\n\nSeveral business trends and uncertainties may affect CMS Energy's and Consumers' financial condition and results of operations. These trends and uncertainties could have a material impact on CMS Energy's and Consumers' consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see Forward-looking Statements and Information; Notes to the Unaudited Consolidated Financial Statements-Note 1, Regulatory Matters and Note 2, Contingencies and Commitments; and Part II-Item 1A. Risk Factors.\n\nConsumers Electric Utility Outlook and Uncertainties\n\nClean Energy Plan: Consumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its electric business by 2040. Under this net-zero goal, Consumers plans to eliminate the impact of carbon emissions created by the electricity it generates or purchases for customers. Additionally, through its Clean Energy Plan, Consumers continues to make progress on expanding its customer programs, namely its demand response, energy efficiency, and conservation voltage reduction programs, as well as increasing its renewable energy generation.\nThe Clean Energy Plan was most recently revised and approved by the MPSC in 2022. Under this plan, Consumers will eliminate the use of coal-fueled generation in 2025 and expects to meet 90 percent of its customers' needs with clean energy sources by 2040. Specifically, the Clean Energy Plan provides for:\n\u2022the retirement of the D.E. Karn coal-fueled generating units, totaling 515 MW of nameplate capacity; these units closed in June 2023\n\u2022the retirement of the J.H. Campbell coal-fueled generating units, totaling 1,407 MW of nameplate capacity, in 2025\n\u2022the retirement of the D.E. Karn oil and gas-fueled generating units, totaling 1,219 MW of nameplate capacity, in 2031 \nThe MPSC authorized Consumers to issue securitization bonds to finance the recovery of and return on the D.E. Karn coal-fueled generating units; Consumers issued these bonds in December 2023. Additionally, the MPSC has authorized regulatory asset treatment for Consumers to recover the remaining book value of the J.H. Campbell coal-fueled generating units, as well as a 9.0\u2011percent return on equity, commencing in 2025.\n30\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 31: \nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n","context_html_without_headers":"Certain of CMS Energy's and Consumers' credit agreements contain covenants that require CMS Energy and Consumers to maintain certain financial ratios, as defined therein. At March 31, 2024, no default had occurred with respect to any financial covenants contained in CMS Energy's and Consumers' credit agreements. CMS Energy and Consumers were each in compliance with these covenants as of March 31, 2024, as presented in the following table:\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"3\">Limit <\/td><td colspan=\"3\">Actual <\/td><\/tr><tr><td colspan=\"3\">CMS Energy, parent only<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Debt to Capital<\/td><td colspan=\"3\">&lt; 0.70 to 1.0<\/td><td colspan=\"3\">0.57 to 1.0<\/td><\/tr><tr><td colspan=\"3\">Consumers<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Debt to Capital<\/td><td colspan=\"3\">&lt; 0.65 to 1.0<\/td><td colspan=\"3\">0.50 to 1.0<\/td><\/tr><\/table>\nApplies to CMS Energy's revolving credit agreement and letter of credit reimbursement agreement.\nApplies to Consumers' revolving credit agreements.\n\nOutlook\n\nSeveral business trends and uncertainties may affect CMS Energy's and Consumers' financial condition and results of operations. These trends and uncertainties could have a material impact on CMS Energy's and Consumers' consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see Forward-looking Statements and Information; Notes to the Unaudited Consolidated Financial Statements-Note 1, Regulatory Matters and Note 2, Contingencies and Commitments; and Part II-Item 1A. Risk Factors.\n\nConsumers Electric Utility Outlook and Uncertainties\n\nClean Energy Plan: Consumers' Clean Energy Plan details its strategy to meet customers' long-term energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its electric business by 2040. Under this net-zero goal, Consumers plans to eliminate the impact of carbon emissions created by the electricity it generates or purchases for customers. Additionally, through its Clean Energy Plan, Consumers continues to make progress on expanding its customer programs, namely its demand response, energy efficiency, and conservation voltage reduction programs, as well as increasing its renewable energy generation.\nThe Clean Energy Plan was most recently revised and approved by the MPSC in 2022. Under this plan, Consumers will eliminate the use of coal-fueled generation in 2025 and expects to meet 90 percent of its customers' needs with clean energy sources by 2040. Specifically, the Clean Energy Plan provides for:\n\u2022the retirement of the D.E. Karn coal-fueled generating units, totaling 515 MW of nameplate capacity; these units closed in June 2023\n\u2022the retirement of the J.H. Campbell coal-fueled generating units, totaling 1,407 MW of nameplate capacity, in 2025\n\u2022the retirement of the D.E. Karn oil and gas-fueled generating units, totaling 1,219 MW of nameplate capacity, in 2031 \nThe MPSC authorized Consumers to issue securitization bonds to finance the recovery of and return on the D.E. Karn coal-fueled generating units; Consumers issued these bonds in December 2023. Additionally, the MPSC has authorized regulatory asset treatment for Consumers to recover the remaining book value of the J.H. Campbell coal-fueled generating units, as well as a 9.0\u2011percent return on equity, commencing in 2025.\n30\n\n\n\n\n, \nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n"}
{"QID":"q_Ri074","Question":" How is the company managing litigation risks related to environmental issues?","ground_truth_answer":"Consumers Energy manages significant litigation risks related to environmental and contractual issues. In compliance with environmental laws, the company addresses liabilities under CERCLA and NREPA, including the cleanup of contaminated sites like the Kalamazoo River. Consumers estimates its liabilities for these sites to range between $3 million and $8 million for CERCLA and $4 million for NREPA, with amounts subject to periodic review. Additionally, Consumers and DTE Electric are engaged in litigation against TAES and Toshiba over defective work on the Ludington Pumped Storage Plant, with potential damages of $15 million, of which Consumers could be liable for 51%. Another key litigation involves Wolverine Power, which has claimed $37 million in damages over the early retirement of the J.H. Campbell 3 unit. While the court upheld Consumers\u2019 right to retire the unit, some breach of agreement claims are still pending resolution. These legal matters, if resolved unfavorably, could materially impact Consumers\u2019 financial condition.","question_type":"Risk","page_number":"58, 59, 60","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 58: new service installations. The order directed Consumers to provide information on such meters and their replacement, meter-reading performance, communications with customers and the MPSC regarding these issues, and other information. Subsequently, the MPSC issued a show-cause order directing Consumers to provide further information on consecutive estimated billings, the provision of actual meter readings, and new service installation issues.\nIn April 2024, Consumers signed an agreement with the MPSC Staff and Attorney General settling this matter. Under the settlement agreement, Consumers will pay a $1 million penalty to the MPSC and will return to customers a minimum of $3 million, which may be satisfied with amounts received through an associated claim Consumers has filed against a vendor. The settlement agreement is subject to MPSC approval.\n\n2:    Contingencies and Commitments\n\nCMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy's and Consumers' liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures stating that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.\n\nCMS Energy Contingencies\n\nBay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement establishing the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, which is valid through 2025.\nAt March 31, 2024, CMS Energy had a recorded liability of $44 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $56 million. CMS Energy expects to pay the following amounts for long-term leachate disposal and operating and maintenance costs during the remainder of 2024 and in each of the next five years:\n|    |                                                                 |      |      |      |      |      |      |    |    |    |    |    |    |    |    |    |\n|---:|:----------------------------------------------------------------|:-----|:-----|:-----|:-----|:-----|:-----|:---|:---|:---|:---|:---|:---|:---|:---|:---|\n|  1 | In Millions                                                     |      |      |      |      |      |      |    |    |    |    |    |    |    |    |    |\n|  2 |                                                                 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |    |    |    |    |    |    |    |    |    |\n|  3 | CMS Energy                                                      |      |      |      |      |      |      |    |    |    |    |    |    |    |    |    |\n|  4 | Long-term leachate disposal and operating and maintenance costs |      | $    | 3    |      |      | $    | 4  | $  | 4  | $  | 4  | $  | 4  | $  | 4  |\nCMS Energy's estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.\n58\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 59: \nConsumers Electric Utility Contingencies\n\nElectric Environmental Matters: Consumers' operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.\nCleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates its liability for NREPA sites for which it can estimate a range of loss to be between $4 million and $5 million. At March 31, 2024, Consumers had a recorded liability of $4 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.\nConsumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA had reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties asked to participate in the removal action plan, including Consumers, declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.\nBased on its experience, Consumers estimates its share of the total liability for known CERCLA sites to be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers' share of the total liability. At March 31, 2024, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.\nThe timing of payments related to Consumers' remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.\nLudington Overhaul Contract Dispute: Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. The overhauled Ludington units are operational, but TAES' work has been defective and non\u2011conforming. Consumers and DTE Electric have demanded that TAES provide a comprehensive plan to resolve those matters, including adherence to its warranty commitments and other contractual obligations. Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES' parent, Toshiba, under a parent guaranty it provided. TAES has not provided a comprehensive plan or otherwise met its performance obligations.\nIn order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and Toshiba in the U.S. District Court for the Eastern District of Michigan in 2022. TAES and Toshiba filed a motion to dismiss the complaint, along with an answer and counterclaims seeking approximately $15 million in damages related to payments allegedly owed under the parties' contract. As a co-owner of \n59\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 60: Ludington, Consumers would be liable for 51 percent of any such damages, if liability and damages were proven. The court denied the motion to dismiss filed by TAES and Toshiba. The parties are engaged in ongoing litigation, including discovery, pursuant to a court-ordered schedule. Consumers believes the counterclaims filed by TAES and Toshiba are without merit, but cannot predict the financial impact or outcome of this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity. \nToshiba has announced that, through a common stock purchase, TBJH became the majority shareholder and new parent company of Toshiba. TBJH is a subsidiary of a Japanese private equity firm. Consumers and DTE Electric continue to monitor this development, but do not believe that this affects their rights under the parent guaranty provided by Toshiba. \nIn May 2023, the MPSC approved Consumers' and DTE Electric's jointly-filed request for authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from TAES or Toshiba. Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation, but cannot predict the financial impact or outcome of such proceedings.\nJ.H. Campbell 3 Contract Dispute: In 2022, Consumers filed a complaint against Wolverine Power in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under Consumers' and Wolverine Power's agreement to jointly own and operate the unit. Wolverine Power filed an answer, affirmative defenses, and a counterclaim seeking approximately $37 million in damages allegedly caused by Consumers' decision to retire the unit before the end of its useful life. The state circuit court judge found that Consumers may, in its sole discretion, retire J.H. Campbell 3, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power's claim for damages is pending. In May 2023, the circuit court judge issued an order granting Consumers' motion for clarification confirming that Consumers may continue to operate and invest in J.H. Campbell 3 consistent with the May 2025 retirement date. \nIn March 2024, the circuit court judge issued an order denying Wolverine Power's motion for partial summary disposition and granting in part and denying in part Consumers' motion for summary disposition. The judge granted Consumers' motion for summary disposition on Wolverine Power's claim that Consumers acted in bad faith in deciding to retire J.H. Campbell 3 early, finding no evidence to support that claim. The judge held that Wolverine Power did identify a genuine issue of material fact as to whether Consumers breached the joint ownership and operating agreement by failing to notify and consult with Wolverine Power regarding the unit's early retirement. \nConsumers believes Wolverine Power's claim has no merit, but cannot predict the final impact or outcome on this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity.\n60\n\n\n\n\n","context_markdown_without_headers":"new service installations. The order directed Consumers to provide information on such meters and their replacement, meter-reading performance, communications with customers and the MPSC regarding these issues, and other information. Subsequently, the MPSC issued a show-cause order directing Consumers to provide further information on consecutive estimated billings, the provision of actual meter readings, and new service installation issues.\nIn April 2024, Consumers signed an agreement with the MPSC Staff and Attorney General settling this matter. Under the settlement agreement, Consumers will pay a $1 million penalty to the MPSC and will return to customers a minimum of $3 million, which may be satisfied with amounts received through an associated claim Consumers has filed against a vendor. The settlement agreement is subject to MPSC approval.\n\n2:    Contingencies and Commitments\n\nCMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy's and Consumers' liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures stating that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.\n\nCMS Energy Contingencies\n\nBay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement establishing the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, which is valid through 2025.\nAt March 31, 2024, CMS Energy had a recorded liability of $44 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $56 million. CMS Energy expects to pay the following amounts for long-term leachate disposal and operating and maintenance costs during the remainder of 2024 and in each of the next five years:\n|    |                                                                 |      |      |      |      |      |      |    |    |    |    |    |    |    |    |    |\n|---:|:----------------------------------------------------------------|:-----|:-----|:-----|:-----|:-----|:-----|:---|:---|:---|:---|:---|:---|:---|:---|:---|\n|  1 | In Millions                                                     |      |      |      |      |      |      |    |    |    |    |    |    |    |    |    |\n|  2 |                                                                 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |    |    |    |    |    |    |    |    |    |\n|  3 | CMS Energy                                                      |      |      |      |      |      |      |    |    |    |    |    |    |    |    |    |\n|  4 | Long-term leachate disposal and operating and maintenance costs |      | $    | 3    |      |      | $    | 4  | $  | 4  | $  | 4  | $  | 4  | $  | 4  |\nCMS Energy's estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.\n58\n\n\n\n\n, \nConsumers Electric Utility Contingencies\n\nElectric Environmental Matters: Consumers' operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.\nCleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates its liability for NREPA sites for which it can estimate a range of loss to be between $4 million and $5 million. At March 31, 2024, Consumers had a recorded liability of $4 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.\nConsumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA had reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties asked to participate in the removal action plan, including Consumers, declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.\nBased on its experience, Consumers estimates its share of the total liability for known CERCLA sites to be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers' share of the total liability. At March 31, 2024, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.\nThe timing of payments related to Consumers' remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.\nLudington Overhaul Contract Dispute: Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. The overhauled Ludington units are operational, but TAES' work has been defective and non\u2011conforming. Consumers and DTE Electric have demanded that TAES provide a comprehensive plan to resolve those matters, including adherence to its warranty commitments and other contractual obligations. Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES' parent, Toshiba, under a parent guaranty it provided. TAES has not provided a comprehensive plan or otherwise met its performance obligations.\nIn order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and Toshiba in the U.S. District Court for the Eastern District of Michigan in 2022. TAES and Toshiba filed a motion to dismiss the complaint, along with an answer and counterclaims seeking approximately $15 million in damages related to payments allegedly owed under the parties' contract. As a co-owner of \n59\n\n\n\n\n, Ludington, Consumers would be liable for 51 percent of any such damages, if liability and damages were proven. The court denied the motion to dismiss filed by TAES and Toshiba. The parties are engaged in ongoing litigation, including discovery, pursuant to a court-ordered schedule. Consumers believes the counterclaims filed by TAES and Toshiba are without merit, but cannot predict the financial impact or outcome of this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity. \nToshiba has announced that, through a common stock purchase, TBJH became the majority shareholder and new parent company of Toshiba. TBJH is a subsidiary of a Japanese private equity firm. Consumers and DTE Electric continue to monitor this development, but do not believe that this affects their rights under the parent guaranty provided by Toshiba. \nIn May 2023, the MPSC approved Consumers' and DTE Electric's jointly-filed request for authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from TAES or Toshiba. Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation, but cannot predict the financial impact or outcome of such proceedings.\nJ.H. Campbell 3 Contract Dispute: In 2022, Consumers filed a complaint against Wolverine Power in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under Consumers' and Wolverine Power's agreement to jointly own and operate the unit. Wolverine Power filed an answer, affirmative defenses, and a counterclaim seeking approximately $37 million in damages allegedly caused by Consumers' decision to retire the unit before the end of its useful life. The state circuit court judge found that Consumers may, in its sole discretion, retire J.H. Campbell 3, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power's claim for damages is pending. In May 2023, the circuit court judge issued an order granting Consumers' motion for clarification confirming that Consumers may continue to operate and invest in J.H. Campbell 3 consistent with the May 2025 retirement date. \nIn March 2024, the circuit court judge issued an order denying Wolverine Power's motion for partial summary disposition and granting in part and denying in part Consumers' motion for summary disposition. The judge granted Consumers' motion for summary disposition on Wolverine Power's claim that Consumers acted in bad faith in deciding to retire J.H. Campbell 3 early, finding no evidence to support that claim. The judge held that Wolverine Power did identify a genuine issue of material fact as to whether Consumers breached the joint ownership and operating agreement by failing to notify and consult with Wolverine Power regarding the unit's early retirement. \nConsumers believes Wolverine Power's claim has no merit, but cannot predict the final impact or outcome on this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity.\n60\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 58: new service installations. The order directed Consumers to provide information on such meters and their replacement, meter-reading performance, communications with customers and the MPSC regarding these issues, and other information. Subsequently, the MPSC issued a show-cause order directing Consumers to provide further information on consecutive estimated billings, the provision of actual meter readings, and new service installation issues.\nIn April 2024, Consumers signed an agreement with the MPSC Staff and Attorney General settling this matter. Under the settlement agreement, Consumers will pay a $1 million penalty to the MPSC and will return to customers a minimum of $3 million, which may be satisfied with amounts received through an associated claim Consumers has filed against a vendor. The settlement agreement is subject to MPSC approval.\n\n2:    Contingencies and Commitments\n\nCMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy's and Consumers' liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures stating that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.\n\nCMS Energy Contingencies\n\nBay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement establishing the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, which is valid through 2025.\nAt March 31, 2024, CMS Energy had a recorded liability of $44 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $56 million. CMS Energy expects to pay the following amounts for long-term leachate disposal and operating and maintenance costs during the remainder of 2024 and in each of the next five years:\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"39\">In Millions<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"6\">2024<\/td><td colspan=\"6\">2025<\/td><td colspan=\"6\">2026<\/td><td colspan=\"6\">2027<\/td><td colspan=\"6\">2028<\/td><td colspan=\"6\">2029<\/td><\/tr><tr><td colspan=\"3\">CMS Energy<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Long-term leachate disposal and operating and maintenance costs<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>3 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><\/tr><\/table>CMS Energy's estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.\n58\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 59: \nConsumers Electric Utility Contingencies\n\nElectric Environmental Matters: Consumers' operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.\nCleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates its liability for NREPA sites for which it can estimate a range of loss to be between $4 million and $5 million. At March 31, 2024, Consumers had a recorded liability of $4 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.\nConsumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA had reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties asked to participate in the removal action plan, including Consumers, declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.\nBased on its experience, Consumers estimates its share of the total liability for known CERCLA sites to be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers' share of the total liability. At March 31, 2024, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.\nThe timing of payments related to Consumers' remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.\nLudington Overhaul Contract Dispute: Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. The overhauled Ludington units are operational, but TAES' work has been defective and non\u2011conforming. Consumers and DTE Electric have demanded that TAES provide a comprehensive plan to resolve those matters, including adherence to its warranty commitments and other contractual obligations. Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES' parent, Toshiba, under a parent guaranty it provided. TAES has not provided a comprehensive plan or otherwise met its performance obligations.\nIn order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and Toshiba in the U.S. District Court for the Eastern District of Michigan in 2022. TAES and Toshiba filed a motion to dismiss the complaint, along with an answer and counterclaims seeking approximately $15 million in damages related to payments allegedly owed under the parties' contract. As a co-owner of \n59\n\n\n\n\n, CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 60: Ludington, Consumers would be liable for 51 percent of any such damages, if liability and damages were proven. The court denied the motion to dismiss filed by TAES and Toshiba. The parties are engaged in ongoing litigation, including discovery, pursuant to a court-ordered schedule. Consumers believes the counterclaims filed by TAES and Toshiba are without merit, but cannot predict the financial impact or outcome of this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity. \nToshiba has announced that, through a common stock purchase, TBJH became the majority shareholder and new parent company of Toshiba. TBJH is a subsidiary of a Japanese private equity firm. Consumers and DTE Electric continue to monitor this development, but do not believe that this affects their rights under the parent guaranty provided by Toshiba. \nIn May 2023, the MPSC approved Consumers' and DTE Electric's jointly-filed request for authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from TAES or Toshiba. Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation, but cannot predict the financial impact or outcome of such proceedings.\nJ.H. Campbell 3 Contract Dispute: In 2022, Consumers filed a complaint against Wolverine Power in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under Consumers' and Wolverine Power's agreement to jointly own and operate the unit. Wolverine Power filed an answer, affirmative defenses, and a counterclaim seeking approximately $37 million in damages allegedly caused by Consumers' decision to retire the unit before the end of its useful life. The state circuit court judge found that Consumers may, in its sole discretion, retire J.H. Campbell 3, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power's claim for damages is pending. In May 2023, the circuit court judge issued an order granting Consumers' motion for clarification confirming that Consumers may continue to operate and invest in J.H. Campbell 3 consistent with the May 2025 retirement date. \nIn March 2024, the circuit court judge issued an order denying Wolverine Power's motion for partial summary disposition and granting in part and denying in part Consumers' motion for summary disposition. The judge granted Consumers' motion for summary disposition on Wolverine Power's claim that Consumers acted in bad faith in deciding to retire J.H. Campbell 3 early, finding no evidence to support that claim. The judge held that Wolverine Power did identify a genuine issue of material fact as to whether Consumers breached the joint ownership and operating agreement by failing to notify and consult with Wolverine Power regarding the unit's early retirement. \nConsumers believes Wolverine Power's claim has no merit, but cannot predict the final impact or outcome on this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity.\n60\n\n\n\n\n","context_html_without_headers":"new service installations. The order directed Consumers to provide information on such meters and their replacement, meter-reading performance, communications with customers and the MPSC regarding these issues, and other information. Subsequently, the MPSC issued a show-cause order directing Consumers to provide further information on consecutive estimated billings, the provision of actual meter readings, and new service installation issues.\nIn April 2024, Consumers signed an agreement with the MPSC Staff and Attorney General settling this matter. Under the settlement agreement, Consumers will pay a $1 million penalty to the MPSC and will return to customers a minimum of $3 million, which may be satisfied with amounts received through an associated claim Consumers has filed against a vendor. The settlement agreement is subject to MPSC approval.\n\n2:    Contingencies and Commitments\n\nCMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy's and Consumers' liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures stating that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.\n\nCMS Energy Contingencies\n\nBay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement establishing the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, which is valid through 2025.\nAt March 31, 2024, CMS Energy had a recorded liability of $44 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $56 million. CMS Energy expects to pay the following amounts for long-term leachate disposal and operating and maintenance costs during the remainder of 2024 and in each of the next five years:\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"39\">In Millions<\/td><\/tr><tr><td colspan=\"3\"><\/td><td colspan=\"6\">2024<\/td><td colspan=\"6\">2025<\/td><td colspan=\"6\">2026<\/td><td colspan=\"6\">2027<\/td><td colspan=\"6\">2028<\/td><td colspan=\"6\">2029<\/td><\/tr><tr><td colspan=\"3\">CMS Energy<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">Long-term leachate disposal and operating and maintenance costs<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>3 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>4 <\/td><td><\/td><\/tr><\/table>CMS Energy's estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.\n58\n\n\n\n\n, \nConsumers Electric Utility Contingencies\n\nElectric Environmental Matters: Consumers' operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.\nCleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates its liability for NREPA sites for which it can estimate a range of loss to be between $4 million and $5 million. At March 31, 2024, Consumers had a recorded liability of $4 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.\nConsumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA had reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties asked to participate in the removal action plan, including Consumers, declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.\nBased on its experience, Consumers estimates its share of the total liability for known CERCLA sites to be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers' share of the total liability. At March 31, 2024, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.\nThe timing of payments related to Consumers' remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.\nLudington Overhaul Contract Dispute: Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. The overhauled Ludington units are operational, but TAES' work has been defective and non\u2011conforming. Consumers and DTE Electric have demanded that TAES provide a comprehensive plan to resolve those matters, including adherence to its warranty commitments and other contractual obligations. Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES' parent, Toshiba, under a parent guaranty it provided. TAES has not provided a comprehensive plan or otherwise met its performance obligations.\nIn order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and Toshiba in the U.S. District Court for the Eastern District of Michigan in 2022. TAES and Toshiba filed a motion to dismiss the complaint, along with an answer and counterclaims seeking approximately $15 million in damages related to payments allegedly owed under the parties' contract. As a co-owner of \n59\n\n\n\n\n, Ludington, Consumers would be liable for 51 percent of any such damages, if liability and damages were proven. The court denied the motion to dismiss filed by TAES and Toshiba. The parties are engaged in ongoing litigation, including discovery, pursuant to a court-ordered schedule. Consumers believes the counterclaims filed by TAES and Toshiba are without merit, but cannot predict the financial impact or outcome of this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity. \nToshiba has announced that, through a common stock purchase, TBJH became the majority shareholder and new parent company of Toshiba. TBJH is a subsidiary of a Japanese private equity firm. Consumers and DTE Electric continue to monitor this development, but do not believe that this affects their rights under the parent guaranty provided by Toshiba. \nIn May 2023, the MPSC approved Consumers' and DTE Electric's jointly-filed request for authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from TAES or Toshiba. Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation, but cannot predict the financial impact or outcome of such proceedings.\nJ.H. Campbell 3 Contract Dispute: In 2022, Consumers filed a complaint against Wolverine Power in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under Consumers' and Wolverine Power's agreement to jointly own and operate the unit. Wolverine Power filed an answer, affirmative defenses, and a counterclaim seeking approximately $37 million in damages allegedly caused by Consumers' decision to retire the unit before the end of its useful life. The state circuit court judge found that Consumers may, in its sole discretion, retire J.H. Campbell 3, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power's claim for damages is pending. In May 2023, the circuit court judge issued an order granting Consumers' motion for clarification confirming that Consumers may continue to operate and invest in J.H. Campbell 3 consistent with the May 2025 retirement date. \nIn March 2024, the circuit court judge issued an order denying Wolverine Power's motion for partial summary disposition and granting in part and denying in part Consumers' motion for summary disposition. The judge granted Consumers' motion for summary disposition on Wolverine Power's claim that Consumers acted in bad faith in deciding to retire J.H. Campbell 3 early, finding no evidence to support that claim. The judge held that Wolverine Power did identify a genuine issue of material fact as to whether Consumers breached the joint ownership and operating agreement by failing to notify and consult with Wolverine Power regarding the unit's early retirement. \nConsumers believes Wolverine Power's claim has no merit, but cannot predict the final impact or outcome on this matter. An unfavorable outcome could have a material adverse effect on CMS Energy's and Consumers' financial condition, results of operations, or liquidity.\n60\n\n\n\n\n"}
