SEI Investments Company SEIC Business Risk Report

I. Market Risks

A. Fluctuations in investment markets affecting assets under management

SEI Investments Company’s assets under management (AUM) can be vulnerable to market volatility. Changes in equity and fixed-income markets can impact the valuation of the assets managed by the company, thereby affecting overall revenue and profitability.

B. Changes in interest rates impacting investment returns

Interest rate fluctuations can have a significant impact on SEI’s investment returns, particularly in its fixed-income portfolios and interest-sensitive equities. Adjustments in Federal Reserve policies and global economic conditions can directly influence these results.

C. Regulatory changes affecting financial services industry

As a participant in the global financial services industry, SEI Investments is subject to extensive regulations. Changes in financial services regulations, such as those concerning fiduciary duties or investment advisories, can affect how SEI operates and its compliance costs.

II. Operational Risks

A. Cybersecurity threats compromising sensitive data

SEI Investments manages a vast amount of sensitive financial data, making it a potential target for cybersecurity threats such as data breaches or cyber-attacks. Effective management of these risks is crucial to protect client information and maintain trust.

B. Disruption in technology systems impacting service delivery

Being heavily reliant on technology for operations, any disruption in SEI’s technology infrastructure can lead to significant service delivery failures. This includes day-to-day operations and client interface platforms like online investment portals.

C. Human error leading to errors in client transactions

Human errors in processing client transactions can lead to financial losses and dissatisfied clients. Such incidents can negatively impact SEI’s reputation and require rigorous training and monitoring to mitigate.

III. Financial Risks

A. Credit risk associated with investment portfolios

SEI is exposed to credit risks that can arise from the inability of counterparties to meet their financial obligations. These risks are inherent in various investment activities including but not limited to corporate debt securities and loans.

B. Liquidity risk in managing client withdrawals and fund redemptions

Liquidity risk is a concern for SEI Investments as it needs to ensure sufficient liquidity to handle client withdrawals and fund redemptions, particularly during market stress or periods of financial instability.

C. Foreign exchange risk due to global operations

Operating globally subjects SEI to foreign exchange risk, which arises from holding assets or liabilities in foreign currencies. Fluctuations in exchange rates can therefore affect the company’s financial performance.

IV. Compliance Risks

A. Failure to comply with regulatory requirements leading to fines

Non-compliance with regulatory requirements can lead to substantial fines and penalties for SEI, negatively impacting its financial stability and market reputation.

B. Non-compliance with anti-money laundering regulations

SEI Investments must adhere strictly to anti-money laundering (AML) regulations. Failure in compliance could lead to legal consequences and damage the company’s standing in the financial market.

C. Compliance risks associated with data privacy laws

Data privacy is a critical area of compliance for SEI, with regulations like GDPR affecting how they manage and protect client data. Compliance failures could result in penalties and a loss of client trust.

V. Strategic Risks

A. Competitive pressures impacting market share

The financial industry is highly competitive, and SEI faces significant pressures from both traditional financial institutions and fintech startups. Maintaining competitive services and fees is essential for retaining market share.

B. Failure to innovate and adapt to changing market trends

If SEI Investments fails to innovate or adapt to new market trends, such as digital asset management or ESG investing, it risks losing relevance and clientele to more agile competitors.

C. Strategic partnerships or acquisitions not delivering expected results

Strategic partnerships and acquisitions are integral to SEI’s growth strategy, but these ventures can carry risks if they fail to meet performance expectations or integrate successfully within the company’s existing operations.

VI. Reputation Risks

A. Negative publicity impacting client trust and loyalty

In an industry reliant on trust, negative publicity can significantly damage SEI’s reputation, leading to client attrition and decreased investor confidence.

B. Litigation risks affecting brand reputation

SEI is susceptible to litigation risks that can arise from business practices or disputes with clients and other entities. Such legal battles can tarnish the company’s image and have financial implications.

C. Social media risks leading to reputational damage

The spread of misinformation or negative information through social media can rapidly harm SEI’s reputation, requiring vigilant management of online presence and rapid response strategies.