Booz Allen (BAH) Risk Analysis

The U.S. government may: - revise its procurement practices or adopt new contract laws, rules, and regulations, such as cost accounting standards, organizational conflicts of interest, and other rules governing inherently governmental functions at any time;- reduce, delay, or cancel procurement programs resulting from U.S. government efforts to improve procurement practices and efficiency;- limit the creation of new government-wide or agency-specific multiple award contracts;- face restrictions or pressure from government employees and their unions regarding the amount of services the U.S. government may obtain from private contractors;- award contracts on a technically acceptable/lowest cost basis in order to reduce expenditures, and we may not be the lowest cost provider of services;- adopt new socio-economic requirements, including setting aside procurement opportunities to small, disadvantaged businesses;- change the basis upon which it reimburses our compensation and other expenses or otherwise limits such reimbursements; and - at its option, terminate or decline to renew our contracts. We continue to see delays in procurements with our U.S. government customers, and these delays are expected to continue in the near term. In addition, any new contracting methods could be costly or administratively difficult for us to implement and could adversely affect our future revenue and profit margin, and changes to the procurement system could cause delays in the procurement decision-making process. Any such delays in procurements generally, changes to the U.S. government's procurement practices or the adoption of new contracting rules or practices could impair our ability to obtain new or re-compete contracts and any such changes or increased associated costs could materially and adversely affect our results of operations.

Our business is subject to a number of risks related to climate and environmental matters, including regulatory, political, reputational, litigation and financial risks. We have operations located in regions that have been, and may in the future be, impacted by physical risks related to climate, including rising sea levels, severe weather events, and natural disasters, as well as disease outbreaks. Such events could disrupt our operations or those of our customers and suppliers, including the inability of employees to work, destruction of facilities, loss of life, and adverse effects on our supply chain and the integrity of information technology systems, all of which could materially increase our costs and expenses, delay or decrease revenue from our customers, and disrupt our ability to maintain business continuity. We could incur significant costs to improve the resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate the effects of climate-related events. There are numerous foreign, U.S. and state laws and regulations related to climate and environmental management disclosures, including regulations related to greenhouse gas emissions reporting. These regulations often impose different and, occasionally, conflicting or contradictory requirements, which may result in increased compliance and operational costs to comply with such regulatory requirements as well as an increased potential for liability arising from noncompliance with such requirements. Additionally, the evolving technological, social, legal, and political context of these issues as well as changing expectations from foreign, U.S. and state governments, customers, employees, investors, and other stakeholders may create conflicts, disaffection, and dissatisfaction between regulatory requirements and various stakeholder expectations, which could result in potential damage to our reputation and adversely affect our business.

In recent years, there has been significant litigation involving intellectual property rights in technology industries. We may face from time to time, allegations that we or a supplier or customer have violated the rights of third parties, including patent, copyright, trademark, trade secret, and other intellectual property rights. If, with respect to any claim against us for violation of third-party intellectual property rights, we are unable to prevail in the litigation or retain or obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business practices on a timely or cost-efficient basis, our business and competitive position may be adversely affected. Any infringement, misappropriation, or related claims, whether or not meritorious, are time consuming, divert technical and management personnel, and are costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease utilizing certain products or services, or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.