{"QID":"q_Ri075","Question":" What steps are being taken to comply with renewable energy standards?","ground_truth_answer":"Consumers Energy is actively advancing its renewable energy initiatives to comply with the 2023 Energy Law, which raises the renewable energy standard to 50% by 2030 and 60% by 2035. The company meets these targets through the use of Renewable Energy Credits (RECs), combining newly generated RECs with those carried over from previous years. The Michigan Public Service Commission (MPSC) has approved the development of up to 525 MW of new wind generation projects, including a 150-MW project in Gratiot County (operational in 2020), a 166-MW project in Hillsdale (operational in 2021), and a 201-MW project in Gratiot County (operational in December 2023). Consumers has also secured a 20-year Power Purchase Agreement (PPA) for 100 MW of renewable capacity from a 149-MW solar facility in Calhoun County, expected to be operational in 2024. Additionally, through its Voluntary Large Customer Renewable Energy Program, Consumers is expanding renewable energy offerings for large customers. This program includes a 309-MW solar project in Calhoun County (operational in 2025) and an 85-MW solar project at the D.E. Karn site (operational in 2026). These initiatives underscore Consumers\u2019 commitment to expanding renewable energy capacity and meeting future regulatory standards.","question_type":"Risk","page_number":"31","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 31: \nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n","context_markdown_without_headers":"\nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 31: \nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n","context_html_without_headers":"\nUnder the Clean Energy Plan, Consumers:\n\n\n\u2022purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023\n\n\u2022conducted a one\u2011time competitive solicitation for up to 700 MW of capacity through PPAs from sources able to deliver to Michigan's Lower Peninsula beginning in 2025 (including up to 500 MW from dispatchable sources)\nThese actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage expected by 2027 and an additional 475 MW by 2040. The 2023 Energy Law, enacted in November 2023, set more ambitious standards for renewable energy and energy storage. Consumers is required to file updates to its amended renewable energy plan before or in November 2024 and its Clean Energy Plan before or in 2027. Together, these updated plans will outline a path to meeting these accelerated timelines.\nUnder its Clean Energy Plan, Consumers bids new capacity competitively and expects to own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its pre-tax weighted-average cost of capital on permanent capital structure on payments made under new competitively bid PPAs with non\u2011affiliated entities approved by the MPSC.\nAs a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:\n31\n\n\n\n\n"}
{"QID":"q_Ri076","Question":"How is Consumers addressing risks from severe weather events?","ground_truth_answer":"Consumers Energy acknowledges that the increased frequency and intensity of severe weather events, often driven by climate change, could significantly impact its facilities, energy sales, and operational results. While the company cannot predict specific events, it evaluates the potential physical impacts, including heightened storm activity, increased precipitation, rising temperatures, and changes in lake and river levels. In 2022, Consumers released a detailed report addressing these physical risks and their potential effects on its infrastructure. To mitigate these risks, the company is implementing various measures, including infrastructure upgrades and operational enhancements, ensuring greater resilience and preparedness against extreme weather conditions.","question_type":"Risk","page_number":"35","accession_number":"0000811156-24-000084","item":"Item 1.    Financial Statements","context_markdown_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 35: strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n","context_markdown_without_headers":"strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n","context_html_with_headers":"CMS ENERGY CORP 10-Q form for quarterly period ended 2024-03-31, page 35: strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n","context_html_without_headers":"strategy. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.\nConsumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:\n\u2022a change in Consumers' fuel mix\n\u2022changes in the types of generating units Consumers may purchase or build in the future\n\u2022changes in how certain units are operated, including the installation of additional emission control equipment\n\u2022the retirement, mothballing, or repowering with an alternative fuel of some of Consumers' generating units\n\u2022changes in Consumers' environmental compliance costs\n\u2022the purchase or sale of allowances\nGreenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.\nIn May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule had requirements for existing natural gas-fueled facilities that could have had a material impact on Consumers' natural gas-fueled facilities. However, the EPA announced in March 2024 that the final rule, expected in April or May 2024, will not cover existing natural gas-fueled facilities. Instead, the EPA expects to cover those facilities in a future rulemaking. Consumers will continue to follow the finalization of this rule and any subsequent rules to control greenhouse gases and will continue to evaluate potential impacts to its Clean Energy Plan.\nUnder the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.\nIn 2020, Michigan's Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28\u2011percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28\u2011percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. The 2023 Energy Law codifies much of the Governor's goals. For additional details on the 2023 Energy Law, see the Planet section of the Executive Overview. \nIncreased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers' facilities, energy sales, and results of operations. Consumers is unable to predict these events; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.\n35\n\n\n\n\n"}
{"QID":"q_Ri077","Question":"How is Fortinet maintaining its competitive edge in the evolving cybersecurity landscape?","ground_truth_answer":"Fortinet maintains its competitive edge in the cybersecurity landscape through its integrated Fortinet Security Fabric, which spans secure networking, Unified Secure Access Service Edge (SASE), and Security Operations (SecOps). Key elements include FortiOS, the foundation of its platform, which delivers over 30 functions across physical, virtual, cloud, and SaaS environments. Proprietary ASIC technology enhances performance by accelerating tasks such as encrypted traffic inspection.\n\nThe company also leverages AI-driven threat intelligence via FortiGuard Labs, which delivers real-time, coordinated detection and response across the entire attack surface. Fortinet\u2019s Security Operations portfolio automates threat detection and response to streamline remediation. Additionally, Fortinet addresses the global cybersecurity skills gap through the Fortinet Training Institute, which has issued over one million certifications.","question_type":"Risk","page_number":"27","accession_number":"0001262039-24-000037","item":"ITEM 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations","context_markdown_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 27: \u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n","context_markdown_without_headers":"\u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n","context_html_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 27: \u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n","context_html_without_headers":"\u2022expected impact of plans and strategy for the acceleration of our points of presence (\"PoP\") deployment;\n\u2022expectations that our operating expense will increase year over year in absolute dollars during the remainder of 2024;\n\u2022expectations that proceeds from the exercise of stock options in future years will be adversely impacted by the increased mix of restricted stock units and performance stock units versus stock options granted or a decline in our stock price;\n\u2022uncertain tax benefits and our effective domestic and global tax rates, the impact of interpretations of or changes to tax law, and the timing of tax payments;\n\u2022expectations regarding spending related to real estate assets, acquisitions and development, including data centers and points of presence, office building and warehouse investments, as well as other capital expenditures and to the impact on free cash flow and expenses;\n\u2022estimates of a range of 2024 spending on capital expenditures;\n\u2022expected outcomes and liabilities in litigation;\n\u2022our intentions regarding share repurchases and the sufficiency of our existing cash, cash equivalents and investments to meet our cash needs, including our debt servicing requirements, for at least the next 12 months; \n\u2022other statements regarding our future operations, financial condition and prospects and business strategies; and\n\u2022adoption and impact of new accounting standards. \nThese forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the heading \"Risk Factors\" in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed in other documents we file with the SEC. We undertake no obligation, and specifically disclaim any obligation, to revise or publicly release the results of any revision to these and any other forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\nBusiness Overview\n\nFortinet is a leader in cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere. Our integrated platform, the Fortinet Security Fabric, spans secure networking, unified SASE and AI-driven security operations to deliver cybersecurity where our customers need it. As of June 30, 2024, over a half million customers trusted our solutions, including enterprises such as in the financial services, retail, healthcare and operational technology market verticals, communication and security service providers, and government organizations. As a global company headquartered in Sunnyvale, California our research and development is centered in the United States and Canada with a global footprint of support and centers of excellence around the world. As of June 30, 2024, we held 985 U.S. patents and 1,323 global patents and we are recognized in over 100 enterprise analyst reports demonstrating both our vision and execution across security and networking products. \n\u2022Secure Networking-Our Secure Networking solutions focus on the convergence of networking and security via FortiOS, our networking and security operating system that is the foundation of our Fortinet Security Fabric platform and supports over 30 functions that can be delivered via a physical, virtual, cloud or software as a service (\"SaaS\") solution. When delivered via our network firewall appliances, functionality is accelerated through our proprietary ASIC technology. These proprietary ASICs, allow our systems to scale, run multiple applications at higher performance, lower power consumption and perform more processor-intensive operations, such as inspecting encrypted traffic, including streaming video. The Network Firewall solution consists of FortiGate data centers, hyperscale and distributed firewalls, as well as encrypted applications (SSL inspection, Virtual Private Network and IPsec connectivity). Our ability to converge networking and security also enables the ethernet to become an extension of a company's security infrastructure through FortiSwitch and FortiLink. Our wireless LAN solution leverages secure networking to provide secure wireless access for the enterprise LAN edge. FortiExtender secures 5G\/LTE and remote \n27\n\n\n\n\n"}
{"QID":"q_Ri078","Question":" How does Fortinet address dependency on third-party channel partners?","ground_truth_answer":"Fortinet addresses its dependency on third-party channel partners through several strategies to mitigate potential risks. The company relies on channel partners, including distributors and resellers, for a significant portion of its revenue. To manage the risks associated with this dependency, Fortinet has developed specific programs designed to assist and incentivize these partners in selling its products. These programs aim to maintain strong relationships with partners and ensure their motivation to prioritize Fortinet's solutions over competitors' offerings.\n\nAdditionally, Fortinet monitors its channel partners' financial health, as a small number of them represent a large percentage of the company's revenue and accounts receivable. This concentration exposes Fortinet to credit and liquidity risks. The company has established measures to manage these risks, including closely monitoring credit terms and partner performance. However, Fortinet acknowledges that these measures may not always fully mitigate the risks. If a significant channel partner fails to perform, reduces its focus on Fortinet\u2019s products, or experiences financial difficulties, it could adversely impact the company\u2019s sales and operating results","question_type":"Risk","page_number":"47","accession_number":"0001262039-24-000037","item":"ITEM 1A. Risk Factors","context_markdown_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 47: contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n","context_markdown_without_headers":"contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n","context_html_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 47: contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n","context_html_without_headers":"contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n"}
{"QID":"q_Ri079","Question":" How is Fortinet managing its debt obligations?","ground_truth_answer":"Fortinet manages its debt obligations through the issuance and maintenance of its Senior Notes. On March 5, 2021, the company issued $1.0 billion in aggregate principal amount of senior notes, consisting of $500 million of 1.0% notes due March 2026 (the \"2026 Senior Notes\") and $500 million of 2.2% notes due March 2031 (the \"2031 Senior Notes\"). These notes are senior unsecured obligations, ranking equally in right of payment with each other and with other outstanding obligations.\n\nThe company has the option to redeem these notes at specified redemption prices, which include accrued and unpaid interest along with a make-whole premium, although no premium is required for redemptions within a year of maturity (February 2026 for the 2026 Notes and December 2030 for the 2031 Notes). Interest on these notes is payable semi-annually. As of June 30, 2024, the total long-term debt was $993.3 million, net of unamortized discounts and issuance costs, which are amortized using the effective interest method. Fortinet also reports that there are no financial covenants associated with these notes, providing flexibility in their financial management.","question_type":"Risk","page_number":"17","accession_number":"0001262039-24-000037","item":"ITEM 1. Financial Statements","context_markdown_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 17: FORTINET, INC.\n\nNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)\n\n\nThe following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):\n\n|    |               |                    |                  |     |              |              |     |\n|---:|:--------------|:-------------------|:-----------------|:----|:-------------|:-------------|:----|\n|  1 |               | Three Months Ended | Six Months Ended |     |              |              |     |\n|  2 |               | June 30,2024       | June 30,2023     |     | June 30,2024 | June 30,2023 |     |\n|  3 | RSUs          | -                  |                  | -   |              | -            | 0.9 |\n|  4 | Stock options | 3.6                |                  | 3.0 |              | 3.4          | 2.6 |\n|  5 | PSUs          | 0.2                |                  | -   |              | 0.1          | -   |\n|  6 | Total         | 3.6                |                  | 3.0 |              | 3.4          | 3.5 |\n\n\n9. DEBT\n\n\n2026 and 2031 Senior Notes\n\nOn March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the \"Senior Notes\"), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the \"2026 Senior Notes\") and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the \"2031 Senior Notes\"), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. As of June 30, 2024 and December 31, 2023, the Senior Notes were recorded as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.\nThe total outstanding debt is summarized below (in millions, except percentages):\n\n|    |                                                    |            |             |                         |              |       |                  |         |    |       |\n|---:|:---------------------------------------------------|:-----------|:------------|:------------------------|:-------------|:------|:-----------------|:--------|:---|:------|\n|  1 |                                                    | Maturity   | Coupon Rate | Effective Interest Rate | June 30,2024 |       | December 31,2023 |         |    |       |\n|  2 | Debt                                               |            |             |                         |              |       |                  |         |    |       |\n|  3 | 2026 Senior Notes                                  | March 2026 | 1.0%        | 1.3%                    | $            | 500.0 |                  |         | $  | 500.0 |\n|  4 | 2031 Senior Notes                                  | March 2031 | 2.2%        | 2.3%                    | 500.0        |       |                  | 500.0   |    |       |\n|  5 | Total debt                                         |            |             |                         | 1,000.0      |       |                  | 1,000.0 |    |       |\n|  6 | Less: Unamortized discount and debt issuance costs |            |             |                         | 6.7          |       |                  | 7.7     |    |       |\n|  7 | Total long-term debt                               |            |             |                         | $            | 993.3 |                  |         | $  | 992.3 |\n\nAs of June 30, 2024 and December 31, 2023, we accrued interest payable of $4.7 million, and there are no financial covenants with which we must comply. During the three months ended June 30, 2024 and 2023, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. During the six months ended June 30, 2024 and 2023, we recorded $9.0 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the six months ended June 30, 2024 and 2023, as the costs that qualified for capitalization were not material.\nThe total estimated fair value of the outstanding Senior Notes was approximately $880.6 million, including accrued and unpaid interest, as of June 30, 2024. