Risk Factors Dashboard
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Risk Factors - SEIC
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Item 1A. Risk Factors.
Cybersecurity risk management is an important part of our overall risk management efforts. Our industry is prone to cybersecurity threats and attacks, and we regularly experience cybersecurity incidents of varying degrees. At any given time, we face known and unknown cybersecurity risks and threats that are not fully-mitigated, and we discover vulnerabilities in our Cybersecurity Program. We continuously work to enhance our Cybersecurity Program and risk management efforts.As of the date of this report, we are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations and financial condition.
As part of the governance and oversight of the Cybersecurity Program, regular reporting is performed for the Legal and Regulatory Oversight Committee of our Board of Directors along with SEI’s various subsidiaries’ boards of directors. The reports include cybersecurity metrics/statistics, details of relevant events, results of testing, and overview of current threats. Should any material incidents arise, those will be timely and appropriately communicated to the relevant subsidiary's board of directors.
We believe that the risks and uncertainties described below are those that impose the greatest threat to the sustainability of our business. However, there are other risks and uncertainties that exist that may be unknown to us or, in the present opinion of our management, do not currently pose a material risk of harm to us. The risk and uncertainties facing our business, including those described below, could materially adversely affect our 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.
Strategic & Business Model Risks
Market-Driven Risks. Our financial performance is heavily influenced by conditions in the capital markets and the value of assets we manage or administer. A significant portion of our revenues is earned as fees based on the market value of client assets. Declines in asset values, whether due to overall market downturns or poor performance of specific investment products, directly reduce our assets under management or administration and thereby our revenue and earnings. Similarly, adverse economic conditions or negative investor, consumer, and business sentiment can dampen demand for our products and services, leading to lower business activity and fee revenues. We continually strive to increase revenues and meet our customers' needs by introducing new products and services as well as maintaining and improving our existing products and services. We also earn important fee income from programs that sweep client cash into interest-bearing deposit accounts at third-party banks. Changes in interest rates or significant client withdrawals from these sweep programs could decrease the fees we earn and negatively impact our profitability. Furthermore, periods of market volatility, geopolitical turmoil, illiquid markets, or other disruptions can make it difficult to value or liquidate certain investments. In extreme cases, we or our clients might be forced to sell assets at depressed prices or write down valuations, causing losses. In summary, sustained market declines or extreme market dislocations could materially erode our revenue, earnings, and overall firm value. In addition, prolonged market volatility may impact our ability to attract new assets or retain existing clients, which could adversely affect our financial performance. Finally, investor and client perception of the risks attendant to the business models of our various market
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units and our ability to successfully manage these risks, including those related to the potential disruptions from automation, artificial intelligence and machine learning, may significantly affect our value.
Client and Relationship Risks. Our business depends on maintaining strong relationships with clients across all segments, including investment management, technology outsourcing, and fiduciary services. We are exposed to risks that could lead to client attrition, unfavorable contract renewals, or termination of agreements, each of which could materially reduce our revenues and earnings.
We may lose clients for a variety of reasons beyond poor investment performance. While investment performance relative to benchmarks and competitors remains a critical factor for retaining assets under management, clients may also leave due to pricing pressure, service disruptions, technology platform issues, or competitive innovations such as AI-driven solutions and tokenized products. Consolidation among financial institutions may reduce the number of potential clients or lead to rationalization of services we provide. Strategic shifts by clients, including decisions to internalize functions we currently perform, can also result in attrition. Because certain clients represent a significant portion of our assets under management or administration, the loss of one or more large clients could disproportionately impact our financial results.
Our investment advisory and outsourcing contracts may be terminated or may not be renewed on favorable terms.Our investment advisory contracts may be terminated or may not be renewed on favorable terms. We derive a substantial portion of our revenue from providing investment advisory and technology services under long-term agreements. We derive a substantial portion of our revenue from providing investment advisory services. These agreements often allow clients to terminate with limited notice or penalty. For example, U.S. mutual fund management contracts must be renewed annually by boards of trustees, a majority of whom are independent from SEI. Our fee arrangements under any advisory or management contracts may be reduced, including at the behest of a fund’s board of trustees. Similarly, outsourcing contracts for technology platforms may be renegotiated or terminated early, particularly if clients seek cost reductions, regulatory changes alter service requirements, or competitors offer more advanced solutions. If several of our clients terminate their contracts, liquidate funds, or fail to renew agreements on favorable terms, our assets under management, revenue, and earnings could decline.
Client relationships are also affected by external factors such as market volatility, regulatory changes, and industry consolidation. In addition, our ability to retain and grow client relationships depends on our capacity to innovate and deliver new products and services that meet evolving client needs, including ESG solutions, AI-driven strategies, and tokenized investment products. Failure to anticipate and respond to these changes could impair our competitive position and lead to client attrition or unfavorable contract renegotiations.
Fee Compression and Competitive Pricing Pressure. We face persistent pricing pressure across our industry. Investor demand for low-cost solutions, the rise of passive strategies, and competition from fintech and technology-driven firms have driven fee reductions. If we are unable to demonstrate value or match competitive pricing, our margins and profitability may decline.
Product Development and Innovation Risks. We depend on continuous innovation and improvement of our products and services to drive growth and meet client needs, and failures in this area pose significant risk. If we are unable to develop and deliver new products or enhancements that address our clients’ needs, provide competitive value, and are ready in a timely manner, our business could suffer. For example, much of our technology development effort is devoted to our core platforms, such as the SEI Wealth Platform℠ and TRUST 3000®, and our other proprietary processing systems, and their ongoing evolution is critical to our value proposition. Delays, cost overruns, or performance problems in enhancing these mission-critical systems could impair our competitiveness or reputation. We are also mindful that new products or solutions we introduce might not function as expected or could experience errors and disruptions, which can lead to client dissatisfaction, remediation costs, legal liability, or damage to our reputation. Additionally, implementing certain product innovations (particularly those involving cloud-based solutions or other third-party technology changes) often requires obtaining consents or cooperation from clients and vendors. These external parties may withhold approval or demand onerous terms, which can slow down or even thwart our product development efforts, potentially making some initiatives impractical despite their strategic value.
