Columbia Sportswear 2012 Annual Report Download - page 14

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material unanticipated expenses, including additional costs of implementation or costs of conducting business. These risks
could result in significant business disruptions and have a material adverse effect on our capital resources, financial condition,
results of operations or cash flows.
We Rely on Our Highly Customized Information Management Systems
Our business is increasingly reliant on information technology. Information systems are used across our supply chain
and retail operations, from design to distribution and sales, and are used as a method of communication among employees,
with our subsidiaries and liaison offices overseas and with our customers and retail stores. We also rely on our information
systems to allocate resources, manage product data, develop demand and supply plans, forecast and report operating results
and meet regulatory requirements. System failures, breaches of confidential information or service interruptions may occur
as the result of a number of factors, including our failure to properly maintain systems redundancy or to protect, repair,
maintain or upgrade our systems, computer viruses, programming errors, hacking or other unlawful activities by third parties,
and disasters. Any breach or interruption of critical business information systems could have a material adverse effect on
our financial condition, results of operations or cash flows.
Our legacy ERP system, on which we currently manage a substantial majority of our business, is highly customized.
As a result, the availability of internal and external resources with the expertise to maintain this ERP system is limited. Our
legacy ERP system may inhibit our ability to operate efficiently, which could have an adverse effect on our financial
condition, results of operations or cash flows. For example, our legacy ERP system may not be compatible with other
systems that support desired functionality for our operations. As we transition from our legacy ERP system to a new ERP
system and supporting systems that interface with our new ERP system, certain functionality and information from our
legacy ERP system may not be fully compatible with the new ERP system. As a result, temporary processes may be required,
including manual operations, which could significantly increase the risk of human errors in information used by the business
and/or result in business disruptions, which could have a material adverse effect on our capital resources, financial condition,
results of operations or cash flows.
System Security Risks, Data Protection Breaches and Cyber Attacks Could Disrupt Our Operations
We manage and store various proprietary information and sensitive or confidential data relating to our business,
including sensitive and personally identifiable information. Breaches of our security measures or the accidental loss,
inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us,
or our customers, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other
forms of deception, could expose us, our customers or the individuals affected to a risk of loss or misuse of this information,
result in litigation and potential liability for us, damage our brand and reputation or otherwise harm our business. In addition,
the cost and operational consequences of implementing further data protection measures could be significant.
Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate
or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer
programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs
that attack or otherwise exploit any security vulnerabilities of our systems. In addition, sophisticated hardware and operating
system software and applications that we procure from third parties may contain defects in design or manufacture, including
"bugs" and other problems that could unexpectedly interfere with the operation of the system. The costs to us to eliminate
or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities
could be significant, and our efforts to address these problems may not be successful and could result in interruptions,
delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution
or other critical functions.
We Depend on Independent Factories
Our products are manufactured by independent factories worldwide. Although we enter into purchase order
commitments with these independent factories each season, we generally do not maintain long-term manufacturing
commitments with them. Without long-term or reserve commitments, there is no assurance that we will be able to secure
adequate or timely production capacity or favorable pricing if growth or product demand differs from our forecasts.
Independent factories may fail to perform as expected or our competitors may obtain production capacities that effectively