Costco 2008 Annual Report Download - page 20

We rely extensively on computer systems to process transactions, summarize results and
manage our business. Disruptions in both our primary and secondary (back-up) systems could
harm our ability to run our business.
Although we have independent, redundant, and primary and secondary computer systems, given the
number of individual transactions we have each year, it is critical that we maintain uninterrupted
operation of our business-critical computer systems. Our computer systems, including our back-up
systems, are subject to damage or interruption from power outages, computer and telecommunications
failures, computer viruses, internal or external security breaches, catastrophic events such as fires,
earthquakes, tornadoes and hurricanes, and/or errors by our employees. If our computer systems and
our back-up systems are damaged or cease to function properly, we may have to make significant
investment to fix or replace them, and we may suffer interruptions in our operations in the interim. Any
material interruption in both of our computer systems and back-up systems may have a material
adverse effect on our business or results of operations.
Natural disasters could unfavorably affect our financial performance.
The occurrence of natural disasters, such as hurricanes or earthquakes, particularly in California, or in
Washington state, where our centralized operating systems and administrative personnel are located,
could unfavorably affect our operations and financial performance. Such events could result in physical
damage to one or more of our properties, the temporary closure of one or more warehouses or depots,
the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the
supply of products from some local and overseas suppliers, the temporary disruption in the transport of
goods from overseas, delays in the delivery of goods to our depots or warehouses within a country in
which we operate and the temporary reduction in the availability of products in our warehouses.
We are subject to a wide variety of federal, state, regional, local and international laws and
regulations relating to the use, storage, discharge, and disposal of hazardous materials and
hazardous and non-hazardous wastes, and other environmental matters.
Any failure to comply with these laws could result in costs to satisfy environmental compliance,
remediation or compensatory requirements, or the imposition of severe penalties or restrictions on
operations by governmental agencies or courts that could adversely affect our operations.
We are involved in a number of legal proceedings and audits, and while we cannot predict the
outcomes of such proceedings and other contingencies with certainty, some of these
outcomes may unfavorably affect our operations or increase our costs.
We are involved in a number of legal proceedings and audits, including grand jury investigations, other
government investigations, consumer, employment, tort and other litigation. We cannot predict with
certainty the outcomes of these legal proceedings and other contingencies, including environmental
remediation and other proceedings commenced by governmental authorities. The outcome of some of
these legal proceedings and other contingencies could require us to take or refrain from taking actions
which could unfavorably affect our operations or could require us to pay substantial amounts of money.
Additionally, defending against these lawsuits and proceedings may involve significant expense and
diversion of management’s attention and resources. Our business requires compliance with a great
variety of laws and regulations. Failure to achieve compliance could subject us to lawsuits and other
proceedings, and lead to damage awards, fines and penalties.
We are subject to the risk of product liability claims, including claims concerning food and
prepared food products.
The sale of food and prepared food products for human consumption involves the risk of injury to our
members. Such injuries may result from tampering by unauthorized third parties, product
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