Developing and launching new products and services in our industry typically demands significant time, resources, and ongoing support. There are substantial uncertainties in this process, including the need to establish new operational processes and controls, to anticipate shifting client preferences, to respond to new competitors or technologies, and to ensure compliance with evolving regulatory requirements. Many emerging investment offerings do not gain traction immediately, it can take several years for a new product to build the performance track record and client acceptance required to attract significant asset inflows. During this incubation period, we must invest in development, marketing, and support without assurance that the product will ultimately succeed. For instance, client demand has increasingly expanded into alternative investments (such as private equity, hedge funds, real estate, and infrastructure) as they seek diversification beyond traditional asset classes. Offering and supporting these alternative investment products presents unique challenges. Unlike traditional securities with well-established automated processes, alternative assets often lack widely adopted technological infrastructure for administration, leading to more manual processes and bespoke operational
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support. This increases our operational complexity and the risk of errors or inefficiencies. Moreover, as noted, new alternative products usually require a multi-year track record before they can attract substantial assets under management, which delays revenue and may strain resources. We have also pursued innovation in other newer areas of asset management, for example, developing tax optimization and tax‐harvesting programs, which likewise need time to prove their effectiveness and appeal to investors. If we fail to continue innovating successfully, fail to introduce new products and services that gain market acceptance, or fail to manage the complexities and risks associated with these innovations, our competitive position could deteriorate. In such a scenario, we could lose market share, and our revenue and earnings (particularly those tied to assets under management or administration) may decline. Even when our new offerings do perform as intended, they may not generate significant revenue or profit for some time, if ever. It’s possible that some new products will never achieve profitable scale, or that their operating margins are thinner than our historical averages. Should our development initiatives not meet client expectations, or if we cannot support new products in a cost-effective and compliant way, we could incur substantial costs, experience reputational harm, and ultimately suffer financial losses.
Business Model Innovation and Expansion Risks. As part of our strategy, we may pursue new business models or distribution channels to drive growth, and these strategic shifts carry their own risks. For example, while we have explored and in some cases engage in direct-to-consumer (B2C) offerings, serving individual investors directly can increase operational and regulatory complexity: it entails handling a much larger number of client accounts and transactions, which raises the possibility of processing errors or fraud and generally drives higher servicing costs. Direct consumer engagement also heightens exposure to cybersecurity threats and data privacy concerns, since a breach or service disruption could impact a broad retail client base and attract greater scrutiny from regulators and the public. Participating in consumer markets may require substantial investments in marketing, support infrastructure, and compliance capabilities that differ from our institutional business, and we face established competitors in the retail financial services space.
More broadly, any significant shift in our business model, broadening our offerings or presence in existing markets or geographies, or entry into a new market segment or geography, technology-driven platforms, or partnerships, can take considerable time to yield results, and there is no guarantee of success. These initiatives might not generate meaningful revenue or profit for several years, if at all, and their ultimate viability is uncertain. If our strategic expansions or innovations are not executed effectively, or if they fail to resonate with target customers, we could divert management attention and capital without adequate return. In turn, an unsuccessful business model innovation could undermine our growth prospects and earnings. Conversely, if we were to misjudge or hesitate in adapting to industry changes, for instance, failing to offer services in channels that clients prefer, we could lose relevance. Overall, managing the evolution of our business model in response to technological change and market trends is a delicate task; failure to balance innovation with effective execution and risk control in this area could adversely affect our competitive position and financial performance.
Market Consolidation and Competitive Disruption. The financial services industry is highly competitive and is being reshaped by consolidation and technological disruption, including the changes in the technology development and the delivery of services related to automation, artificial intelligence and machine learning. These dynamics continue to pressure our fees, challenge our market share, and could adversely affect our revenues and earnings. The investment management business has relatively low barriers to entry, and in recent years we have faced persistent pricing pressure. New competitors (including fintech startups and automated “robo-advisors”) have introduced lower-cost investment products and services, while investor preferences have shifted toward low-fee passive strategies. These trends have driven a general decline in fee levels across many market segments. We expect this price competition to continue; investors are demanding more value for less cost and established firms and new entrants alike are cutting fees or margins to win business. If we are forced to reduce the fees for our services or cannot match the pricing of competitors, our profit margins and earnings will likely suffer. Moreover, advances in technology are accelerating this trend. For example, some competitors are beginning to deploy artificial intelligence-driven pricing and portfolio management, which could enable them to optimize service pricing or investment performance in ways that attract clients. Firms that successfully leverage these innovations may gain a significant competitive advantage, making it harder for us to retain or grow our client base.
Beyond pricing pressure, the competitive landscape is evolving with the entry of non‑traditional players, including fintech firms and large technology companies (“big tech”), into asset management and processing services. Many of these new entrants boast superior technological capabilities or well-known consumer brands, and in some cases, they operate under lighter regulatory constraints than diversified financial institutions like SEI. Additionally, advances in artificial intelligence have also made the development of technology solutions more attainable to a broader range of firms and potentially require less capital-intensive business models. These differences can give competitors a cost or agility advantage. A tech-driven rival with lower compliance costs or a disruptive business model can potentially offer services at a lower price point or deliver innovative client experiences that we might find difficult to match under our existing cost, regulatory and operating framework. If we fail to compete effectively against these emerging players, we could lose market share to firms that are not as burdened by regulation or that benefit from technology-based advantages.
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At the same time, consolidation in the financial services industry is altering the competitive environment. Over the past several years, numerous firms in our space have merged, been acquired, or exited the business. As competitors combine, the survivors often emerge larger and with more resources, including broader product lines and more geographically diverse client bases. We could increasingly find ourselves up against a smaller number of much larger competitors with greater capital, scale, and range of services. These consolidated firms might be able to invest more heavily in technology, withstand fee reductions, or bundle a wider array of services, making competition more intense in the segments we serve. There is also the possibility of entirely new competitors arising from consolidation or realignment in adjacent industries (for example, a large technology or consulting firm acquiring capabilities to enter our markets). Heightened competition from any of these sources, whether traditional peers, fintech/big tech entrants, or enlarged consolidated institutions, puts pressure on the key factors by which we differentiate ourselves and could impair our growth.
We compete across multiple dimensions. SEI’s business model offers a broad suite of integrated investment management programs and back-office processing services, often delivered on a bundled basis through our proprietary platforms (such as the SEI Wealth Platform℠ and TRUST 3000®). The breadth of this offering allows us to contend on a number of factors, including the performance of our investment products, the value of our fee structure, the quality and reliability of our operational services, our reputation and track record in the industry, and our ability to innovate and adapt to clients’ changing needs (including adopting new technologies when appropriate). Our success has been built on excelling in these areas simultaneously. However, increased competition on any of these fronts could erode our advantages. Any such competitive erosion would likely lead to a decline in our revenues and earnings.
Finally, market consolidation among our own clients poses a strategic risk to our business. Many of SEI’s clients are financial institutions and investment managers themselves, and if they engage in mergers or acquisitions, the pool of potential clients can shrink. 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. A merger of two firms that each use our services might result in one combined entity that requires fewer of our solutions (or has duplicate services that get rationalized). In some cases, a larger combined client may decide to internalize functions that we previously provided, using their greater scale to build in-house capabilities instead of outsourcing to SEI. Consequently, consolidation in the markets we serve could reduce the number of clients or the scope of services they outsource, which may limit our opportunities for revenue growth. We may face the dual challenge of winning business from a consolidating client base while also contending with ever-stronger competitors in the marketplace. If we cannot offset these consolidation effects by attracting new business, our future revenue and earnings growth could be negatively impacted.
