Capital One 2012 Annual Report Download - page 46

significant shortcomings, we could be materially adversely affected. Third parties with which we do business
could also be sources of operational risk, particularly in the event of breakdowns or failures of such parties’ own
systems. We may also be subject to disruptions of our operating systems arising from events that are wholly or
partially beyond our control, which may include, for example, computer viruses or electrical or
telecommunications outages, cyber-attacks, including distributed denial-of-service attacks discussed above,
natural disasters, other damage to property or physical assets or events arising from local or larger scale politics,
including terrorist acts. Any of these occurrences could diminish our ability to operate our direct banking
business, service customer accounts, and protect customers’ information, or result in potential liability to
customers, reputational damage, regulatory intervention and customers’ loss of confidence in our direct banking
business, any of which could result in a material adverse effect.
We May Fail To Realize All Of The Anticipated Benefits Of Our Mergers And Acquisitions.
We have engaged in merger and acquisition activity over the past several years and may continue to engage in
such activity in the future. For example, in 2012, we closed the ING Direct and 2012 U.S. card acquisitions. We
continue to evaluate and anticipate engaging in, among other merger and acquisition activity, additional strategic
partnerships and selected acquisitions of financial institutions and other financial assets, including credit card and
other loan portfolios.
Any merger, acquisition or strategic partnership we undertake will entail certain risks, which may materially and
adversely affect our results of operations. If we experience greater than anticipated costs to integrate acquired
businesses into our existing operations or are not able to achieve the anticipated benefits of any merger,
acquisition or strategic partnership, including cost savings and other synergies, our business could be negatively
affected. In addition, it is possible that the ongoing integration processes could result in the loss of key
employees, errors or delays in systems implementation, the disruption of our ongoing businesses or
inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain
relationships with partners, clients, customers, depositors and employees or to achieve the anticipated benefits of
any merger, acquisition or strategic partnership. Integration efforts also may divert management attention and
resources. These integration matters may have an adverse effect on us during any transition period.
In addition, we may face the following risks in connection with any merger, acquisition or strategic partnership:
•New Businesses and Geographic or Other Markets. Our merger, acquisition or strategic partnership activity
may involve our entry into new businesses and new geographic areas or other markets which present risks
resulting from our relative inexperience in these new businesses or markets. These new businesses or
markets may change the overall character of our consolidated portfolio of businesses and could react
differently to economic and other external factors. We face the risk that we will not be successful in these
new businesses or in these new markets.
•Identification and Assessment of Merger and Acquisition Targets and Deployment of Acquired Assets. We
cannot assure you that we will identify or acquire suitable financial assets or institutions to supplement our
organic growth through acquisitions or strategic partnerships. In addition, we may incorrectly assess the
asset quality and value of the particular assets or institutions we acquire. Further, our ability to achieve the
anticipated benefits of any merger, acquisition or strategic partnership will depend on our ability to assess
the asset quality and value of the particular assets or institutions we partner with, merge with or acquire. We
may be unable to profitably deploy any assets we acquire.
•Accuracy of Assumptions. In connection with any merger, acquisition or strategic partnership, we may make
certain assumptions relating to the proposed merger or acquisition that may be, or may prove to be,
inaccurate, including as the result of the failure to realize the expected benefits of any merger, acquisition or
strategic partnership. The inaccuracy of any assumptions we may make could result in unanticipated
consequences that could have a material adverse effect on our results of operations or financial condition.
Assumptions we might make when considering a proposed merger, acquisition or strategic partnership may
relate to numerous matters, including:
27