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.\n17\n\n\n\n\n","context_markdown_without_headers":"FORTINET, INC.\n\nNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)\n\n\nThe following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):\n\n|    |               |                    |                  |     |              |              |     |\n|---:|:--------------|:-------------------|:-----------------|:----|:-------------|:-------------|:----|\n|  1 |               | Three Months Ended | Six Months Ended |     |              |              |     |\n|  2 |               | June 30,2024       | June 30,2023     |     | June 30,2024 | June 30,2023 |     |\n|  3 | RSUs          | -                  |                  | -   |              | -            | 0.9 |\n|  4 | Stock options | 3.6                |                  | 3.0 |              | 3.4          | 2.6 |\n|  5 | PSUs          | 0.2                |                  | -   |              | 0.1          | -   |\n|  6 | Total         | 3.6                |                  | 3.0 |              | 3.4          | 3.5 |\n\n\n9. DEBT\n\n\n2026 and 2031 Senior Notes\n\nOn March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the \"Senior Notes\"), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the \"2026 Senior Notes\") and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the \"2031 Senior Notes\"), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. As of June 30, 2024 and December 31, 2023, the Senior Notes were recorded as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.\nThe total outstanding debt is summarized below (in millions, except percentages):\n\n|    |                                                    |            |             |                         |              |       |                  |         |    |       |\n|---:|:---------------------------------------------------|:-----------|:------------|:------------------------|:-------------|:------|:-----------------|:--------|:---|:------|\n|  1 |                                                    | Maturity   | Coupon Rate | Effective Interest Rate | June 30,2024 |       | December 31,2023 |         |    |       |\n|  2 | Debt                                               |            |             |                         |              |       |                  |         |    |       |\n|  3 | 2026 Senior Notes                                  | March 2026 | 1.0%        | 1.3%                    | $            | 500.0 |                  |         | $  | 500.0 |\n|  4 | 2031 Senior Notes                                  | March 2031 | 2.2%        | 2.3%                    | 500.0        |       |                  | 500.0   |    |       |\n|  5 | Total debt                                         |            |             |                         | 1,000.0      |       |                  | 1,000.0 |    |       |\n|  6 | Less: Unamortized discount and debt issuance costs |            |             |                         | 6.7          |       |                  | 7.7     |    |       |\n|  7 | Total long-term debt                               |            |             |                         | $            | 993.3 |                  |         | $  | 992.3 |\n\nAs of June 30, 2024 and December 31, 2023, we accrued interest payable of $4.7 million, and there are no financial covenants with which we must comply. During the three months ended June 30, 2024 and 2023, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. During the six months ended June 30, 2024 and 2023, we recorded $9.0 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the six months ended June 30, 2024 and 2023, as the costs that qualified for capitalization were not material.\nThe total estimated fair value of the outstanding Senior Notes was approximately $880.6 million, including accrued and unpaid interest, as of June 30, 2024. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.\n17\n\n\n\n\n","context_html_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 17: FORTINET, INC.\n\nNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)\n\n\nThe following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"> <\/td><td colspan=\"9\">Three Months Ended<\/td><td colspan=\"3\"><\/td><td colspan=\"9\">Six Months Ended<\/td><\/tr><tr><td colspan=\"3\"> <\/td><td colspan=\"3\">June 30,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2023<\/td><\/tr><tr><td colspan=\"3\">RSUs <\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">0.9 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Stock options<\/td><td colspan=\"2\">3.6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.4 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2.6 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">PSUs<\/td><td colspan=\"2\">0.2 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">0.1 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total <\/td><td colspan=\"2\">3.6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.4 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.5 <\/td><td><\/td><\/tr><\/table>\n\n9. DEBT\n\n\n2026 and 2031 Senior Notes\n\nOn March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the \"Senior Notes\"), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the \"2026 Senior Notes\") and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the \"2031 Senior Notes\"), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. As of June 30, 2024 and December 31, 2023, the Senior Notes were recorded as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.\nThe total outstanding debt is summarized below (in millions, except percentages):\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"> <\/td><td colspan=\"3\">Maturity<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Coupon Rate<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Effective Interest Rate<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">December 31,2023<\/td><\/tr><tr><td colspan=\"3\">Debt<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">2026 Senior Notes<\/td><td colspan=\"3\">March 2026<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">1.0%<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">1.3%<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>500.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>500.0 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">2031 Senior Notes<\/td><td colspan=\"3\">March 2031<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2.2%<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2.3%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">500.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">500.0 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total debt<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,000.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,000.0 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Less: Unamortized discount and debt issuance costs<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6.7 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">7.7 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total long-term debt<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>993.3 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>992.3 <\/td><td><\/td><\/tr><\/table>\nAs of June 30, 2024 and December 31, 2023, we accrued interest payable of $4.7 million, and there are no financial covenants with which we must comply. During the three months ended June 30, 2024 and 2023, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. During the six months ended June 30, 2024 and 2023, we recorded $9.0 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the six months ended June 30, 2024 and 2023, as the costs that qualified for capitalization were not material.\nThe total estimated fair value of the outstanding Senior Notes was approximately $880.6 million, including accrued and unpaid interest, as of June 30, 2024. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.\n17\n\n\n\n\n","context_html_without_headers":"FORTINET, INC.\n\nNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)\n\n\nThe following weighted-average shares of common stock were excluded from the computation of diluted net income per share for the periods presented, as their effect would have been antidilutive (in millions):\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"> <\/td><td colspan=\"9\">Three Months Ended<\/td><td colspan=\"3\"><\/td><td colspan=\"9\">Six Months Ended<\/td><\/tr><tr><td colspan=\"3\"> <\/td><td colspan=\"3\">June 30,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2023<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2023<\/td><\/tr><tr><td colspan=\"3\">RSUs <\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">0.9 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Stock options<\/td><td colspan=\"2\">3.6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.4 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">2.6 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">PSUs<\/td><td colspan=\"2\">0.2 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">0.1 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">- <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total <\/td><td colspan=\"2\">3.6 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.4 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">3.5 <\/td><td><\/td><\/tr><\/table>\n\n9. DEBT\n\n\n2026 and 2031 Senior Notes\n\nOn March 5, 2021, we issued $1.0 billion aggregate principal amount of senior notes (collectively, the \"Senior Notes\"), consisting of $500.0 million aggregate principal amount of 1.0% notes due March 15, 2026 (the \"2026 Senior Notes\") and $500.0 million aggregate principal amount of 2.2% notes due March 15, 2031 (the \"2031 Senior Notes\"), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. As of June 30, 2024 and December 31, 2023, the Senior Notes were recorded as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.\nThe total outstanding debt is summarized below (in millions, except percentages):\n\n<table><tr><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><td><\/td><\/tr><tr><td colspan=\"3\"> <\/td><td colspan=\"3\">Maturity<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Coupon Rate<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">Effective Interest Rate<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">June 30,2024<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">December 31,2023<\/td><\/tr><tr><td colspan=\"3\">Debt<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><\/tr><tr><td colspan=\"3\">2026 Senior Notes<\/td><td colspan=\"3\">March 2026<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">1.0%<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">1.3%<\/td><td colspan=\"3\"><\/td><td>$<\/td><td>500.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>500.0 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">2031 Senior Notes<\/td><td colspan=\"3\">March 2031<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2.2%<\/td><td colspan=\"3\"><\/td><td colspan=\"3\">2.3%<\/td><td colspan=\"3\"><\/td><td colspan=\"2\">500.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">500.0 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total debt<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,000.0 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">1,000.0 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Less: Unamortized discount and debt issuance costs<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">6.7 <\/td><td><\/td><td colspan=\"3\"><\/td><td colspan=\"2\">7.7 <\/td><td><\/td><\/tr><tr><td colspan=\"3\">Total long-term debt<\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>993.3 <\/td><td><\/td><td colspan=\"3\"><\/td><td>$<\/td><td>992.3 <\/td><td><\/td><\/tr><\/table>\nAs of June 30, 2024 and December 31, 2023, we accrued interest payable of $4.7 million, and there are no financial covenants with which we must comply. During the three months ended June 30, 2024 and 2023, we recorded $4.5 million of total interest expense in relation to these Senior Notes in each period. During the six months ended June 30, 2024 and 2023, we recorded $9.0 million of total interest expense in relation to these Senior Notes in each period. No interest costs were capitalized for the six months ended June 30, 2024 and 2023, as the costs that qualified for capitalization were not material.\nThe total estimated fair value of the outstanding Senior Notes was approximately $880.6 million, including accrued and unpaid interest, as of June 30, 2024. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.\n17\n\n\n\n\n"}
{"QID":"q_Ri080","Question":"What approach does Fortinet take to mitigate foreign exchange risks?","ground_truth_answer":"Fortinet mitigates foreign exchange risks by employing forward exchange contracts to hedge currency exposures related to certain balance sheet accounts. While these contracts help manage some risks associated with currency fluctuations, Fortinet acknowledges that its financial results could still be adversely affected if these hedging strategies are not successful or if they cease to hedge against specific risks. The company's expenses, incurred in various foreign currencies such as the Euro, Japanese Yen, Canadian Dollar, and British Pound, are subject to exchange rate volatility, which could negatively impact its financial condition and results of operations. Additionally, the strengthening of the U.S. dollar could increase the effective cost of Fortinet\u2019s products for international customers, potentially reducing demand.","question_type":"Risk","page_number":"71","accession_number":"0001262039-24-000037","item":"ITEM 1A. Risk Factors","context_markdown_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 71: Furthermore, in the event that we communicate certain initiatives and goals regarding ESG matters, such as our commitment to target Net-Zero on Scope 1 and Scope 2 emissions resulting from our owned facilities worldwide by 2030 or our commitment to the Paris Agreement via the Science Based Targets Initiative, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope, target and timelines of such initiatives or goals. If we fail to satisfy the expectations of investors, customers, employees, and other stakeholders or our initiatives are not executed as planned, our reputation and business, operating results and financial condition could be adversely impacted. In addition, the SEC adopted a rule that requires climate disclosures in periodic and other filings with the SEC covering fiscal years beginning in 2025, which rule has been stayed pending the completion of a judicial review. To comply with this SEC rule, if such rule goes into effect in their current form, we will be required to establish additional internal controls, engage additional consultants and incur additional costs related to evaluating, managing and reporting on our environmental impact and climate-related risks and opportunities. If we fail to implement sufficient oversight or accurately capture and disclose on environmental matters, our reputation, business, operating results and financial condition may be materially adversely affected.\n\nRisks Related to Finance, Accounting and Tax Matters\n\nIf our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.\n\nThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in \"Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates\" in this Quarterly Report on Form 10-Q, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our condensed consolidated financial statements include those related to revenue recognition, deferred contract costs and commission expense, accounting for business combinations, contingent liabilities and accounting for income taxes. \nWe are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.\nA significant portion of our operating expenses are incurred outside the United States. These expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Japanese yen, Canadian dollar and British pound. A weakening of the U.S. dollar compared to foreign currencies would negatively affect our expenses and operating results, which are expressed in U.S. dollars. Additionally, fluctuations in the exchange rate of the Canadian dollar may negatively impact our development plans in Burnaby, Canada. While we are not currently engaged in material hedging activities, we have been hedging currency exposures relating to certain balance sheet accounts through the use of forward exchange contracts. If we stop hedging against any of these risks or if our attempts to hedge against these currency exposures are not successful, our financial condition and results of operations could be adversely affected. Our sales contracts are primarily denominated in U.S. dollars and therefore, while substantially all of our revenue is not subject to foreign currency risk, it does not serve as a hedge to our foreign currency-denominated operating expenses. In addition, a strengthening of the U.S. dollar may increase the real cost of our products to our customers outside of the United States, which may also adversely affect our financial condition and results of operations. \nWe could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation, exposure to additional tax liabilities or impacts from the timing of tax payments. \nWe are subject to taxes in the United States and numerous foreign jurisdictions, where a number of our subsidiaries are organized. Our provision for income taxes is subject to volatility and could be adversely affected by several factors, many of which are outside of our control. These include:\n\u2022the mix of earnings in countries with differing statutory tax rates or withholding taxes;\n\u2022changes in the valuation of our deferred tax assets and liabilities;\n\u2022transfer pricing adjustments;\n\u2022increases to corporate tax rates;\n71\n\n\n\n\n","context_markdown_without_headers":"Furthermore, in the event that we communicate certain initiatives and goals regarding ESG matters, such as our commitment to target Net-Zero on Scope 1 and Scope 2 emissions resulting from our owned facilities worldwide by 2030 or our commitment to the Paris Agreement via the Science Based Targets Initiative, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope, target and timelines of such initiatives or goals. If we fail to satisfy the expectations of investors, customers, employees, and other stakeholders or our initiatives are not executed as planned, our reputation and business, operating results and financial condition could be adversely impacted. In addition, the SEC adopted a rule that requires climate disclosures in periodic and other filings with the SEC covering fiscal years beginning in 2025, which rule has been stayed pending the completion of a judicial review. To comply with this SEC rule, if such rule goes into effect in their current form, we will be required to establish additional internal controls, engage additional consultants and incur additional costs related to evaluating, managing and reporting on our environmental impact and climate-related risks and opportunities. If we fail to implement sufficient oversight or accurately capture and disclose on environmental matters, our reputation, business, operating results and financial condition may be materially adversely affected.