In sum, intensifying competition, whether through fee compression, technology development advantages, disruptive new entrants, or industry consolidation, is an ongoing reality of our industry. We must continue to adapt, invest in innovation, and demonstrate the value of our platforms and services to clients. If we fail to keep pace with these competitive and structural changes, our business and financial results could be adversely affected.
Key Personnel and Human Capital Risks. Our success heavily depends on the leadership and expertise of our key people. Any loss of critical individuals, or broader challenges in managing our workforce, could disrupt our operations and impair our performance.
We rely on a relatively small group of executive officers and senior managers whose industry knowledge, client relationships, and institutional experience are crucial to our business. Many of these leaders have long tenures at SEI and, importantly, most do not have fixed-term employment agreements with us. This means they could leave at any time. The unexpected departure of any of our top executives or other key personnel could deprive us of important expertise and leadership, potentially causing a material adverse effect on our operations and strategic direction. Any gap in leadership, or even a protracted transition period, might erode stakeholder confidence or hinder important initiatives.
In addition to leadership retention, we face wider human capital challenges related to maintaining an effective workforce. As a company looking to manage expenses and remain efficient, we have undertaken headcount reduction initiatives (such as hiring freezes, targeted staff cuts, or voluntary separation programs) to create efficiencies and optimize our operating model. While such measures provide short-term benefit, they carry longer-term risks. Significant reductions in workforce can lead to the unintentional loss of institutional knowledge and high-performing employees, increased workload stress on remaining staff, and decreased morale across the organization. Service quality or innovation may suffer due to fewer personnel or lower employee engagement. Likewise, limiting investment in new talent or training could leave us ill-equipped to support or achieve our growth expectations, especially as our business evolves or more senior employees retire.
Moreover, our ability to identify, attract, develop, and retain talented employees at all levels is crucial to our ongoing success. If we cannot hire and retain people with the necessary expertise, or if turnover in key roles rises, our client service, product development, and operational capabilities could be weakened. High turnover can also increase costs (due to recruitment and training) and impede our ability to pursue new opportunities or to maintain consistent relationships with clients and partners.
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Outsourcing and Offshoring Strategy Risks. We have undertaken a major internal offshoring initiative by establishing a Global Capability Center (GCC) in India to improve efficiency and access specialized talent. While this strategy offers potential benefits, it also introduces significant new risks to our operations and financial performance.
Operating a captive center in India introduces an obligation to navigate different local laws and regulations, manage cultural and communication differences (including coordination across time zones), and ensure effective remote supervision, all of which can impede smooth collaboration and control. In addition, the GCC’s activities are exposed to external risks in the region, such as geopolitical uncertainties, shifts in local regulatory policy, or economic instability. Such factors could disrupt our business processes or unexpectedly increase operating costs. We also depend heavily on local infrastructure and technology systems at the GCC. These systems may be vulnerable to outages, cyber-security threats, natural disasters, or other disruptions beyond our direct control. Any significant interruption in our India center’s operations, for example, a prolonged network blackout, political unrest, or a security breach, could impair our ability to serve clients in a timely and reliable manner. This, in turn, might lead to reputational damage, client dissatisfaction, and financial losses.
The success of our GCC strategy also hinges on human capital factors principally, our ability to attract and retain skilled employees in India. The technology and financial services labor market in India is competitive, and demand for experienced professionals may outpace supply. As a result, we risk facing staff attrition or upward pressure on wages, which could erode the cost advantages we sought through offshoring. If turnover at the GCC is higher than expected, we could lose critical knowledge and see productivity decline, while having to incur higher recruitment and training costs. Additionally, we must effectively integrate GCC’s operations with our global processes and maintain the same quality and compliance standards as in our other locations. Managing a geographically distant team requires considerable effort in knowledge transfer, process alignment, and quality control. Any failure to synchronize the India center’s activities with our broader operations or drop in the quality of services provided by the GCC, could undermine our overall efficiency and client service levels. Significant problems with the GCC could have a material adverse effect on our business operations, financial condition, and results of operations.
M&A Execution and Integration Risks. Our ability to derive value from mergers, acquisitions, and strategic partnerships is uncertain, especially when integrating large or cross-border transactions. If we cannot smoothly combine acquired businesses into our operations, we may fail to realize expected benefits, and our financial results could suffer.
We have pursued acquisitions, divestitures, joint ventures, and alliances as part of our growth strategy, and each such deal carries significant risks and uncertainties. Combining or separating business units is inherently complex: we must merge or carve out accounting and data systems, align management controls, and integrate relationships with clients, counterparties, and vendors. Large acquisitions can strain our resources and attention, particularly if they involve geographically dispersed operations or partial ownership structures. In some cases, we acquire less than 100% of a company or enter joint ventures, which means we rely on systems and personnel we don’t fully control and must cooperate with outside partners. Any conflicts or disagreements with joint venture or minority partners can further complicate decision making and undermine the intended benefits of the deal. There is also no guarantee that transactions will yield the synergies or strategic objectives anticipated. If we fail to integrate an acquired business effectively, or if a divestiture or restructuring proves more costly or complicated than expected, our operations and financial condition could be materially and adversely affected.
The risks are amplified for acquisitions that expand our geographic footprint or involve cross-border operations. Integrating a business in a new geography requires managing teams, systems, and facilities that are geographically separated, and it demands blending different corporate cultures and business practices. We must also ensure compliance with foreign laws and regulatory requirements, which may be quite different from those in our home market. Cross-border deals introduce currency exchange risk (e.g., if the local currency fluctuates against the U.S. dollar) and can expose us to differences in how intellectual property rights are enforced, local market consumer preferences, and other nuances of operating in a new region. Moreover, general economic or political conditions in the new territory can impact the success of the acquisition – for instance, if a country’s economy weakens or its regulatory climate shifts, the business we bought there might underperform expectations. Moreover, we utilize multiple business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information. All these factors can make it harder to achieve the growth or efficiency goals that motivated the transaction in the first place.
In 2025, we agreed to acquire a 57.5% majority stake in Stratos Wealth Holdings, a U.S.-based wealth management firm, for approximately $544.0 million. Stratos operates an extensive network of over 350 financial advisors and has an affiliate in Mexico that we have the opportunity to acquire and one which we expect to close in 2026, subject to satisfactory due diligence and regulatory approval. We formed SEI-Eclipse Holding Company, LLC (SEI-Eclipse) as the holding company for this partnership. The transaction involves significant integration risks, including consolidating financial statements, and aligning technology platforms, compliance processes, and service models, as well as managing cultural differences and retaining key talent. Cross-border complexities related to the Mexico affiliate that we may also acquire add regulatory and operational challenges. Failure to integrate effectively, consolidate financial statements in a timely and accurate manner,
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secure regulatory approvals, or retain advisors could delay or reduce financial benefits or anticipated synergies. Stratos continues to operate under its existing brand, with its executive management team having control over the exercise of certain minority interest and governance rights, which may limit our ability to fully control integration.
