Citibank 2008 Annual Report Download - page 56

These restrictions, alone or in combination with the other factors
described above, could adversely affect Citigroup’s ability to hire and retain
qualified employees.
A failure in Citigroup’s operational systems or
infrastructure, or those of third parties, could impair the
Company’s liquidity, disrupt its businesses, result in the
disclosure of confidential information, damage Citigroup’s
reputation and cause losses.
Citigroup’s businesses are highly dependent on its ability to process and
monitor, on a daily basis, a very large number of transactions, many of
which are highly complex, across numerous and diverse markets in many
currencies. These transactions, as well as the information technology services
Citigroup provides to clients, often must adhere to client-specific guidelines,
as well as legal and regulatory standards. Due to the breadth of Citigroup’s
client base and its geographical reach, developing and maintaining the
Company’s operational systems and infrastructure has become increasingly
challenging. Citigroup’s financial, account, data processing or other
operating systems and facilities may fail to operate properly or become
disabled as a result of events that are wholly or partially beyond the
Company’s control, such as a spike in transaction volume or unforeseen
catastrophic events, adversely affecting the Company’s ability to process these
transactions or provide these services.
Citigroup also faces the risk of operational failure, termination or
capacity constraints of any of the clearing agents, exchanges, clearing
houses or other financial intermediaries Citigroup uses to facilitate its
transactions, and as Citigroup’s interconnectivity with its clients grows, the
Company increasingly faces the risk of operational failure with respect to its
clients’ systems. Implementation of the Morgan Stanley Smith Barney joint
venture may, at least temporarily, exacerbate these risks insofar as the
activities of the joint venture are concerned.
In addition, Citigroup’s operations rely on the secure processing, storage
and transmission of confidential and other information in its computer
systems and networks. Although Citigroup takes protective measures and
endeavors to modify them as circumstances warrant, its computer systems,
software and networks may be vulnerable to unauthorized access, computer
viruses or other malicious code, and other events that could have a security
impact. Given the high volume of transactions at Citigroup, certain errors
may be repeated or compounded before they are discovered and rectified. If
one or more of such events occurs, this could potentially jeopardize
Citigroup’s, its clients’, counterparties’ or third parties’ confidential and
other information processed and stored in, and transmitted through, the
Company’s computer systems and networks, or otherwise cause interruptions
or malfunctions in Citigroup’s, its clients’, its counterparties’ or third parties’
operations, which could result in significant losses or reputational damage.
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