\n\nRisks Related to Finance, Accounting and Tax Matters\n\nIf our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.\n\nThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in \"Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates\" in this Quarterly Report on Form 10-Q, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our condensed consolidated financial statements include those related to revenue recognition, deferred contract costs and commission expense, accounting for business combinations, contingent liabilities and accounting for income taxes. \nWe are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.\nA significant portion of our operating expenses are incurred outside the United States. These expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Japanese yen, Canadian dollar and British pound. A weakening of the U.S. dollar compared to foreign currencies would negatively affect our expenses and operating results, which are expressed in U.S. dollars. Additionally, fluctuations in the exchange rate of the Canadian dollar may negatively impact our development plans in Burnaby, Canada. While we are not currently engaged in material hedging activities, we have been hedging currency exposures relating to certain balance sheet accounts through the use of forward exchange contracts. If we stop hedging against any of these risks or if our attempts to hedge against these currency exposures are not successful, our financial condition and results of operations could be adversely affected. Our sales contracts are primarily denominated in U.S. dollars and therefore, while substantially all of our revenue is not subject to foreign currency risk, it does not serve as a hedge to our foreign currency-denominated operating expenses. In addition, a strengthening of the U.S. dollar may increase the real cost of our products to our customers outside of the United States, which may also adversely affect our financial condition and results of operations. \nWe could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation, exposure to additional tax liabilities or impacts from the timing of tax payments. \nWe are subject to taxes in the United States and numerous foreign jurisdictions, where a number of our subsidiaries are organized. Our provision for income taxes is subject to volatility and could be adversely affected by several factors, many of which are outside of our control. These include:\n\u2022the mix of earnings in countries with differing statutory tax rates or withholding taxes;\n\u2022changes in the valuation of our deferred tax assets and liabilities;\n\u2022transfer pricing adjustments;\n\u2022increases to corporate tax rates;\n71\n\n\n\n\n","context_html_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 71: Furthermore, in the event that we communicate certain initiatives and goals regarding ESG matters, such as our commitment to target Net-Zero on Scope 1 and Scope 2 emissions resulting from our owned facilities worldwide by 2030 or our commitment to the Paris Agreement via the Science Based Targets Initiative, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope, target and timelines of such initiatives or goals. If we fail to satisfy the expectations of investors, customers, employees, and other stakeholders or our initiatives are not executed as planned, our reputation and business, operating results and financial condition could be adversely impacted. In addition, the SEC adopted a rule that requires climate disclosures in periodic and other filings with the SEC covering fiscal years beginning in 2025, which rule has been stayed pending the completion of a judicial review. To comply with this SEC rule, if such rule goes into effect in their current form, we will be required to establish additional internal controls, engage additional consultants and incur additional costs related to evaluating, managing and reporting on our environmental impact and climate-related risks and opportunities. If we fail to implement sufficient oversight or accurately capture and disclose on environmental matters, our reputation, business, operating results and financial condition may be materially adversely affected.\n\nRisks Related to Finance, Accounting and Tax Matters\n\nIf our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.\n\nThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in \"Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates\" in this Quarterly Report on Form 10-Q, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our condensed consolidated financial statements include those related to revenue recognition, deferred contract costs and commission expense, accounting for business combinations, contingent liabilities and accounting for income taxes. \nWe are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.\nA significant portion of our operating expenses are incurred outside the United States. These expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Japanese yen, Canadian dollar and British pound. A weakening of the U.S. dollar compared to foreign currencies would negatively affect our expenses and operating results, which are expressed in U.S. dollars. Additionally, fluctuations in the exchange rate of the Canadian dollar may negatively impact our development plans in Burnaby, Canada. While we are not currently engaged in material hedging activities, we have been hedging currency exposures relating to certain balance sheet accounts through the use of forward exchange contracts. If we stop hedging against any of these risks or if our attempts to hedge against these currency exposures are not successful, our financial condition and results of operations could be adversely affected. Our sales contracts are primarily denominated in U.S. dollars and therefore, while substantially all of our revenue is not subject to foreign currency risk, it does not serve as a hedge to our foreign currency-denominated operating expenses. In addition, a strengthening of the U.S. dollar may increase the real cost of our products to our customers outside of the United States, which may also adversely affect our financial condition and results of operations. \nWe could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation, exposure to additional tax liabilities or impacts from the timing of tax payments. \nWe are subject to taxes in the United States and numerous foreign jurisdictions, where a number of our subsidiaries are organized. Our provision for income taxes is subject to volatility and could be adversely affected by several factors, many of which are outside of our control. These include:\n\u2022the mix of earnings in countries with differing statutory tax rates or withholding taxes;\n\u2022changes in the valuation of our deferred tax assets and liabilities;\n\u2022transfer pricing adjustments;\n\u2022increases to corporate tax rates;\n71\n\n\n\n\n","context_html_without_headers":"Furthermore, in the event that we communicate certain initiatives and goals regarding ESG matters, such as our commitment to target Net-Zero on Scope 1 and Scope 2 emissions resulting from our owned facilities worldwide by 2030 or our commitment to the Paris Agreement via the Science Based Targets Initiative, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope, target and timelines of such initiatives or goals. If we fail to satisfy the expectations of investors, customers, employees, and other stakeholders or our initiatives are not executed as planned, our reputation and business, operating results and financial condition could be adversely impacted. In addition, the SEC adopted a rule that requires climate disclosures in periodic and other filings with the SEC covering fiscal years beginning in 2025, which rule has been stayed pending the completion of a judicial review. To comply with this SEC rule, if such rule goes into effect in their current form, we will be required to establish additional internal controls, engage additional consultants and incur additional costs related to evaluating, managing and reporting on our environmental impact and climate-related risks and opportunities. If we fail to implement sufficient oversight or accurately capture and disclose on environmental matters, our reputation, business, operating results and financial condition may be materially adversely affected.\n\nRisks Related to Finance, Accounting and Tax Matters\n\nIf our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.\n\nThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in \"Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates\" in this Quarterly Report on Form 10-Q, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our condensed consolidated financial statements include those related to revenue recognition, deferred contract costs and commission expense, accounting for business combinations, contingent liabilities and accounting for income taxes. \nWe are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.\nA significant portion of our operating expenses are incurred outside the United States. These expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Japanese yen, Canadian dollar and British pound. A weakening of the U.S. dollar compared to foreign currencies would negatively affect our expenses and operating results, which are expressed in U.S. dollars. Additionally, fluctuations in the exchange rate of the Canadian dollar may negatively impact our development plans in Burnaby, Canada. While we are not currently engaged in material hedging activities, we have been hedging currency exposures relating to certain balance sheet accounts through the use of forward exchange contracts. If we stop hedging against any of these risks or if our attempts to hedge against these currency exposures are not successful, our financial condition and results of operations could be adversely affected. Our sales contracts are primarily denominated in U.S. dollars and therefore, while substantially all of our revenue is not subject to foreign currency risk, it does not serve as a hedge to our foreign currency-denominated operating expenses. In addition, a strengthening of the U.S. dollar may increase the real cost of our products to our customers outside of the United States, which may also adversely affect our financial condition and results of operations. \nWe could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation, exposure to additional tax liabilities or impacts from the timing of tax payments. \nWe are subject to taxes in the United States and numerous foreign jurisdictions, where a number of our subsidiaries are organized. Our provision for income taxes is subject to volatility and could be adversely affected by several factors, many of which are outside of our control. These include:\n\u2022the mix of earnings in countries with differing statutory tax rates or withholding taxes;\n\u2022changes in the valuation of our deferred tax assets and liabilities;\n\u2022transfer pricing adjustments;\n\u2022increases to corporate tax rates;\n71\n\n\n\n\n"}
{"QID":"q_Ri081","Question":"How does Fortinet address credit risk associated with accounts receivable?","ground_truth_answer":"Fortinet addresses credit risk associated with accounts receivable by implementing monitoring and mitigation programs designed to manage the credit and liquidity risks of its channel partners. The company acknowledges its reliance on a limited number of significant partners, which poses a concentration risk. For instance, six distributor customers accounted for 68% of Fortinet's total net accounts receivable as of June 30, 2024. Fortinet actively assesses the financial health of its partners and takes measures to mitigate potential risks such as delayed payments or defaults. However, the company admits that these mitigation strategies may not always fully prevent financial losses .","question_type":"Risk","page_number":"47","accession_number":"0001262039-24-000037","item":"ITEM 1A. Risk Factors","context_markdown_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 47: contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n","context_markdown_without_headers":"contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n","context_html_with_headers":"Fortinet, Inc. 10-Q form for quarterly period ended 2024-06-30, page 47: contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n","context_html_without_headers":"contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and\/or other negative impacts to our expected returns.\nWe have broad insurance programs covering our properties and operating activities with limits of liability, deductibles and self-insured retentions that we believe are comparable to similarly situated companies. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of extraordinary losses which may not be adequately covered under our insurance program. In addition, we could sustain losses due to insurance deductibles, self-insured retention, uninsured claims or casualties or losses in excess of applicable coverage. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur in the future. Such events could materially and adversely affect our financial condition and results of operations.\nAdditionally, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that property. Those laws often impose liability even if the owner or operator did not cause or know of the presence of hazardous or toxic substances and even if the storage of those substances was in violation of a customer's lease. In addition, the presence of hazardous or toxic substances, or the failure of the owner to address their presence on the property, may adversely affect the owner's ability to borrow using that real property as collateral. Any environmental issues related to our real estate activities could materially and adversely affect our financial condition and results of operations. \nWe are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.\nOur future performance depends on the continued services and continuing contributions of our senior management to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of members of senior management, particularly Ken Xie, our Co-Founder, Chief Executive Officer and Chairman, or Michael Xie, our Co-Founder, President and Chief Technology Officer, or of any of our senior sales leaders or functional area leaders, could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services or the distraction of our senior management for any reason could adversely affect our business, financial condition and results of operations.\nWe rely on third-party channel partners for substantially all of our revenue. If our partners fail to perform, our ability to sell our products and services will be limited, and if we fail to optimize our channel partner model going forward, our operating results may be harmed. Additionally, a small number of distributors represents a large percentage of our revenue and accounts receivable, and one distributor accounted for 30% of our total net accounts receivable as of June 30, 2024.\n\nA significant portion of our sales is generated through a limited number of distributors, and substantially all of our revenue is from sales by our channel partners, including distributors and resellers. We depend on our channel partners to generate a significant portion of our sales opportunities and to manage our sales process. To the extent our channel partners are unsuccessful in selling our products, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality channel partners in each of the regions in which we sell products, we are unable to keep them motivated to sell our products, or our channel partners shift focus to other vendors and\/or our competitors, our ability to sell our products and operating results may be harmed. The termination of our relationship with any significant channel partner may adversely impact our sales and operating results. If we change our partner strategy, such as if we start engaging in more sales directly with customers, and if we terminate partners or partners terminate or reduce selling on our behalf based on changes in our strategy or for any other reason, this could harm our results.\nIn addition, a small number of channel partners represents a large percentage of our revenue and gross accounts receivable. We are exposed to the credit and liquidity risk of some of our channel partners and to credit exposure in weakened markets, which could result in material losses. Our dependence on a limited number of key channel partners means that our billings, revenue and operating results may be harmed by the inability of these key channel partners to successfully sell our products and services, or if any of these key channel partners is unable or unwilling to pay us, terminates its relationship with us or goes out of business. Although we have programs in place that are designed to monitor and mitigate credit and liquidity risks, we cannot guarantee these programs will be effective in reducing our credit risks. If we are unable to adequately control these risks, our business, operating results, and financial condition could be harmed. If channel partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these channel partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our channel partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position, and cash flow. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience \n47\n\n\n\n\n"}