More broadly, acquisitions carry inherent risks, including unforeseen liabilities, technology gaps, and resource diversion. If integration costs exceed expectations or synergies do not materialize, our business, financial condition, and results of operations could be adversely affected.
Operational Risks
Third-Party Service Provider Dependencies. We rely on third-party suppliers for essential functions, including software development, processing, support, licensed software, software-as-a-service platforms, business process outsourcing, cloud hosting, and the Automated Clearing House (ACH) network. This reliance is expected to continue and may increase over time.
The financial entities and technology systems we depend on have become increasingly interconnected and complex.Third-party financial entities and technology systems upon which we rely are becoming more interdependent and complex. Consolidation among clearing agents, exchanges, and clearing houses, combined with heightened interconnectivity among financial institutions and central agents, has amplified the risk of operational failure at both individual and industry-wide levels. Accelerated integration timelines further elevate these risks.
A failure by a third-party provider could impair our ability to deliver contractual services, process transactions accurately, or meet regulatory obligations. If a provider is unable or unwilling to perform adequately, we may incur significant costs to internalize services, implement alternatives, or compensate clients for resulting losses. Breakdowns in third-party systems or unauthorized actions by consultants and subcontractors could lead to financial loss, business disruption, regulatory sanctions, or reputational harm. We also depend on critical market infrastructure, such as clearing and settlement systems like the Depository Trust Company (DTC). Disruptions in these systems could hinder our ability to execute transactions, meet client obligations, and maintain liquidity, creating systemic risks that could materially affect operations.
Additionally, we rely on investment sub-advisers to manage significant portions of assets within our programs. Failures in oversight or misconduct by these firms, including regulatory noncompliance or fraud, could result in financial loss, sanctions, or reputational damage. Transitioning assets between sub-advisers or insourcing these functions may also present operational challenges.
Further, we depend on third-party pricing services to value securities in our investment products. Inaccurate valuations, particularly for securities without readily available market prices, could adversely affect revenues and earnings from assets under management.
Finally, many investment advisors distributing our products are affiliated with independent broker-dealers or networks that require approval of our offerings. Failure to obtain or maintain these approvals could negatively impact our ability to market and distribute investment products.
Process Errors (Fund Accounting, Investment Operations, Pricing Services). Our operations involve complex processes that require accuracy and judgment, particularly in fund accounting, investment operations, and pricing services. These activities include manual trade placement and other transaction processing steps, which carry inherent risk of human error. Mistakes in trade execution or manual processing could result in financial losses, regulatory issues, and reputational harm.
Valuations of certain assets depend on active markets and involve considerable judgment. If these valuations prove inaccurate, our revenues and earnings from assets under management could be adversely affected. If these valuations prove to be inaccurate, our revenues and earnings from assets under management could be adversely affected.
Operational Resilience (Business Continuity and Disaster Recovery). Our ability to deliver products and services depends on the uninterrupted functioning of our systems and those of other participants in the global financial system. Our continued success also depends in part on our ability to protect our proprietary technology and solutions and to defend against infringement claims of others. These operations are highly interconnected, and many transactions involving our products rely on multiple parties to move funds and exchange information. A disruption, whether due to operational failure, cyberattack, or other causes, at any point in this chain could impair our ability to process transactions, obtain or provide information, and deliver services. A significant disruption could result in reputational damage, client loss, revenue decline, and additional costs, all of which could materially affect our business, results of operations, and financial condition.
We employ a comprehensive risk and control framework, including financial, credit, operational, compliance, and legal reporting systems, internal controls, and management review processes. However, these strategies and models cannot anticipate every economic or operational outcome. As our business evolves and markets change, our risk management processes may not fully adapt. Many of our methods rely on historical data and management judgment, which may not predict future exposures.
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Additionally, reliance on models introduces risks of design flaws, inaccurate inputs, or unauthorized access that could lead to unapproved changes. Recent market dislocations underscore the limitations of historical data in managing risk. Consequently, we may incur losses despite our risk mitigation efforts.
While we maintain business continuity, disaster recovery, and security response plans, these measures may not fully mitigate all risks. Our operations could be adversely affected by disruptions to infrastructure supporting our business and communities where we operate, primarily the Philadelphia metropolitan area, London, and Dublin. Potential disruptions include physical site access issues, cyber incidents, terrorist activities, pandemics, natural disasters, severe weather, electrical outages, environmental hazards, and failures of critical systems or third-party services.
Although we employ backup systems for data, these may be unavailable or incomplete following a disruption, and recovery could be costly or unsuccessful, adversely impacting our business.
Rapid Growth and Capacity Constraints. Growth of our business may increase costs and regulatory risks.Growth of our business could increase costs and regulatory risks. Expanding platforms, integrating acquisitions, and partnering with other firms present financial, managerial, and operational challenges. Significant expenses may arise from these initiatives, and profitability could suffer if revenues do not offset associated costs.
As we expand digital capabilities, including payment solutions, we face heightened cybersecurity and fraud risks. Increased digital transactions elevate threats of data breaches, identity theft, and sophisticated cyberattacks, which could result in financial losses and reputational harm. Expansion also requires enhanced compliance, risk management, and internal controls, as well as additional personnel. Failure to implement adequate procedures could expose us to material losses or regulatory sanctions.
Strategic acquisitions introduce further risks, including demands on employees, new regulatory requirements, technology integration challenges, potential impairment of goodwill or intangible assets, and undisclosed liabilities.
Subsidiary expansions in areas without a primary regulator, yet subject to SEC and FFIEC oversight, create unique governance and compliance challenges. Aligning technology infrastructure with evolving regulatory expectations may require significant investment and operational changes.
Our growth strategy includes broadening our presence in the EMEA region and entering new geographic markets, such as the APAC region, which presents opportunities but also introduces additional complexity. Broadening our presence in EMEA and expansion into APAC requires navigating diverse regulatory environments, cultural differences, and operational scalability challenges. These efforts may involve significant upfront investment and could take time to achieve profitability. Furthermore, if we fail to close or restructure underperforming or unprofitable locations promptly, we may incur ongoing costs that negatively impact margins and overall financial performance.
Certain initiatives may involve new markets, asset classes, and counterparties outside our traditional base, exposing us to unfamiliar risks, greater regulatory scrutiny, and reputational concerns. Failure to manage these risks effectively could result in decreased earnings, regulatory sanctions, financial losses, and harm to our competitive position in an increasingly complex and rapidly evolving financial services landscape.
Technology, Innovation & Cyber Risks
Cybersecurity Threats. We are exposed to significant cybersecurity risks. Like other global financial service providers, we experience millions of cyber-attacks on our systems, networks, and technology assets daily. Like other global financial service providers, we experience millions of cyber-attacks on our computer systems, software, networks and other technology assets on a daily basis. Cybersecurity threats have increased due to the proliferation of new technologies, the use of internet and mobile platforms for financial transactions, and the growing sophistication of organized crime, hackers, terrorists, and foreign state actors. The commoditization of artificial intelligence (AI) and advanced cyber tools has lowered the barrier for less sophisticated actors to launch highly effective attacks, including automated phishing, credential harvesting, and exploitation of zero-day vulnerabilities.