We create, implement, integrate, and maintain information technology ("IT") systems that (a) are often mission critical, (b) regularly involve sensitive information, (c) may be deployed within war zones or other hazardous environments, and/or (d) can include information whose confidentiality is protected by law or contract. Additionally, we maintain internal systems housing sensitive employee and confidential company data. As a result, our systems and IT work products are susceptible to systems or service failures resulting from technical complexity, failures of third-party service providers, natural disasters, power shortages, insider threats (including improper access to the Company's, customers' or third parties' information or resources, employee error, or malfeasance), terrorist attacks, physical or electronic security breaches, cyber-attacks, computer viruses, or similar events or disruptions. Our systems and IT work product are the target of constantly evolving cyber-attack vectors, including malware, social engineering, denial-of-service attacks, malicious software programs, phishing, smishing, vishing, identity spoofing (including "deep fakes"), account takeovers, and other cyber-attacks fueled by emerging technologies, including cyber-attacks enhanced or facilitated by artificial intelligence. Additionally, future technological advances, including quantum computing, could potentially compromise the cryptographic foundations of our systems, posing additional risk to the security of those systems. We have observed an increase in the frequency and sophistication of the cyber and security threats these systems face, with attacks that are more advanced and persistent, targeting us because we hold classified, controlled unclassified, and other sensitive information. As a result, we and our vendors face a heightened risk of a security breach or disruption resulting from an attack by computer hackers, persons with access to systems inside our organization, foreign governments, and cyber terrorists. We also may from time to time modernize, upgrade, replace, or consolidate certain of our internal systems and related processes, and delays in implementing such changes or failures of such systems to operate as intended could disrupt our operations, require significant time, effort, and costs to implement changes or corrections, and adversely affect our business and results of operations. We have put in place policies, controls, and technologies to help detect and protect against such attacks, but we cannot guarantee that future incidents will not occur. If an incident occurs, we may not be able to successfully mitigate the impact. We have been the target of these types of attacks in the past, and attempted attacks are likely to continue. Due to the ongoing geopolitical conflicts in Eastern Europe and the Middle East, and increased tensions in Asia, state-sponsored parties or their supporters may launch retaliatory cyber-attacks and may attempt to conduct other geopolitically motivated retaliatory actions. Those same parties may also attempt to fraudulently induce employees or authorized third parties, including contractors, to disclose sensitive information in order to gain access to our systems or data, or that of our customers, or service providers. If successful, these types of attacks on our network or other systems or service failures could have a material adverse effect on our business and results of operations, due to, among other things, the loss of customer or proprietary data, interruptions or delays in our customers' businesses, or damage to our reputation. In addition, the failure or disruption of our systems, communications, vendors, or utilities could cause us to interrupt or suspend our operations, which could have a material adverse effect on our business and results of operations. If our employees, contractors, suppliers or other authorized third parties do not adhere (whether inadvertently or intentionally) to appropriate information security protocols, our protocols are inadequate, or our or our customers' sensitive information is released and/or compromised, we may experience significant negative impacts to our reputation and expose us or our customers to liability. We are not immune from the possibility of a malicious insider compromising our information systems and infrastructure, including but not limited to insiders exfiltrating the personal data of employees and customers, stealing corporate trade secrets and key financial metrics, illegally diverting funds, or intentionally disclosing our secrets (e.g., application credentials) to others in order to bypass our security policies and control mechanisms. No series of measures can fully safeguard against every insider threat. Refer to "Item 1C. Cybersecurity" for additional information about our cybersecurity risk management program. If our or our vendors' systems, services, or other applications have significant defects, errors, or vulnerabilities, are successfully attacked by cyber and other security threats, suffer delivery delays, or otherwise fail to meet our customers' expectations, we may: - lose revenue due to adverse customer reaction;- be required to provide additional services to a customer at no charge;- incur additional costs related to remediation, monitoring, and enhancing our cybersecurity;- lose revenue due to the deployment of employees for remediation efforts instead of customer assignments;- receive negative publicity, which could damage our reputation and credibility of our brand and adversely affect our ability to attract or retain customers or talent;- be unable to successfully market services that are reliant on the creation and maintenance of secure information technology systems to U.S. government, foreign, and commercial customers;- suffer claims by customers, employees, or impacted third parties for substantial damages, particularly as a result of any successful network or systems breach and exfiltration of customer and/or third-party information; or - incur significant costs, including fines from government regulators, related to complying with applicable federal or state laws, including laws pertaining to the security and protection of personal information. In addition, we may have insufficient recourse against our vendors or subcontractors for costs, losses or claims we incur as a result of or reliance on their systems, services or other applications having significant defects, errors, or vulnerabilities, or which are successfully attacked by cyber and other security threats, resulting in our inability to meet our customers' expectations. Further, in addition to any costs resulting from contract performance or required corrective action, these failures may result in increased costs or loss of revenue if they result in customers postponing subsequently scheduled work or canceling or failing to renew contracts. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Additionally, some cyber technologies and techniques that we utilize or develop may raise potential liabilities related to legal compliance, intellectual property, and civil liberties, including privacy concerns, which may not be fully insured or indemnified. We may not be able to obtain and maintain insurance coverage on reasonable terms or in sufficient amounts to cover one or more large claims, or the insurer may disclaim coverage as to some types of future claims. The successful assertion of any large claim against us could seriously harm our business. Even if not successful, these claims could result in significant legal and other costs, may be a distraction to our management, may harm our customer relationships, and may adversely affect our ability to attract or retain talent. In certain new business areas, we may not be able to obtain sufficient insurance and may decide not to accept or solicit business in these areas.

