DISCUSSION 1
General Dynamics Corporation Risk Discussion
Melissa K. Campbell
School of Business, Liberty University
Author Note
Melissa K. Campbell
I have no known conflict of interest to disclose.
Correspondence concerning this article should be addressed to Melissa K. Campbell.
Email: mcampbell53@liberty.edu
DISCUSSION 2
Introduction
General Dynamics Corporation primary customer is the United States government. Since
majority of their revenue is from the U.S. government, there are specific risks that are unique to
both General Dynamics and their industry. These risks will affect their common stock which in
turn can affect their investors. Per Hitcher, “Every business enterprise will have its own unique
attributes and risks, which can be incorporated into the rate of return.” (Hitcher, 2017). It is vital
to understand the company’s unique attributes to fully understand the scope of the specific risks.
Unique Attributes
Since 70% of General Dynamics consolidated revenue was from the U.S. government in
2021, there are some unique attributes for supporting them as a customer. (General Dynamics,
2021). U.S government contracts are highly regulated and there are stipulations that are put in
place within the contracts to protect the government which may increase the risk for the
company. General Dynamics also deal with sales and operations outside of the United States
which exposes them to different risks when working with foreign countries.
Specific Risks
Public companies must identify their rick factors that may impact their stocks annually
within the form 10-K as well as quarterly in the form 10-Q. As we identify specific risks for
General Dynamics, they disclose this information in item 1A in form 10-K and section N in 10-
Q. In form 10-K they group their risk based on their supporting industry’s.
U.S. Government
When working the U.S government, there is this sense of security that the government
always pays their bill. That is true to a certain extent. There are many limitations and restrictions
companies must abide by when supporting the U.S. government which can also increase some
DISCUSSION 3
risk for the company. Within the past few years, there has been many media attention on
government shutdowns. If the U.S. government does not pass on a budget, contract do not get
paid. The budget approval process occurs annually, even if the budget is approved on time, there
is always a delay when the funds are appropriated and when the government can pay their
contracts.
International Operations
When working with foreign countries, General Dynamics needs to be sensitive to and
impacts that may arise due to changes in a foreign government’s national policies, priorities,
budget, and the volatility in economics conditions. (General Dynamics, 2021). Specific risks
include, but are not limited to, foreign currency value risk, commodity price risk, and investment
risk. (General Dynamics, 2022).
Other Business and Operational Risks
Outside of government support and International Operations, General Dynamics has risks
involving acquisitions, joint ventures, and due to the rapid growth of technology, cyber security
events can impose a huge risk. (General Dynamics, 2021). One other risk that has impacted the
entire world was the coronavirus (COVID-19). The pandemic has affected how companies do
business and have had to adjust to rely on technology more to continue productivity by providing
employees a teleworking solution. As we enter the endemic, some companies are trying to return
back to ‘normal’ and others are adjusting to a new normal.
Impacts of Risks
General Dynamics risks can impact them both financially and legally. Working with the
U.S. government, if the budget is not passed, delayed, or not appropriated, this could result in
one or more of their programs to be reduced, delayed, or even terminated. (General Dynamics,
DISCUSSION 4
2021). When dealing with International Operations, foreign currency exchange may affect their
bottom line between receipts from the customers, paying the suppliers, and inter-company
transactions. (General Dynamics, 2022). Per General Dynamics 2022 Q1 10-Q filing, they “are
exposed to market risk” and “may use derivative financial instruments to hedge some of the
risks.”
DISCUSSION 5
References
General Dynamics. (2021). Form 10-K.
https://s22.q4cdn.com/891946778/files/doc_financials/2021/q4/2021-10-K-As-Filed-(2-
9-2022).pdf
General Dynamics. (2022). Form 10-Q.
https://s22.q4cdn.com/891946778/files/doc_financials/2022/q1/1Q22-10-Q-(4-27-
2022).pdf
Hitchner, J. (2017). Financial valuation: Applications and models (4th ed.). Wiley.
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