Cybersecurity risks may also arise from human error, insider malfeasance, accidental technological failure, or delays in implementing vendor-provided security patches. Third-party vendors and service providers present additional risk, particularly where their systems fall outside our direct control. A successful cyber-attack or technology failure, whether targeting us or a critical third party, could result in disruption of operations, misappropriation or destruction of sensitive data, regulatory violations, financial losses, litigation exposure, and severe reputational harm. Despite our investment in advanced security measures, there is no assurance that these strategies will prevent or fully mitigate the impact of evolving cyber threats.
Artificial Intelligence, Machine Learning, and Automation. We are exposed to risks associated with the adoption of artificial intelligence (AI), machine learning (ML), and automation technologies. We are exploring how to expand our use of these technologies across investment analytics, client servicing, fraud detection, operational efficiency, and automated trading. While these tools offer significant benefits, they also present risks, including model bias or flawed assumptions
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leading to inaccurate outputs, over-reliance on historical data that may not predict future conditions, and operational disruptions caused by automation failures. These technologies may also be vulnerable to unauthorized access or manipulation, adversarial attacks targeting ML models, and systemic errors that propagate rapidly through automated processes. Regulatory frameworks governing AI and algorithmic decision-making are evolving and may impose additional compliance obligations or restrictions on our use of these technologies. Failure to manage these risks effectively could result in operational errors, regulatory sanctions, reputational harm, and financial losses.
Tokenization. We are exposed to risks associated with tokenization of assets. We are exploring tokenization of funds and other financial instruments to enhance efficiency and transparency. Tokenization relies on distributed ledger technology (DLT), which introduces unique risks, including uncertain and evolving regulatory frameworks across jurisdictions, custody and settlement challenges for tokenized assets, cybersecurity vulnerabilities in smart contracts and digital wallets, and liquidity and valuation risks in markets that lack depth or standardized practices. Integration with existing platforms and legacy systems may present operational challenges and increase costs. Smart contracts, which govern tokenized transactions, may contain errors or vulnerabilities and their enforceability under current legal frameworks remains uncertain. Divergent regulatory regimes across global markets could create compliance burdens and limit scalability. Tokenization also introduces custody risks related to private key management, and failures in these controls could result in irreversible asset loss. Market adoption may be slower than anticipated, and liquidity constraints could impair the economic viability of tokenized products. Additionally, reliance on third-party blockchain platforms and service providers exposes us to operational and cybersecurity risks beyond our direct control. Tokenization may also increase exposure to financial crime risks, requiring enhanced AML and KYC compliance measures. Failure to address these challenges could adversely affect our ability to launch or scale tokenization initiatives, impair client confidence, and expose us to financial and reputational harm.
Open-Source Software Risks. We rely on open-source software components in the development and operation of certain products and services. While open-source software offers flexibility and cost advantages, it also introduces risks, including security vulnerabilities, inconsistent maintenance, and potential exposure to malicious code. Open-source components may not be subject to the same rigorous testing and security standards as proprietary software, increasing the risk of exploitation by cyber attackers. In addition, failure to comply with open-source license terms could result in legal liability, reputational harm, or restrictions on our ability to use or distribute certain technologies. The widespread use of open-source software in the financial services industry also creates systemic risk, as vulnerabilities in widely adopted libraries can propagate across multiple platforms. We may be required to expend significant resources to monitor, patch, and remediate vulnerabilities in open-source components. Failure to adequately manage these risks could adversely affect our operations, regulatory compliance, and financial performance.
Data Privacy and Protection. We are exposed to risks related to data privacy and protection. We store, transfer, and process large amounts of personally identifiable information of our clients (and their customers) to deliver our products and services. It is possible our security controls over personal data, our training of employees on data security, our vendor due diligence and oversight processes, and other practices we follow may not prevent the improper disclosure or misuse of personal data that we or our vendors store and manage. Improper disclosure or misuse of personal data could harm our reputation, lead to legal exposure, or subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. Perceptions that the collection, use, and retention of personal information is not satisfactorily protected could inhibit sales of our products or services. Additional security measures we may take to address customer concerns may cause higher operating expenses or hinder growth of our products and services.
Intellectual Property Risk. We are exposed to intellectual property risks.We are exposed to intellectual property risks. Our continued success depends in part on our ability to protect our proprietary technology, trademarks, copyrights, and solutions, and to defend against infringement claims by others. Our continued success also depends in part on our ability to protect our proprietary technology and solutions and to defend against infringement claims of others. We primarily rely upon trade secret law, trademark and copyright protections, software security measures, and contractual confidentiality restrictions with employees, vendors, and customers. We primarily rely upon trade secret law, software security measures, copyrights and confidentiality restrictions in contracts with employees, vendors and customers. Our industry is characterized by the existence of numerous trade secrets, copyrights, trademarks, and the rapid issuance of patents, as well as frequent litigation based on allegations of infringement or other violations of intellectual property rights. Our industry is characterized by the existence of a large number of trade secrets, copyrights and the rapid issuance of patents, as well as frequent litigation based on allegations of infringement or other violations of intellectual property rights of others. Unauthorized use of our trademarks or failure to maintain trademark protections could dilute our brand and harm our reputation. Similarly, infringement of our copyrights or inadvertent use of third-party copyrighted material could expose us to legal liability. A successful assertion by others of infringement claims or a failure to maintain the confidentiality and exclusivity of our intellectual property may have a material adverse effect on our business and financial results.
System Outages and Downtime. We are exposed to risks of outages, data losses, and disruptions of services. We are exposed to risk of outages, data losses, and disruptions of services. We maintain and process data for our clients that is critical to their business operations. The products and services used to process data are increasingly complex, and maintaining, securing, and expanding this infrastructure is expensive. The products and services used to process that data is increasingly complex, and maintaining, securing, and expanding this infrastructure is expensive. Inefficiencies or operational failures, including temporary or permanent loss of customer data, damaged software codes, delayed or inaccurate processing of transactions, insufficient Internet connectivity, or inadequate storage and compute capacity, could diminish the quality of our products, services, and user experience resulting in contractual liability, claims
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by customers and other third parties, regulatory actions, damage to our reputation, and loss of current and potential users, each of which may adversely impact our consolidated financial statements. The costs necessary to rectify these problems may be substantial and may adversely impact our business.