The cost of providing our services, including the degree to which our employees are utilized, affects our profitability. The degree to which we are able to utilize our employees in a timely manner or at all is affected by a number of factors, including: - our ability to transition employees from completed projects to new assignments and to hire, assimilate, and deploy new employees;- our ability to forecast demand for our services and to maintain and deploy headcount that is aligned with demand, including employees with the right mix of skills and experience to support our projects;- our employees' inability to obtain or retain necessary security clearances;- our ability to manage attrition; and - our need to devote time and resources to training, business development, and other non-chargeable activities. If our employees are under-utilized, our profit margin and profitability could suffer. Additionally, if our employees are over-utilized, it could have a material adverse effect on employee engagement and attrition, which would in turn have a material adverse impact on our business. Our profitability is also affected by the extent to which we are able to effectively manage our overall cost structure for operating expenses, such as wages and benefits, overhead and capital, and other investment-related expenditures. If we are unable to effectively manage our costs and expenses and achieve efficiencies, our competitiveness and profitability may be adversely affected.

Our business depends upon continued U.S. government expenditures on defense, intelligence, and civil programs for which we provide support. These expenditures have not remained constant over time, have been and in the future may be reduced in certain periods, and have been and in the future may be affected by the U.S. government's efforts to improve efficiency and reduce costs affecting U.S. government programs generally. Our business, prospects, financial condition, or operating results could be materially harmed by, among other causes, the following: - U.S. government budget deficits and budgetary constraints, including mandated automatic spending cuts, affecting U.S. government spending generally, or specific agencies in particular, and changes in available funding;- a shift in the permissible federal debt limit;- reduced U.S. government outsourcing of functions that we are currently contracted to provide, including as a result of increased insourcing by various U.S. government agencies;- a shift in expenditures away from U.S. government agencies or programs that we support, including changes or delays in such programs, shifts in the scope of work, or shifts away from the federal government to state and local governments, or away from government contractors, in general, or from us;- changes in U.S. government customer cybersecurity investments and resourcing that impact the security posture of systems hosted by the Company on behalf of the U.S. government and under a U.S. government authority to operate;- U.S. government shutdowns due to, among other reasons, a failure to fund the government and other potential delays in the appropriations process;- U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures;- increased U.S. government processing times for security clearances and other governmental consents;- delays in the U.S. government contract procurement process or in the payment of our invoices by government payment offices; and - an inability by the U.S. government to fund its operations as a result of a failure to increase the U.S. government's debt ceiling, the exhaustion of "extraordinary measures" to borrow additional funds without breaching the government's debt ceiling, a credit downgrade of U.S. government obligations or for any other reason. In addition, any disruption in the functioning of U.S. government agencies, including as a result of U.S. government closures and shutdowns, terrorism, war, foreign conflicts, trade tensions related to international trade policies, under-staffing or layoffs within the government, natural disasters, public health crises, destruction of U.S. government facilities, and other potential calamities could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to deploy our staff to customer locations or facilities as a result of such disruptions. If government funding relating to our contracts with the U.S. government becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contracts or subcontracts under such programs may be terminated or adjusted by the U.S. government or the prime contractor, if applicable. Our operating results could also be adversely affected by spending caps or changes in the budgetary priorities of the U.S. government or Department of War, as well as delays in program starts or the award of contracts or task orders under contracts. These or other factors could cause our defense, intelligence, or civil customers to decrease the number of new contracts awarded generally and fail to award us new contracts, reduce their purchases under our existing contracts, exercise their right to terminate our contracts, or not exercise options to renew our contracts, any of which could cause a material decline in our revenue.