{"QID":"q_Ri082","Question":"How could potential impairment charges impact The Coca-Cola Company's financial results and business value?","ground_truth_answer":"Potential impairment charges can have a significant impact on The Coca-Cola Company's financial results and business value. Impairment charges arise when the carrying amount of assets exceeds their recoverable amount, indicating that the assets are not as valuable as previously thought. For Coca-Cola, such charges might involve trademarks, goodwill, or other intangible assets, which are crucial for maintaining brand equity and market presence. If The Coca-Cola Company is required to recognize substantial impairment charges, it could lead to a significant decrease in net income, thereby affecting overall profitability.","question_type":"Risk","page_number":"22","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 22: to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n","context_markdown_without_headers":"to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 22: to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n","context_html_without_headers":"to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n"}
{"QID":"q_Ri083","Question":"What are the potential financial and reputational risks for The Coca-Cola Company if it faces a significant cybersecurity incident?","ground_truth_answer":"If The Coca-Cola Company faces a significant cybersecurity incident, the financial and reputational risks could be substantial. Cybersecurity incidents, such as data breaches or service disruptions, can lead to severe financial losses due to operational downtime, regulatory fines, and costs associated with remediation and legal defense. For instance, if confidential customer data is compromised, Coca-Cola could face significant legal liabilities and regulatory penalties, which would affect its financial standing.","question_type":"Risk","page_number":"22, 23","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 22: to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 23: system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n","context_markdown_without_headers":"to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n, system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 22: to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 23: system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n","context_html_without_headers":"to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations. On December 31, 2021, the United Kingdom's Financial Conduct Authority, the governing body responsible for regulating the London Interbank Offered Rate (\"LIBOR\"), ceased to publish certain LIBOR reference rates. Other LIBOR reference rates, including U.S. dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, ceased to be published in July 2023. As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate, but it is possible that these changes may have an adverse impact on our financing costs as compared to LIBOR in the long term. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottling partners. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottling partners' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of credit market conditions on our or our major bottling partners' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottling partners in which we have equity method investments were to be downgraded, such bottling partners' interest expense could increase, which would reduce our equity income. \nIf we are unable to achieve our overall long-term growth objectives, the value of an investment in our Company could be negatively affected.\nWe have established and publicly announced certain long-term growth objectives. These objectives are based on, among other things, our evaluation of our growth prospects, which are generally driven by the sales potential of our many beverage products, some of which are more profitable than others, and on an assessment of the potential price and product mix. We may not be able to realize the sales potential and the price and product mix necessary to achieve our long-term growth objectives. \nDefault by or failure of one or more of our counterparty financial institutions could cause us to incur significant losses.\nAs part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition. \nWe may be required to recognize impairment charges that could materially affect our financial results.\nWe assess our noncurrent assets, including trademarks, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform similar recoverability and impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our net income could be materially adversely affected.\n\nRISKS RELATED TO CYBERSECURITY AND DATA PRIVACY\n\nIf we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.\nWe rely on networks and information systems and other technology (\"information systems\"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes, consumer marketing, mergers and acquisitions, and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company employees and our bottlers, customers, suppliers, consumers and other third parties. Because information systems are critical to many of the Company's operating activities, our business may be impacted by \n22\n\n\n\n\n, system shutdowns, service disruptions or cybersecurity incidents. These incidents may be caused by failures during routine operations, such as system upgrades, or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by hackers, criminal groups or nation-state organizations (which may include deepfake or social engineering schemes, ransomware and other forms of malware, business email compromise, cyber extortion, denial of service, or attempts to exploit vulnerabilities or gain unauthorized access), geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. In addition, cybersecurity incidents could result in unauthorized or accidental access to or disclosure of material confidential information or regulated personal data. If our information systems or third-party information systems on which we rely suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrates or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information, or unauthorized access to machines and equipment could result in violations of data protection laws and regulations, misuse or malfunction of machines and equipment, damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands, and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight, including governmental investigations, enforcement actions and regulatory fines. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a cybersecurity incident or to repair or replace networks and information systems. These risks are also present with respect to our bottling partners, distributors, joint venture partners and suppliers that generally use separate information systems, not integrated with the information systems of the Company, and that have cybersecurity programs and processes that differ in scope and complexity from our overall cybersecurity programs and processes. While we have established a third-party risk management program to address security risks, including relating to our bottling partners, our ability to monitor their security measures is limited, and we may experience secondary contractual, regulatory financial and reputational harm as a result of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches experienced by our bottling partners. These risks may also be present to the extent a business or bottler we have acquired, but which does not use our information systems, experiences severe damage, a system shutdown, service disruption or a cybersecurity incident.\nLike most major corporations, the Company's information systems are a target of attacks. In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, joint venture partners, suppliers or acquired businesses that use separate information systems, may experience cybersecurity incidents that may involve data we share with them. Although the cybersecurity incidents that we have experienced to date, as well as those reported to us by our third-party partners, have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training. Data protection laws and regulations around the world often require \"reasonable,\" \"appropriate\" or \"adequate\" technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed adequate, appropriate, reasonable or in accordance with applicable legal requirements may not protect the information we maintain against increasingly sophisticated attacks. In addition to potential fines, we could be subject to mandatory corrective action due to a cybersecurity incident, which could adversely affect our business operations and result in substantial costs for years to come. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in types and amounts we view as appropriate for our operations.\nIf we fail to comply with privacy and data protection laws, we could be subject to adverse publicity, business disruption, data loss, government enforcement actions and\/or private litigation, any of which could negatively affect our business and operating results.\nIn the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals (\"personal data\"), including employees, former employees, vendors, third-party personnel, customers and consumers with whom we interact. As a result, we are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy and data protection. These privacy and data protection laws may include different standards and obligations or may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. In addition, new legislation in this area may be enacted in other jurisdictions at any time or may revise the law in jurisdictions that already have privacy regulations. These laws impose operational requirements \n23\n\n\n\n\n"}
{"QID":"q_Ri084","Question":"What are the potential financial and operational impacts of climate change on The Coca-Cola Company?","ground_truth_answer":"Climate change poses several financial and operational risks to The Coca-Cola Company. Changes in weather patterns and increased frequency of extreme weather events can disrupt production and supply chains. For example, severe droughts or floods can impact water availability and quality, affecting manufacturing processes.","question_type":"Risk","page_number":"25, 26","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 26: production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n","context_markdown_without_headers":"and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n, production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 25: and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 26: production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n","context_html_without_headers":"and oceans, as well as inefficient use of resources when packaging materials are not included in a circular economy. We and our bottling partners sell certain of our beverage products in plastic bottles and use other packaging materials that, while largely recyclable, may not be regularly recovered and recycled due to lack of collection and recycling infrastructure. If we and our bottling partners do not, or are perceived not to, act responsibly to address plastic materials recoverability and recycling concerns and associated waste management issues, our corporate image and brand reputation could be damaged, which may cause some consumers to reduce or discontinue consumption of some of our beverage products. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's impact on the environment by, for example, increasing our use of recycled content in our packaging materials; increasing our use of packaging materials that are made in part of plant-based renewable materials; expanding our use of reusable packaging (including refillable or returnable glass and plastic bottles, as well as dispensed and fountain delivery models where consumers use refillable containers for our beverages); participating in programs and initiatives to reclaim or recover bottles and other packaging materials that are already in the environment; and taking other actions and participating in other programs and initiatives organized or sponsored by nongovernmental organizations and other groups. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our announced environmental goals and targets, the resulting negative publicity could adversely affect consumer preference for our products. In addition, in response to environmental concerns, governmental entities in the United States and in many other jurisdictions around the world have adopted, or are considering adopting, regulations and policies designed to mandate or encourage plastic packaging waste reduction and an increase in recycling rates and\/or recycled content minimums, or, in some cases, restrict or even prohibit the use of certain plastic containers or packaging materials. These regulations and policies, whatever their scope or form, could increase the cost of our beverage products or otherwise put the Company at a competitive disadvantage. In addition, our increased focus on reducing plastic containers and other packaging materials waste has in the past and may continue to require us or our bottling partners to incur additional expenses and to increase our capital expenditures. A reduction in consumer demand for our products and\/or an increase in costs and expenditures relating to production and distribution as a result of these environmental concerns regarding plastic bottles and other packaging materials could have an adverse effect on our business and results of operations. \nWater scarcity and poor quality could negatively impact the Coca-Cola system's costs and capacity.\nWater is a main ingredient in substantially all of our products, is vital to the production of the agricultural ingredients on which our business relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve and the ecosystems in which we operate. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution and emerging awareness of potential contaminants, poor management, lack of physical or financial access to water, sociopolitical tensions due to lack of public infrastructure in certain areas of the world and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, the Coca-Cola system may incur higher costs or face capacity constraints and the possibility of reputational damage, which could adversely affect our profitability. \nIncreased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence may negatively affect our business. \nAs part of the manufacture of our beverage products, we and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea. Increased demand for food products; decreased agricultural productivity in certain regions of the world as a result of changing weather patterns; loss of biodiversity; increased agricultural regulations, including regulation of ingredient sourcing due diligence; and other factors have in the past, and may in the future, limit the availability and\/or increase the cost of such agricultural commodities and could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in sustainable agriculture, our ability to source raw materials for use in our manufacturing processes and the affordability of our products and ultimately our business and results of operations could be negatively impacted. \nClimate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.\nThere is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate extreme weather, resulting in water scarcity or flooding, and cause a further deterioration of water quality in affected regions, which could limit water availability for the Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair \n25\n\n\n\n\n, production capabilities, disrupt our supply chain or impact demand for our products. Increasing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment, and\/or may result in increased disclosure obligations. Increased energy or compliance costs and expenses due to increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our beverage products. The physical effects and transition costs of climate change and legal, regulatory or market initiatives to address climate change could have a long-term adverse impact on our business and results of operations. In addition, from time to time we establish and publicly announce goals and targets to reduce the Coca-Cola system's carbon footprint by increasing our use of recycled packaging materials, expanding our renewable energy usage, and participating in environmental and sustainability programs and initiatives organized or sponsored by nongovernmental organizations and other groups to reduce greenhouse gas emissions industrywide. If we and our bottling partners fail to achieve or improperly report on our progress toward achieving our carbon footprint reduction goals and targets, the resulting negative publicity could adversely affect consumer preference for our beverage products. \nAdverse weather conditions could reduce the demand for our products.\nThe sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods. \n"}