Technology Disruption and Software Development Delays. We may experience software defects, development delays, or installation difficulties, which would harm our business and reputation and expose us to potential liability.We may experience software defects, development delays or installation difficulties, which would harm our business and reputation and expose us to potential liability. A significant portion of our revenue is dependent upon our ability to develop, implement, maintain, and enhance sophisticated software and computer systems. We may encounter delays when developing new applications and services. Further, the software underlying our services may contain undetected errors, vulnerabilities, or defects when first introduced or when new versions are released. Further, the software underlying our services may contain undetected errors or defects when first introduced or when new versions are released. We may also experience difficulties in installing, integrating, or supporting our technology on systems or with other programs used by our clients. We may also experience difficulties in installing or integrating our technology on systems or with other programs used by our clients. Likewise, our clients may make a determination to delay or cancel the integration of our new applications and services. Defects in our software, failure to adequately maintain and enhance our software products, errors or delays in the processing of electronic transactions, or other difficulties could result in interruption of business operations, delay in market acceptance, additional development and remediation costs, diversion of technical and other resources, loss of clients or client data, negative publicity, or exposure to liability claims. Defects in our software, failure to adequately maintain and enhance our software products, errors or delays in the processing of electronic transactions or other difficulties could result in interruption of business operations, delay in market acceptance, additional development and remediation costs, diversion of technical and other resources, loss of clients or client data, negative publicity or exposure to liability claims. Although we attempt to limit our potential liability through disclaimers and limitation of liability provisions in our license and client agreements, we cannot be certain that these measures will successfully limit our liability.
Financial & Market Risks
Earnings and Volatility (including LSV impact). Our earnings and cash flows are subject to volatility driven by multiple factors, including the performance of LSV Asset Management (LSV), in which we maintain a minority ownership interest. LSV is a significant contributor to our earnings, and we also receive partnership distribution payments from LSV on a quarterly basis that contribute to our operating cash flows. Volatility in the capital markets or poor investment performance by LSV, whether on a relative or absolute basis, could result in a significant reduction in its assets under management and revenues, as well as a decline in performance fees. Volatility in the capital markets or poor investment performance on the part of LSV, on a relative basis or an absolute basis, could result in a significant reduction in their assets under management and revenues and a reduction in performance fees. In addition, our earnings and cash flow may be impacted by regulatory capital requirements applicable to certain subsidiaries, which may restrict the amount of capital available for distribution to the holding company. We also engage in strategic investments and acquisitions, such as our recent acquisition of Stratos, which require significant upfront expenditures and may not generate anticipated returns within expected timeframes. These factors, combined with potential increases in technology modernization costs and global expansion initiatives, could result in fluctuations in our earnings and operating cash flows. Failure to manage these risks effectively may negatively impact our financial condition and results of operations.
Interest Rate, Currency, and Tax Changes. Changes in interest rates, currency exchange rates, or tax laws could adversely affect our financial condition and operating results. While interest rates have recently declined, future movements, whether upward or downward, may impact our business. Rising rates could negatively affect the value of our fixed-income investment securities, including Government National Mortgage Association (GNMA) mortgage-backed securities held to satisfy regulatory requirements. Conversely, declining rates may reduce yields on cash balances and fixed-income investments, compress margins, and increase reinvestment risk. Currency fluctuations could negatively affect our revenues and earnings as we expand globally and operate in multiple jurisdictions. Additionally, changes in tax laws or interpretations of existing tax regulations may adversely affect our effective tax rates and future results of operations. We are subject to examinations by tax authorities in various jurisdictions, and the outcome of these examinations could result in additional tax liabilities. There can be no assurance that changes in interest rates, currency movements, or tax regulations will not have a material adverse effect on our business, financial condition, or results of operations.
Covenant Compliance. We are subject to financial and non-financial covenants under our senior unsecured revolving credit facilities. These covenants include restrictions on transactions with affiliates, the incurrence of liens, and certain types of indebtedness. Historically, our prior $325.0 million facility included a financial covenant limiting our leverage ratio to a maximum of 2.25× EBITDA. In August 2025, we entered into a new $500.0 million five-year senior unsecured revolving credit facility, which replaced the prior $325.0 million facility. The new facility extended the maturity to 2030, maintained similar non-financial covenants, and relaxed the leverage ratio covenant to 3.0× EBITDA, with a temporary allowance up to 3.5× under certain conditions. While these changes increase our borrowing capacity and flexibility, we remain subject to covenant compliance risk. If we fail to maintain compliance with these covenants, whether due to adverse operating results or other factors, we could be required to seek waivers or amendments, incur additional costs, or face restrictions on our ability to access credit, which could materially and adversely affect our liquidity and financial condition.Given our global footprint and the high volume of transactions we process, the large number of clients, partners, vendors and counterparties with which we do business, and the increasing sophistication of cyber-attacks, a cyber-attack or information security breach could occur and persist for an extended period of time without detection.
Holding Company Structure Implications. We are organized as a holding company and operate through a network of wholly- and partially-owned subsidiaries and affiliates. We are organized as a holding company, a legal entity separate and distinct from our operating entities. As a legal entity distinct from our operating entities, we do not engage in direct business operations. Instead, we rely on dividends and other payments from our subsidiaries to meet our obligations, including paying dividends to shareholders, repurchasing our common stock, and funding corporate
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expenses. Many of our subsidiaries are subject to regulatory requirements or other restrictions that may limit the amounts they can pay in dividends or other payments to us. Changes in applicable laws, regulatory actions, or other circumstances could further restrict their ability to make such payments. There can be no assurance that our subsidiaries will be able to make timely or sufficient payments to us, which could adversely affect our liquidity, financial condition, and ability to meet our corporate obligations.
Liquidity Risk (Including Alternative Investments). Our business is subject to risks arising from liquidity constraints. Maintaining adequate liquidity is crucial to our business operations, including transaction settlement and custody requirements. Liquidity risk may arise in periods of market stress, particularly in alternative investments such as private credit, infrastructure, and other illiquid asset classes. We may sometimes be required to fund timing differences arising from the delayed receipt of client funds associated with the settlement of client transactions in securities markets which could negatively impact liquidity. These timing differences are funded either with internally generated cash flow or, if needed, with funds drawn under our revolving credit facilities. Failure to effectively manage liquidity risk or adapt to changing market conditions could result in reduced revenues, increased redemption activity, and reputational harm.
Investment & Product Risks
Investment Performance and Fee Pressure. Our investment management business depends on the performance of our products and strategies. Poor investment returns, whether due to market conditions, underperformance relative to benchmarks or competitors, or errors in investment models, could reduce our ability to retain assets and attract new clients. This may lead to lower management and incentive fees.
Client preferences are evolving rapidly toward: AI-driven strategies and hyper-personalized solutions, sustainable and ESG-focused investments and alternative asset classes such as private credit and infrastructure. Failure to adapt our offerings to these trends could result in asset outflows and fee compression. Additionally, increased competition from passive products and low-cost providers continues to exert downward pressure on fees.
