Risk

The main risks of holding shUSD, and how Shores manages them.

Depositing in Shores involves risk, including the risk of losing some or all of what you deposit.

Risk	How Shores approaches it
Borrower default	Underwriting, conservative sizing, borrower equity, first liens, active servicing, first-loss reserve
Collateral value	Real property with an independent valuation [TBD: valuation standard]
Enforcement	First liens held for the benefit of the vault [TBD: security agent / trustee]
Smart contracts	Independent audit before launch and admin controls [TBD: audit firm, multisig, timelock]
Liquidity	No redemptions. Exit is on the secondary market, which may trade below NAV
Offchain operations	Segregated cells and independent oversight [TBD]
Regulatory	Restricted jurisdictions, identity checks, counsel review

Risk factors

Credit risk. Borrowers may pay late or not at all. Real property collateral and first liens reduce this risk but cannot remove it.

Collateral and enforcement risk. Property values can fall. Enforcing a lien takes time, costs money and depends on local law and courts. Recoveries can be less than the amount owed.

Yield risk. 8% is a target. The actual yield can be lower, including zero.

Liquidity risk. There are no redemptions. You exit by selling shUSD on the secondary market after the lockup. The price can be below NAV, and there may not be enough buyers.

Smart contract risk. Contracts can contain bugs or be exploited, even after an audit.

Offchain and counterparty risk. Loans, funds in transit, servicers, fiduciaries and banks are offchain. Their failure, fraud or error can cause losses.

Asset issuer risk. The digital dollar asset used for deposits can be frozen by its issuer, or lose its peg because of events outside Shores’ control.

NAV risk. NAV depends on valuations and reports from the offchain loan book. See NAV, oracles and reporting.

Concentration risk. An early vault may hold a small number of loans, so one default can have a large effect.

Regulatory risk. Laws can change and may restrict Shores or shUSD.

Total loss. You can lose everything you deposit.

The formal text is in shUSD risk disclosures.