{"QID":"q_Ri085","Question":"What are the potential impacts of market access restrictions on The Coca-Cola Company's global operations?","ground_truth_answer":"Market access restrictions can have significant impacts on The Coca-Cola Company's global operations. Restrictions may arise from regulatory changes, trade policies, or geopolitical tensions, potentially limiting Coca-Cola's ability to enter or operate in certain markets. Such limitations can reduce the company's revenue streams and growth opportunities.","question_type":"Risk","page_number":"12, 13","accession_number":"0000021344-24-000009","item":"ITEM 1A. RISK FACTORS","context_markdown_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nITEM 1A. RISK FACTORS\n\nIn addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition and results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods. \n\nRISKS RELATED TO OUR OPERATIONS\n\nUnfavorable general economic and geopolitical conditions could negatively impact our financial results.\nOur business, operating results, financial condition and liquidity may be adversely affected by changes in global economic conditions, including global inflationary pressures, prevailing interest rates, credit market conditions, increased unemployment, levels of consumer and business confidence, bank failures, commodity (including energy) prices and supply, a recession or economic slowdown, trade policies, foreign currency exchange rates, changing policy positions or priorities, governmental rules and approaches to taxation, levels of government spending and deficits, and actual or anticipated default on sovereign debt. Many of the jurisdictions in which our products are sold have experienced, and could continue to experience, unfavorable changes in economic conditions, which could negatively affect the affordability of, and consumer demand for, our beverages, and certain markets in which our products are sold experienced intensified inflation throughout 2023, which may continue to accelerate in 2024. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies, including private-label brands, which could reduce our profitability and negatively affect our overall financial performance. In addition, the occurrence or resurgence of global or regional health events, such as the COVID-19 pandemic, and the related governmental, private sector and individual consumer responses, could contribute to a recession, depression or global economic downturn. \nOther financial uncertainties in our major markets and unstable geopolitical conditions or events in certain markets, including international conflicts, civil unrest, acts of war, terrorism, governmental changes, or changes in international relations, could undermine global consumer confidence and reduce consumers' purchasing power, thereby reducing demand for our products. Geopolitical instability may also lead to heightened security risk, impacting employee safety and\/or damage to infrastructure or our assets. At times, we have faced product boycotts resulting from activism, which have reduced demand for our products. Restrictions on our ability to transfer earnings or capital across borders, price controls, limitations on profits, retaliatory tariffs, import authorization requirements and other restrictions on business activities, which have been or may be imposed or expanded as a result of political and economic instability, deterioration of economic relations between countries or otherwise, could impact our profitability. In addition, U.S. trade sanctions against countries designated by the U.S. government as state sponsors of terrorism and\/or financial institutions accepting transactions for commerce within such countries could increase significantly, which could make it difficult, or even impossible, for us to continue to make sales to bottlers in such countries. The imposition of retaliatory sanctions against U.S. multinational corporations by countries that are or may become subject to U.S. trade sanctions, or the delisting of our branded products by retailers in various countries in reaction to U.S. trade sanctions or other governmental actions or policies, could also negatively affect our business.\n12\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 13: Throughout 2023, the Company faced disruptions to our operations due to international conflicts, including the conflict between Russia and Ukraine and conflicts in the Middle East. These conflicts have resulted, and could continue to result, in volatile commodity markets; logistical, transportation and supply chain disruptions; increased risk of cyber incidents or other disruptions to our information systems; reputational risk; heightened risks to employee safety; business disruptions (including labor shortages); reduced availability and increased costs of transportation, energy, packaging, raw materials and other input costs; sanctions, export controls and other legislation or regulation; or difficulty protecting and enforcing our intellectual property rights. While we currently do not anticipate that the effects of these conflicts will have a material impact on our results of operations, we cannot predict how and the extent to which these conflicts will continue to affect our employees, operations, customers or business partners.\nIncreased competition could hurt our business.\nWe operate in the highly competitive commercial beverage industry. For additional information regarding the competitive environment in which we operate, including the names of certain of our significant competitors, refer to the heading \"Competition\" set forth in Part I, \"Item 1. Business\" of this report. Our ability to maintain or gain share of sales in the global market or in regional or local markets may be limited as a result of actions by competitors. Competitive pressures may cause the Company and our bottling partners to reduce prices we charge customers or may restrict our and our bottlers' ability to increase prices, as may be necessary in response to commodity and other cost increases. Such pressures may also increase marketing costs along with in-store placement, slotting and other marketing fees. In addition, the rapid growth of e\u2011commerce may create additional consumer price deflation by, among other things, facilitating comparison shopping, and could potentially threaten the value of some of our legacy route-to-market strategies and thus negatively affect revenues. If we do not continuously strengthen our capabilities in marketing and innovation to maintain consumer interest, brand loyalty and market share while strategically expanding into other profitable categories of the commercial beverage industry, our business could be negatively affected. \nIf we are not successful in our innovation activities, our financial results may be negatively affected.\nAchieving our business growth objectives depends in part on our ability to evolve and improve our existing beverage products through innovation and to successfully develop, introduce and market new beverage products. The success of our innovation activities depends on our ability to correctly anticipate customer and consumer acceptance and trends; obtain, maintain and enforce necessary intellectual property rights; and avoid infringing on the intellectual property rights of others. If we are not successful in our innovation activities, we may not be able to achieve our growth objectives, which may have a negative impact on our financial results. \nChanges in the retail landscape or the loss of key retail or foodservice customers could adversely affect our financial results.\nOur industry is being affected by the trend toward consolidation in, and the blurring of the lines between, retail channels, particularly in Europe and the United States. Retailers may seek lower prices from us and our bottling partners, may demand increased marketing or promotional expenditures in support of their businesses, and may be more likely to use their distribution networks to introduce and develop private-label brands, any of which could negatively affect the Coca-Cola system's profitability. In addition, in developed markets, discounters and value stores are growing at a rapid pace, while in emerging and developing markets, modern trade is growing at a faster pace than traditional trade outlets. Our industry is also being affected by the rapid growth in sales through e-commerce retailers, e-commerce websites, mobile commerce applications and subscription services, which may result in a shift away from physical retail operations to digital channels. As we and our bottling partners build e-commerce capabilities, we may not be able to develop and maintain successful relationships with existing and new e-commerce retailers without experiencing a deterioration of our relationships with key customers operating physical retail channels. If we are unable to successfully adapt to the rapidly changing retail landscape, including the rapid growth in digital commerce, our share of sales, volume growth and overall financial results could be negatively affected. In addition, our success depends in part on our ability to maintain good relationships with key retail and foodservice customers. The loss of one or more of our key retail or foodservice customers could have an adverse effect on our financial performance. \nIf we are unable to expand our business in emerging and developing markets, our growth could be negatively affected.\nOur success depends in part on our ability to grow our business in emerging and developing markets, which in turn depends on economic and political conditions in those markets and on our ability to work with local bottlers to make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology. Additionally, we rely on local availability of talented management and employees to establish and manage our operations in these markets. Scarcity of, or heavy competition for, talented employees could impede our abilities in such markets. Moreover, the supply of our products in emerging and developing markets must match consumer demand for those products. Due to product price, limited purchasing power and cultural differences, our products may not be accepted in any particular emerging or developing market. \n13\n\n\n\n\n","context_markdown_without_headers":"\nITEM 1A. RISK FACTORS\n\nIn addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition and results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods. \n\nRISKS RELATED TO OUR OPERATIONS\n\nUnfavorable general economic and geopolitical conditions could negatively impact our financial results.\nOur business, operating results, financial condition and liquidity may be adversely affected by changes in global economic conditions, including global inflationary pressures, prevailing interest rates, credit market conditions, increased unemployment, levels of consumer and business confidence, bank failures, commodity (including energy) prices and supply, a recession or economic slowdown, trade policies, foreign currency exchange rates, changing policy positions or priorities, governmental rules and approaches to taxation, levels of government spending and deficits, and actual or anticipated default on sovereign debt. Many of the jurisdictions in which our products are sold have experienced, and could continue to experience, unfavorable changes in economic conditions, which could negatively affect the affordability of, and consumer demand for, our beverages, and certain markets in which our products are sold experienced intensified inflation throughout 2023, which may continue to accelerate in 2024. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies, including private-label brands, which could reduce our profitability and negatively affect our overall financial performance. In addition, the occurrence or resurgence of global or regional health events, such as the COVID-19 pandemic, and the related governmental, private sector and individual consumer responses, could contribute to a recession, depression or global economic downturn. \nOther financial uncertainties in our major markets and unstable geopolitical conditions or events in certain markets, including international conflicts, civil unrest, acts of war, terrorism, governmental changes, or changes in international relations, could undermine global consumer confidence and reduce consumers' purchasing power, thereby reducing demand for our products. Geopolitical instability may also lead to heightened security risk, impacting employee safety and\/or damage to infrastructure or our assets. At times, we have faced product boycotts resulting from activism, which have reduced demand for our products. Restrictions on our ability to transfer earnings or capital across borders, price controls, limitations on profits, retaliatory tariffs, import authorization requirements and other restrictions on business activities, which have been or may be imposed or expanded as a result of political and economic instability, deterioration of economic relations between countries or otherwise, could impact our profitability. In addition, U.S. trade sanctions against countries designated by the U.S. government as state sponsors of terrorism and\/or financial institutions accepting transactions for commerce within such countries could increase significantly, which could make it difficult, or even impossible, for us to continue to make sales to bottlers in such countries. The imposition of retaliatory sanctions against U.S. multinational corporations by countries that are or may become subject to U.S. trade sanctions, or the delisting of our branded products by retailers in various countries in reaction to U.S. trade sanctions or other governmental actions or policies, could also negatively affect our business.\n12\n\n\n\n\n, Throughout 2023, the Company faced disruptions to our operations due to international conflicts, including the conflict between Russia and Ukraine and conflicts in the Middle East. These conflicts have resulted, and could continue to result, in volatile commodity markets; logistical, transportation and supply chain disruptions; increased risk of cyber incidents or other disruptions to our information systems; reputational risk; heightened risks to employee safety; business disruptions (including labor shortages); reduced availability and increased costs of transportation, energy, packaging, raw materials and other input costs; sanctions, export controls and other legislation or regulation; or difficulty protecting and enforcing our intellectual property rights. While we currently do not anticipate that the effects of these conflicts will have a material impact on our results of operations, we cannot predict how and the extent to which these conflicts will continue to affect our employees, operations, customers or business partners.\nIncreased competition could hurt our business.\nWe operate in the highly competitive commercial beverage industry. For additional information regarding the competitive environment in which we operate, including the names of certain of our significant competitors, refer to the heading \"Competition\" set forth in Part I, \"Item 1. Business\" of this report. Our ability to maintain or gain share of sales in the global market or in regional or local markets may be limited as a result of actions by competitors. Competitive pressures may cause the Company and our bottling partners to reduce prices we charge customers or may restrict our and our bottlers' ability to increase prices, as may be necessary in response to commodity and other cost increases. Such pressures may also increase marketing costs along with in-store placement, slotting and other marketing fees. In addition, the rapid growth of e\u2011commerce may create additional consumer price deflation by, among other things, facilitating comparison shopping, and could potentially threaten the value of some of our legacy route-to-market strategies and thus negatively affect revenues. If we do not continuously strengthen our capabilities in marketing and innovation to maintain consumer interest, brand loyalty and market share while strategically expanding into other profitable categories of the commercial beverage industry, our business could be negatively affected. \nIf we are not successful in our innovation activities, our financial results may be negatively affected.\nAchieving our business growth objectives depends in part on our ability to evolve and improve our existing beverage products through innovation and to successfully develop, introduce and market new beverage products. The success of our innovation activities depends on our ability to correctly anticipate customer and consumer acceptance and trends; obtain, maintain and enforce necessary intellectual property rights; and avoid infringing on the intellectual property rights of others. If we are not successful in our innovation activities, we may not be able to achieve our growth objectives, which may have a negative impact on our financial results. \nChanges in the retail landscape or the loss of key retail or foodservice customers could adversely affect our financial results.\nOur industry is being affected by the trend toward consolidation in, and the blurring of the lines between, retail channels, particularly in Europe and the United States. Retailers may seek lower prices from us and our bottling partners, may demand increased marketing or promotional expenditures in support of their businesses, and may be more likely to use their distribution networks to introduce and develop private-label brands, any of which could negatively affect the Coca-Cola system's profitability. In addition, in developed markets, discounters and value stores are growing at a rapid pace, while in emerging and developing markets, modern trade is growing at a faster pace than traditional trade outlets. Our industry is also being affected by the rapid growth in sales through e-commerce retailers, e-commerce websites, mobile commerce applications and subscription services, which may result in a shift away from physical retail operations to digital channels. As we and our bottling partners build e-commerce capabilities, we may not be able to develop and maintain successful relationships with existing and new e-commerce retailers without experiencing a deterioration of our relationships with key customers operating physical retail channels. If we are unable to successfully adapt to the rapidly changing retail landscape, including the rapid growth in digital commerce, our share of sales, volume growth and overall financial results could be negatively affected. In addition, our success depends in part on our ability to maintain good relationships with key retail and foodservice customers. The loss of one or more of our key retail or foodservice customers could have an adverse effect on our financial performance. \nIf we are unable to expand our business in emerging and developing markets, our growth could be negatively affected.\nOur success depends in part on our ability to grow our business in emerging and developing markets, which in turn depends on economic and political conditions in those markets and on our ability to work with local bottlers to make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology. Additionally, we rely on local availability of talented management and employees to establish and manage our operations in these markets. Scarcity of, or heavy competition for, talented employees could impede our abilities in such markets. Moreover, the supply of our products in emerging and developing markets must match consumer demand for those products. Due to product price, limited purchasing power and cultural differences, our products may not be accepted in any particular emerging or developing market. \n13\n\n\n\n\n","context_html_with_headers":"COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 12: \nITEM 1A. RISK FACTORS\n\nIn addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition and results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods. \n\nRISKS RELATED TO OUR OPERATIONS\n\nUnfavorable general economic and geopolitical conditions could negatively impact our financial results.