Insourcing Investment Functions and Operational Complexity. We have transitioned certain previously outsourced or sub-advised investment functions to internal management, increasing our direct responsibility for portfolio oversight and operations. While insourcing can enhance control and reduce third-party costs, it also introduces greater operational complexity and execution risk. To manage these functions effectively, we must expand internal capabilities, systems, and governance. If our teams or processes fail to meet required standards, we could experience investment underperformance or operational errors that directly affect clients. This shift creates new fixed costs and operational challenges, such as trading errors, valuation inaccuracies, or compliance failures. Without robust internal controls and specialized talent, we risk regulatory sanctions, client dissatisfaction, and reputational harm. In short, by internalizing sub-advisor functions, we assume greater direct risk for investment outcomes and operational integrity, and any failure in these areas could materially harm our performance and reputation.
Proprietary Capital Deployment and Conflicts of Interest. This year, we began investing a portion of our corporate capital in various investment strategies rather than holding excess cash. Deploying SEI’s capital into markets introduces new risks to our balance sheet and earnings. Unlike cash, these investments fluctuate with market conditions, exposing us to market and credit risk. Poor performance of proprietary investments, whether in equity, fixed income, or other assets, could lead to financial losses and increased earnings volatility. For example, a decline in the market value of securities we hold would reduce income and could materially affect financial results, particularly during periods of market stress. Additionally, investing our own capital in products or strategies we manage creates potential conflicts of interest. We must ensure decisions do not favor SEI’s proprietary portfolios over client portfolios. Any perception of prioritizing our own investments, such as allocating desirable opportunities to benefit our balance sheet at clients’ expense, could damage our reputation and erode trust. Regulators closely monitor such conflicts and require rigorous disclosure and management. Failure to manage these conflicts or comply with applicable regulations could result in enforcement actions, penalties, or mandated changes to our practices. In summary, while deploying corporate capital offers potential upside, it introduces significant risks: market losses can directly impact earnings, and misalignment between our investments and client interests could lead to regulatory sanctions and reputational harm. Outside the United States, applicable laws, rules and regulations similarly require designated types of financial institutions to implement compliance programs to address regulatory requirements related to 19money laundering, financial crime and the financing of terrorist activities. Strong risk management and conflict-of-interest controls are essential as we expand proprietary investing.
Fiduciary Risk. We provide fiduciary management services to institutional clients, including defined benefit and defined contribution plans. The ongoing decline in defined benefit plans in the U.S., U.K., and Canada has reduced revenue opportunities in this segment. Fee sensitivity and competition for fiduciary services have intensified, particularly as clients shift toward passive strategies and lower-cost solutions. Our growth strategy includes expanding into global markets and focusing on not-for-profit organizations, but these initiatives may not fully offset revenue declines.
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Regulatory & Legal Risks
Regulatory Changes and Compliance Obligations. The financial services industry is subject to extensive and evolving regulations that impact our business globally. Failure to comply with applicable laws, regulations, rules, and codes of conduct could result in legal or regulatory sanctions, material financial loss (including fines, penalties, judgments, damages, or settlements), and reputational harm. Compliance obligations include privacy, anti-money laundering (“AML”), anti-corruption, and sanctions requirements, as well as operational resilience and consumer protection standards.
We operate under the oversight of multiple U.S. regulators, including the SEC, FINRA, CFTC, NFA, DOL, OCC, and state banking authorities, and our parent company is regulated by the FFIEC and subject to SEC oversight. Our foreign subsidiaries are regulated in jurisdictions such as the United Kingdom, Ireland, Canada, Luxembourg, South Africa, and the Cayman Islands. Regulatory initiatives often differ across jurisdictions, creating complexity and potential competitive disadvantages for multi-jurisdictional operations. Compliance with existing and emerging regulations, responding to examinations, and adapting to supervisory activities can significantly impact our operations, increase costs, and affect our ability to provide certain products or services. Rapid regulatory change also creates staffing challenges, as specialized expertise is required to manage compliance effectively.
Financial Crime, Sanctions, and Anti-Corruption. We are subject to stringent AML and counter-terrorist financing requirements under laws such as the Bank Secrecy Act, the USA PATRIOT Act, and the Anti-Money Laundering Act of 2020. These laws require financial institutions to implement AML programs, verify customer identities, and monitor and report suspicious activity. Recent developments extend AML obligations to registered investment advisers, requiring formal programs with designated compliance officers, training, and independent testing.
Outside the U.S., similar requirements apply across our global operations. Failure to maintain comprehensive AML programs could result in significant fines and enforcement actions. We are also subject to sanctions programs administered by authorities such as OFAC and anti-corruption laws including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. Violations of these laws could lead to severe civil and criminal penalties, regulatory enforcement, and reputational damage.
Privacy and Data Protection. Our businesses are subject to privacy and data protection laws, including the Gramm-Leach-Bliley Act and the Fair and Accurate Credit Transactions Act in the U.S., the EU’s General Data Protection Regulation (GDPR), Canada’s PIPEDA, and similar laws in other jurisdictions. These laws impose strict requirements on data handling, cross-border transfers, and cybersecurity, with significant fines and litigation risk for noncompliance. Increasing global scrutiny of personal data practices may lead to stricter regulations, limiting information sharing among affiliates or with third parties and increasing compliance costs.
Conflicts of Interest. As a global financial services firm serving diverse clients, we face potential conflicts of interest in the normal course of business, including situations involving divergent interests among clients, between us and clients, or between employees and the firm. Our multi-channel business model and acquisitions may heighten these risks. While we maintain policies and controls to identify and manage conflicts, these measures may not prevent all issues. Regulatory bodies, such as the SEC, have increased focus on conflicts disclosure, and failure to manage conflicts effectively could result in litigation, enforcement actions, reputational harm, and loss of business.
As a publicly traded company, we also face conflicts of interest involving our directors and senior executives. These conflicts can arise when directors have outside business interests, serve on other boards, or hold personal investments that intersect with our business activities. Such situations may create perceived or actual conflicts between their fiduciary duties to shareholders and their personal or professional interests. We are subject to stringent governance and disclosure requirements under U.S. securities laws and SEC regulations, which mandate transparent reporting of related-party transactions and director independence. Failure to properly identify, disclose, and manage these conflicts could lead to regulatory scrutiny, shareholder litigation, reputational damage, and potential restrictions on our ability to execute strategic initiatives.
Litigation, Examinations, and Investigations. Our global operations expose us to a wide range of legal and regulatory risks, including litigation, governmental inquiries, and supervisory examinations. These risks arise from the complexity of our business model, the breadth of our product offerings, and the jurisdictions in which we operate. Litigation, examinations, and investigations represent a material risk to our financial condition, reputation, and ability to execute our strategy. The frequency and scope of these matters have increased industry-wide, and given our footprint and product mix, we expect these risks to remain significant.
We are currently subject to lawsuits and regulatory scrutiny, and these matters can result in significant financial exposure, reputational harm, and operational disruption. Litigation may involve class actions or large institutional plaintiffs, which can amplify potential damages and settlement costs.
