Emerging risks are imaginary So are unknown risks

AstraZeneca have an odd risk which they call “emerging risks.” They describe them as follows:

“Emerging risks are ‘new’ risks that may challenge us in the future.” [1]

The important word here is ‘may’. But how can they be important, even material enough to put in a financial report, when they don’t know exactly what they are. But it gets more bizarre when they try to explain further:

“These risks have the potential to crystallise at some point in the future but are unlikely to impact the business during the next year. The outcome of such risks is often more uncertain. They may begin to evolve rapidly or simply not materialise.” [1]

They don’t know so why is this important?  They are in fact imaginary. The heading should be imaginary risks and not emerging ones. And finally they resort to gobbledygook in an attempt to explain what they are doing and fail dismally:

“Annually, we combine input from each SET function and external insight to scan the horizon for emerging risks.” [1]

SET is explained on page 4 of the report. It is the Senior Executive Team. What could external insight be? Anyway the two of them (the SET function and the external insights) get together and ‘scan the horizon’ to look for these emerging risks. But one should not take this metaphor of horizon scanning too literally. It is not standing on the beach looking far out to sea towards the horizon but apparently is a methodology of future studies. I will stop here. It gets too complicated and too boring to explain further and proves that the sentence is incomprehensible for the ordinary reader.

Johnson and Johnson have a similar worry and include this sentence in the first paragraph of their Risk Factors:

“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.”

They specify that it is ‘not possible to predict or identify all’ risks. Everybody knows that! This is so evident that it doesn’t need to be said at all, but perhaps companies need to remind their shareholders in case they forget. The sun sets in the west. Ice is cold. Fire is hot.

[1] AstraZeneca, Annual Report 2021 page 48 under the heading Emerging risks