Liberty Formula 1 (Series A) FWONA Business Risk Report

Risk Report for Liberty Formula 1 (Series A), ticker: FWONA

I. Financial Risks

A. Revenue Volatility

Liberty Formula 1’s revenues are heavily dependent on race hosting fees, broadcasting rights, and advertising sales, which can fluctuate based on the global economic climate and the popularity of the sport. Such dependencies could lead to significant revenue volatility especially in economic downturns.

B. Market and Competition Risks

The sports broadcasting and live events market is increasingly competitive with various other motorsports and entertainment options drawing viewers and attendees away. This competition directly influences Liberty Formula 1’s market share and potential revenue.

C. Currency Exchange Rate Fluctuations

As a global entity that engages in transactions in multiple currencies, Liberty Formula 1 faces risks associated with currency exchange rate fluctuations. These can affect the profitability when converting foreign revenues into domestic currency.

II. Operational Risks

A. Regulatory Compliance Risks

Liberty Formula 1 operates in multiple international jurisdictions, each with its own regulatory landscape. Compliance with varied and sometimes conflicting regulations remains a critical operational challenge.

B. Supply Chain Disruptions

Given the complex logistics involved in F1 racing, disruptions in the supply chain for parts, or transporting equipment across borders can affect race schedules. Such disruptions can derail carefully timed event calendars.

C. Technological Risks

As technology advances, maintaining state-of-the-art operation systems is essential. A failure in these technologies, particularly in timing systems or broadcasting equipment, can impair race integrity and fan experience.

III. Strategic Risks

A. Industry Disruption

Advancements in alternative sports and entertainment platforms, along with emerging trends in virtual and augmented reality, may disrupt traditional Formula 1 viewership and fan engagement models.

B. Mergers and Acquisitions Risks

Liberty Formula 1’s strategic decisions regarding mergers and acquisitions carry risks related to the integration of operations and corporate cultures, which may not always yield the anticipated synergistic benefits.

C. Brand and Reputation Risks

The brand value of Formula 1 is susceptible to risks originating from negative publicity, including controversies over governance, environmental impact, and driver conduct, potentially alienating fans and sponsors.

IV. Legal and Compliance Risks

A. Litigation Risks

Operational disputes, contract conflicts, and employment lawsuits are potential legal challenges that Liberty Formula 1 may face, potentially resulting in financial liabilities or damaging its reputation.

B. Data Privacy and Security Risks

As a company leveraging significant digital platforms for fan engagement and data analytics, Liberty Formula 1 must manage risks related to data breaches and compliance with global data protection regulations.

C. Anti-corruption and Bribery Risks

Involvement in international markets exposes Liberty Formula 1 to potential corruption and bribery risks, necessitating rigorous enforcement of anti-corruption policies and regular audits.

V. External Risks

A. Geopolitical Risks

Global events like political instability, trade restrictions, and diplomatic fallouts can affect Liberty Formula 1’s operations, especially in countries hosting the races or in its international talent and team management.

B. Natural Disaster Risks

Racing events and associated infrastructure are vulnerable to natural disasters, which can lead to cancellations, delays, and logistical challenges, necessitating comprehensive insurance and contingency planning.

C. Pandemic Risks

The global COVID-19 pandemic demonstrated the significant impact of health crises on international sports events, specifically leading to race postponements and cancellations for Liberty Formula 1, impacting revenue and operations.

VI. Mitigation Strategies

A. Diversification of Revenue Streams

Liberty Formula 1 is expanding its revenue base through digital platforms, merchandise, and enhancing the race-day experience to mitigate the reliance on traditional income sources like broadcasting fees.

B. Continuous Monitoring of Market Trends

Understanding shifting consumer preferences and competitor strategies through continuous market analysis helps Liberty Formula 1 adapt its business strategy proactively.

C. Hedging Strategies for Currency Risks

FWONA employs financial hedging strategies to manage risks associated with currency fluctuations, safeguarding against potential adverse impacts on financial outcomes.

D. Robust Compliance Programs

A stringent compliance framework is essential for navigating the complex regulatory environments across the geographies Liberty Formula 1 operates in.

E. Redundancy Planning in Supply Chain

Liberty Formula 1 employs multiple suppliers and has developed alternative logistics routes to shield against potential disruptions in the supply chain.