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Beyond active litigation, our investment management and administration activities involve complex functions such as recordkeeping, pricing, compliance monitoring, and distribution processing. Errors or misrepresentations in these areas could lead to regulatory sanctions, client claims, and reputational damage. Additionally, reliance on models and tools for investment decisions introduces risk if design flaws or incorrect assumptions go undetected, potentially resulting in fiduciary breaches and substantial liabilities.
Regulatory examinations and investigations, whether routine or triggered by specific events, can impose significant costs, require extensive remediation efforts, and divert management attention. These activities may also lead to enforcement actions, fines, or mandated changes to our business practices. The global nature of our operations means we face overlapping and sometimes conflicting regulatory regimes, increasing the complexity and cost of compliance.
Shareholder Activism. We may be subject to shareholder activism, which can cause material disruption to our business. Activist campaigns often focus on operational changes and governance issues, and their global expansion increases risks for multinational firms. Such efforts could result in substantial costs, diversion of management attention, and adverse impacts on stock price. Additionally, ESG ratings by third-party organizations may influence brand perception in ways we cannot control.
External & Environmental Risks
Geopolitical Instability. Geopolitical conflicts remain a significant source of risk to global business operations, with major wars ongoing and new tensions emerging. The Russia–Ukraine war is still unresolved, continuing to roil commodity markets and geopolitical stability. In the Middle East, the Israel–Hamas war has transitioned from active combat to a fragile ceasefire, yet regional volatility persists, recently drawing in Iran and other actors. Meanwhile, emerging flashpoints, notably the strategic rivalry between the U.S. and China, contribute to trade fragmentation and technological decoupling, posing longer-term supply chain and market risks. State-sponsored cyber threats have also escalated in tandem with these conflicts, threatening corporate and financial infrastructure.
Unforeseen or Catastrophic Events. We may also incur losses because of unforeseen or catastrophic events, including pandemics, extreme weather, or other natural disasters. These events can disrupt economic activity and impair our ability to operate effectively, leading to operational difficulties such as travel restrictions and workforce disruptions, increased costs and liquidity pressures, and adverse effects on revenue and profitability.Climate change concerns and incidents could disrupt our businesses, adversely affect the profitability of certain of our investments, adversely affect client activity levels, adversely affect the creditworthiness of our counterparties, or damage our reputation. The severity of these impacts depends on factors such as the duration of the event, government responses, and broader economic conditions, including inflation and labor market disruptions.
Climate Change and ESG Considerations. Climate change and ESG considerations present additional risks that could affect our operations, financial performance, and reputation. Extreme weather events may disrupt our operations or damage assets, including real estate investments, while the transition to a low-carbon economy may affect client financial health, reduce revenues, and increase credit risk. Our reputation and client relationships may also be harmed by our involvement—or perceived involvement—in industries linked to climate change. Regulatory developments, such as the EU’s ESG fund naming guidelines and U.S. state-level ESG enforcement actions, increase compliance complexity, and the lack of global harmonization in ESG standards creates fragmentation and competitive challenges. Stakeholder expectations regarding ESG commitments are evolving rapidly, and failure to meet ESG targets or allegations of “greenwashing” could lead to litigation, regulatory enforcement, and reputational damage. The politicization of ESG practices amplifies these risks.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We use a risk management framework based on applicable laws and regulations, and informed by industry standards and industry-recognized practices, for managing cybersecurity risks within our products and services, infrastructure, and corporate resources. This risk management framework is implemented through our Cybersecurity Program. Our Cybersecurity Program is designed to provide a framework for assessing the potential threats to the security and integrity of our systems, networks, databases, applications, electronic information and intellectual property and developing
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appropriate defenses based on these assessments. We routinely invest to develop and implement numerous cybersecurity programs and processes, including risk management and assessment programs, security and event monitoring capabilities, detailed incident response plans, and other advanced detection, prevention and protection capabilities, including practices and tools to monitor and mitigate insider threats. We regularly assess cybersecurity risks to identify and enumerate threats to us and vulnerabilities these threats can exploit to adversely impact our business operations. In some instances, we engage third parties to conduct or assist us with conducting cybersecurity risk assessments. We have developed and implemented a security infrastructure designed to ensure infrastructure and data confidentiality, integrity, and availability.
Key components of our Cybersecurity Program include, but are not limited to, the following:
•Information Security Governance: We designed what we believe are appropriate measures, policies and procedures to ensure that information and information systems are properly protected given the nature of our businesses and the size and complexity of our organization, including our reliance on third parties;
•Organization: The Information Security team, led by the Chief Information Security Officer (CISO) , is responsible for implementing and managing the Cybersecurity Program with executive oversight from the Chief Executive Officer and Chief Financial Officer/Chief Operating Officer, as well as oversight from our Board of Directors. Our CISO has extensive cybersecurity knowledge and skills gained from over 27 years of work experience on the information security team at SEI. In addition to the CISO’s cybersecurity experience, he has certifications in risk and information systems control along with information systems auditing
•Cybersecurity Controls: We have implemented what we believe are appropriate preventative measures to protect SEI’s infrastructure, systems, and data. These measures include network architecture segmentation, system and platform hardening, in-transit and at-rest encryption, dynamic security awareness training, regular vulnerability scanning and penetration testing, firewalls, web proxy filtering, and multifactor authentication, all of which we constantly evaluate and upgrade as we believe is needed based on our risk assessments;
•Managed Detection and Response: Our security operations center’s uninterrupted monitoring processes utilize tools such as network and host-based intrusion detection systems, endpoint detection and response technology, distributed denial of service detection and mitigation service, and centralized security and information event management (SIEM). These efforts are further supplemented by signals operations and threat hunting that provide the incident responders the ability to write custom detections to complement commercial technology controls and execute triage/analysis, threat intelligence, and response;
•Independent Audits: We are subject to industry regulatory examinations. Our internal audit function provides independent assessment and assurance on the overall operations of our Cybersecurity and Privacy Programs and the supporting control frameworks. We also engage various reputable third parties to perform independent auditing and testing as well as network and web application penetration testing;
•Risk Management Oversight: Enterprise Risk Management, through the Enterprise Risk Committee, provides independent monitoring and reporting of cybersecurity risks commensurate with our Technology Risk Program. In addition, we leverage our Third Party Risk Management, Insider Threats, Business Continuity and Disaster Recovery programs to supplement our Cybersecurity Program ; and
•Privacy Oversight: In addition to our Enterprise Risk Management functions, our Legal and Compliance team maintains a privacy risk management program to assess, manage and report privacy risks related to how we are collecting, using, sharing, and storing user data. Our Privacy team works with our Third Party Risk and Information Security teams to manage privacy-related issues.
Additional information about cybersecurity risks we face is discussed in Item 1A of Part I, “Risk Factors,” under the heading "Technology, Innovation & Cyber Risks" which should be read in conjunction with the information above.
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