Cogeco 2013 Annual Report Download - page 26

Management's discussion and analysis (“MD&A”) COGECO CABLE INC. 2013 25
We are dependent upon our information technology systems and those of certain third parties. The inability to enhance our systems,
or to protect them from a security breach or natural disaster, could have an adverse impact on our financial condition and results of
operations.
The day-to-day operation of our businesses is highly dependent on information technology systems, including those provided by certain
suppliers. Electronic communications increasingly rely on advanced security technology, terminal devices, control systems and software to ensure
conditional access, appropriate billing and service integrity. Security and business systems technology is provided worldwide by a small pool of
global suppliers on a proprietary basis. We depend on the effectiveness of such technology for many of our services. To the extent these providers
are unable to offer technological solutions in a cost-effective and timely manner, we may be unable to effectively prevent or respond to security
breaches.
An inability to maintain and enhance our existing information technology systems or obtain new systems to accommodate additional customer
growth or to support new products and services could also have an adverse impact on our ability to acquire new customers, retain existing
customers, produce accurate and timely billing, generate revenue growth and manage operating expenses, all of which could adversely impact
our financial results and position. In addition, although we have disaster recovery and businesses continuity plans, the occurrence of natural
disasters, quarantine, power failures, terrorist acts, intrusion, computer hacking or other data corruption, a security breach or disaster or a violation
of our Internet sites security could have a material adverse effect on our reputation, businesses, prospects, financial condition, results of operations
and competitiveness of our service offerings. Moreover, we are not insured against the loss of data, hacking or malicious interference with our
electronic communications and systems, or against losses resulting from natural disasters affecting the cable, fibre networks or data centres.
Further, as IP based traffic continues to grow very rapidly over our networks and new technology, systems, software and equipment are deployed
more quickly in order to manage this increased traffic, there is an increased risk of unexpected technical problems, service interruptions and
mean time to restoration and increased threats from malware, hacking or other intrusions.
A breach of our IT security, loss of customer data or system disruption could adversely affect our business and reputation.
Our business is dependent on our payroll, transaction, financial, accounting and other data processing systems. We rely on these systems to
process, on a daily basis, a large number of transactions. Any security breach in our business processes and/or systems has the potential to
impact our customer information, which could result in the potential loss of business. If any of these systems fail to operate properly or become
disabled, we could potentially lose control of customer data and we could suffer financial loss, a disruption of our businesses, liability to clients,
regulatory intervention or damage to our reputation.
In addition, any issue of data privacy as it relates to unauthorized access to, or loss of, customer and/or employee information could result in the
potential loss of business, damage to our market reputation, litigation and regulatory investigation and penalties. Our continued investment in
the security of our IT systems, continued efforts to improve the controls within our IT systems, business processes improvements, and the
enhancements to our culture of information security may not successfully prevent attempts to breach our security or unauthorized access to
confidential, sensitive or proprietary information. In addition, in the event of a catastrophic occurrence, either natural or man-made, our ability to
protect our infrastructure, including client data, and maintain ongoing operations could be significantly impaired. Our business continuity and
disaster recovery plans and strategies may not be successful in mitigating the effects of a catastrophic occurrence. If our security is breached,
confidential information accessed or we experience a catastrophic occurrence, our business and operating results could be significantly adversely
affected.
Malicious and abusive Internet practices could impair our HSI services.
Our HSI customers utilize our network to access the Internet and, as a consequence, we or they may become victim of common illegal, malicious
and abusive Internet activities, such as unsolicited mass advertising (or spam), denial of service attacks (attacks designed to cause a network
to be unavailable to its intended users) and dissemination of viruses, worms and other destructive or disruptive software. These activities could
have adverse consequences on our network and our customers, including deterioration of service, excessive call volume to call centers and
damage to our customers’ equipment and data or ours. Significant incidents could lead to customer dissatisfaction and, ultimately, to loss of
customers or revenue, in addition to increased costs to service our customers and protect our network. Any significant loss of cable data, customers
or revenue or a significant increase in costs of serving those customers could adversely affect our reputation, business, profitability, financial
condition and results of operations.
We may not be able to protect our services from piracy, which may have an adverse effect on our customer base and lead to a possible
decline in revenue.
Although we use encryption technology to protect our cable signals from unauthorized access and to control programming access based on
subscription packages, we may not be able to protect our cable, Internet and telephony services from piracy. If we are unable to prevent unauthorized
access to our analogue and digital television programming and Internet access services, our customer base may be adversely affected and our
revenue may decline. Furthermore, the level of piracy of television signals and the actual penetration of illicit reception of television distribution
services in households within our service areas may also have a significant effect on our businesses and the competitiveness of our service
offerings.
We may be adversely affected by exchange rate fluctuations.
Our financial results are reported in Canadian dollars and a significant portion of our sales and operating costs are realized in currencies other
than Canadian dollars, most often US dollars and British Pounds. For the purposes of financial reporting, any change in the value of the Canadian
dollar against the US dollar or the British Pounds during a given financial reporting period would result in a foreign exchange gain or loss on the
translation of any unhedged foreign currency denominated debt into Canadian dollars. Consequently, our reported earnings and indebtedness
could fluctuate materially as a result of gains or losses. Significant fluctuations in relative currency values against the Canadian
dollar could therefore have a significant impact on our future profitability.