What type of risk disclosure is required when including future performance data?

When it comes to including future performance data in communications, it is crucial to provide a clear warning that forecasts are not reliable indicators of future performance. This requirement is in place to ensure that investors or stakeholders are aware that projections are based on assumptions and can be influenced by a variety of factors beyond the control of the organization. By informing them that forecasts may not materialize as predicted, it emphasizes the uncertainty and volatility inherent in any predictive models. This enhances transparency and supports informed decision-making by offering a balanced view of potential outcomes.

The ability to manage expectations regarding future performance is fundamental in upholding regulatory standards and protecting investors. It not only aligns with good business practices but also helps to build trust between the organization and its audience. This type of disclosure is critical, especially in markets where optimism can lead to overvaluation or misinterpretation of an organization's actual performance.