\nOur business, operating results, financial condition and liquidity may be adversely affected by changes in global economic conditions, including global inflationary pressures, prevailing interest rates, credit market conditions, increased unemployment, levels of consumer and business confidence, bank failures, commodity (including energy) prices and supply, a recession or economic slowdown, trade policies, foreign currency exchange rates, changing policy positions or priorities, governmental rules and approaches to taxation, levels of government spending and deficits, and actual or anticipated default on sovereign debt. Many of the jurisdictions in which our products are sold have experienced, and could continue to experience, unfavorable changes in economic conditions, which could negatively affect the affordability of, and consumer demand for, our beverages, and certain markets in which our products are sold experienced intensified inflation throughout 2023, which may continue to accelerate in 2024. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies, including private-label brands, which could reduce our profitability and negatively affect our overall financial performance. In addition, the occurrence or resurgence of global or regional health events, such as the COVID-19 pandemic, and the related governmental, private sector and individual consumer responses, could contribute to a recession, depression or global economic downturn. \nOther financial uncertainties in our major markets and unstable geopolitical conditions or events in certain markets, including international conflicts, civil unrest, acts of war, terrorism, governmental changes, or changes in international relations, could undermine global consumer confidence and reduce consumers' purchasing power, thereby reducing demand for our products. Geopolitical instability may also lead to heightened security risk, impacting employee safety and\/or damage to infrastructure or our assets. At times, we have faced product boycotts resulting from activism, which have reduced demand for our products. Restrictions on our ability to transfer earnings or capital across borders, price controls, limitations on profits, retaliatory tariffs, import authorization requirements and other restrictions on business activities, which have been or may be imposed or expanded as a result of political and economic instability, deterioration of economic relations between countries or otherwise, could impact our profitability. In addition, U.S. trade sanctions against countries designated by the U.S. government as state sponsors of terrorism and\/or financial institutions accepting transactions for commerce within such countries could increase significantly, which could make it difficult, or even impossible, for us to continue to make sales to bottlers in such countries. The imposition of retaliatory sanctions against U.S. multinational corporations by countries that are or may become subject to U.S. trade sanctions, or the delisting of our branded products by retailers in various countries in reaction to U.S. trade sanctions or other governmental actions or policies, could also negatively affect our business.\n12\n\n\n\n\n, COCA COLA CO 10-K form for the fiscal year ended 2023-12-31, page 13: Throughout 2023, the Company faced disruptions to our operations due to international conflicts, including the conflict between Russia and Ukraine and conflicts in the Middle East. These conflicts have resulted, and could continue to result, in volatile commodity markets; logistical, transportation and supply chain disruptions; increased risk of cyber incidents or other disruptions to our information systems; reputational risk; heightened risks to employee safety; business disruptions (including labor shortages); reduced availability and increased costs of transportation, energy, packaging, raw materials and other input costs; sanctions, export controls and other legislation or regulation; or difficulty protecting and enforcing our intellectual property rights. While we currently do not anticipate that the effects of these conflicts will have a material impact on our results of operations, we cannot predict how and the extent to which these conflicts will continue to affect our employees, operations, customers or business partners.\nIncreased competition could hurt our business.\nWe operate in the highly competitive commercial beverage industry. For additional information regarding the competitive environment in which we operate, including the names of certain of our significant competitors, refer to the heading \"Competition\" set forth in Part I, \"Item 1. Business\" of this report. Our ability to maintain or gain share of sales in the global market or in regional or local markets may be limited as a result of actions by competitors. Competitive pressures may cause the Company and our bottling partners to reduce prices we charge customers or may restrict our and our bottlers' ability to increase prices, as may be necessary in response to commodity and other cost increases. Such pressures may also increase marketing costs along with in-store placement, slotting and other marketing fees. In addition, the rapid growth of e\u2011commerce may create additional consumer price deflation by, among other things, facilitating comparison shopping, and could potentially threaten the value of some of our legacy route-to-market strategies and thus negatively affect revenues. If we do not continuously strengthen our capabilities in marketing and innovation to maintain consumer interest, brand loyalty and market share while strategically expanding into other profitable categories of the commercial beverage industry, our business could be negatively affected. \nIf we are not successful in our innovation activities, our financial results may be negatively affected.\nAchieving our business growth objectives depends in part on our ability to evolve and improve our existing beverage products through innovation and to successfully develop, introduce and market new beverage products. The success of our innovation activities depends on our ability to correctly anticipate customer and consumer acceptance and trends; obtain, maintain and enforce necessary intellectual property rights; and avoid infringing on the intellectual property rights of others. If we are not successful in our innovation activities, we may not be able to achieve our growth objectives, which may have a negative impact on our financial results. \nChanges in the retail landscape or the loss of key retail or foodservice customers could adversely affect our financial results.\nOur industry is being affected by the trend toward consolidation in, and the blurring of the lines between, retail channels, particularly in Europe and the United States. Retailers may seek lower prices from us and our bottling partners, may demand increased marketing or promotional expenditures in support of their businesses, and may be more likely to use their distribution networks to introduce and develop private-label brands, any of which could negatively affect the Coca-Cola system's profitability. In addition, in developed markets, discounters and value stores are growing at a rapid pace, while in emerging and developing markets, modern trade is growing at a faster pace than traditional trade outlets. Our industry is also being affected by the rapid growth in sales through e-commerce retailers, e-commerce websites, mobile commerce applications and subscription services, which may result in a shift away from physical retail operations to digital channels. As we and our bottling partners build e-commerce capabilities, we may not be able to develop and maintain successful relationships with existing and new e-commerce retailers without experiencing a deterioration of our relationships with key customers operating physical retail channels. If we are unable to successfully adapt to the rapidly changing retail landscape, including the rapid growth in digital commerce, our share of sales, volume growth and overall financial results could be negatively affected. In addition, our success depends in part on our ability to maintain good relationships with key retail and foodservice customers. The loss of one or more of our key retail or foodservice customers could have an adverse effect on our financial performance. \nIf we are unable to expand our business in emerging and developing markets, our growth could be negatively affected.\nOur success depends in part on our ability to grow our business in emerging and developing markets, which in turn depends on economic and political conditions in those markets and on our ability to work with local bottlers to make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology. Additionally, we rely on local availability of talented management and employees to establish and manage our operations in these markets. Scarcity of, or heavy competition for, talented employees could impede our abilities in such markets. Moreover, the supply of our products in emerging and developing markets must match consumer demand for those products. Due to product price, limited purchasing power and cultural differences, our products may not be accepted in any particular emerging or developing market. \n13\n\n\n\n\n","context_html_without_headers":"\nITEM 1A. RISK FACTORS\n\nIn addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition and results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods. \n\nRISKS RELATED TO OUR OPERATIONS\n\nUnfavorable general economic and geopolitical conditions could negatively impact our financial results.\nOur business, operating results, financial condition and liquidity may be adversely affected by changes in global economic conditions, including global inflationary pressures, prevailing interest rates, credit market conditions, increased unemployment, levels of consumer and business confidence, bank failures, commodity (including energy) prices and supply, a recession or economic slowdown, trade policies, foreign currency exchange rates, changing policy positions or priorities, governmental rules and approaches to taxation, levels of government spending and deficits, and actual or anticipated default on sovereign debt. Many of the jurisdictions in which our products are sold have experienced, and could continue to experience, unfavorable changes in economic conditions, which could negatively affect the affordability of, and consumer demand for, our beverages, and certain markets in which our products are sold experienced intensified inflation throughout 2023, which may continue to accelerate in 2024. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies, including private-label brands, which could reduce our profitability and negatively affect our overall financial performance. In addition, the occurrence or resurgence of global or regional health events, such as the COVID-19 pandemic, and the related governmental, private sector and individual consumer responses, could contribute to a recession, depression or global economic downturn. \nOther financial uncertainties in our major markets and unstable geopolitical conditions or events in certain markets, including international conflicts, civil unrest, acts of war, terrorism, governmental changes, or changes in international relations, could undermine global consumer confidence and reduce consumers' purchasing power, thereby reducing demand for our products. Geopolitical instability may also lead to heightened security risk, impacting employee safety and\/or damage to infrastructure or our assets. At times, we have faced product boycotts resulting from activism, which have reduced demand for our products. Restrictions on our ability to transfer earnings or capital across borders, price controls, limitations on profits, retaliatory tariffs, import authorization requirements and other restrictions on business activities, which have been or may be imposed or expanded as a result of political and economic instability, deterioration of economic relations between countries or otherwise, could impact our profitability. In addition, U.S. trade sanctions against countries designated by the U.S. government as state sponsors of terrorism and\/or financial institutions accepting transactions for commerce within such countries could increase significantly, which could make it difficult, or even impossible, for us to continue to make sales to bottlers in such countries. The imposition of retaliatory sanctions against U.S. multinational corporations by countries that are or may become subject to U.S. trade sanctions, or the delisting of our branded products by retailers in various countries in reaction to U.S. trade sanctions or other governmental actions or policies, could also negatively affect our business.\n12\n\n\n\n\n, Throughout 2023, the Company faced disruptions to our operations due to international conflicts, including the conflict between Russia and Ukraine and conflicts in the Middle East. These conflicts have resulted, and could continue to result, in volatile commodity markets; logistical, transportation and supply chain disruptions; increased risk of cyber incidents or other disruptions to our information systems; reputational risk; heightened risks to employee safety; business disruptions (including labor shortages); reduced availability and increased costs of transportation, energy, packaging, raw materials and other input costs; sanctions, export controls and other legislation or regulation; or difficulty protecting and enforcing our intellectual property rights. While we currently do not anticipate that the effects of these conflicts will have a material impact on our results of operations, we cannot predict how and the extent to which these conflicts will continue to affect our employees, operations, customers or business partners.\nIncreased competition could hurt our business.\nWe operate in the highly competitive commercial beverage industry. For additional information regarding the competitive environment in which we operate, including the names of certain of our significant competitors, refer to the heading \"Competition\" set forth in Part I, \"Item 1. Business\" of this report. Our ability to maintain or gain share of sales in the global market or in regional or local markets may be limited as a result of actions by competitors. Competitive pressures may cause the Company and our bottling partners to reduce prices we charge customers or may restrict our and our bottlers' ability to increase prices, as may be necessary in response to commodity and other cost increases. Such pressures may also increase marketing costs along with in-store placement, slotting and other marketing fees. In addition, the rapid growth of e\u2011commerce may create additional consumer price deflation by, among other things, facilitating comparison shopping, and could potentially threaten the value of some of our legacy route-to-market strategies and thus negatively affect revenues. If we do not continuously strengthen our capabilities in marketing and innovation to maintain consumer interest, brand loyalty and market share while strategically expanding into other profitable categories of the commercial beverage industry, our business could be negatively affected. \nIf we are not successful in our innovation activities, our financial results may be negatively affected.\nAchieving our business growth objectives depends in part on our ability to evolve and improve our existing beverage products through innovation and to successfully develop, introduce and market new beverage products. The success of our innovation activities depends on our ability to correctly anticipate customer and consumer acceptance and trends; obtain, maintain and enforce necessary intellectual property rights; and avoid infringing on the intellectual property rights of others. If we are not successful in our innovation activities, we may not be able to achieve our growth objectives, which may have a negative impact on our financial results. \nChanges in the retail landscape or the loss of key retail or foodservice customers could adversely affect our financial results.\nOur industry is being affected by the trend toward consolidation in, and the blurring of the lines between, retail channels, particularly in Europe and the United States. Retailers may seek lower prices from us and our bottling partners, may demand increased marketing or promotional expenditures in support of their businesses, and may be more likely to use their distribution networks to introduce and develop private-label brands, any of which could negatively affect the Coca-Cola system's profitability. In addition, in developed markets, discounters and value stores are growing at a rapid pace, while in emerging and developing markets, modern trade is growing at a faster pace than traditional trade outlets. Our industry is also being affected by the rapid growth in sales through e-commerce retailers, e-commerce websites, mobile commerce applications and subscription services, which may result in a shift away from physical retail operations to digital channels. As we and our bottling partners build e-commerce capabilities, we may not be able to develop and maintain successful relationships with existing and new e-commerce retailers without experiencing a deterioration of our relationships with key customers operating physical retail channels. If we are unable to successfully adapt to the rapidly changing retail landscape, including the rapid growth in digital commerce, our share of sales, volume growth and overall financial results could be negatively affected. In addition, our success depends in part on our ability to maintain good relationships with key retail and foodservice customers. The loss of one or more of our key retail or foodservice customers could have an adverse effect on our financial performance. \nIf we are unable to expand our business in emerging and developing markets, our growth could be negatively affected.\nOur success depends in part on our ability to grow our business in emerging and developing markets, which in turn depends on economic and political conditions in those markets and on our ability to work with local bottlers to make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology. Additionally, we rely on local availability of talented management and employees to establish and manage our operations in these markets. Scarcity of, or heavy competition for, talented employees could impede our abilities in such markets. Moreover, the supply of our products in emerging and developing markets must match consumer demand for those products. Due to product price, limited purchasing power and cultural differences, our products may not be accepted in any particular emerging or developing market. \n13\n\n\n\n\n"}