Home Depot 2015 Annual Report Download - page 11

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materially increase our data security costs, adversely impact how we operate our systems and collect and use customer
information, and put us at a competitive disadvantage with other retailers.
If our efforts to maintain the privacy and security of customer, associate, supplier and Company information are not
successful, we could incur substantial additional costs and reputational damage, and could become subject to further
litigation and enforcement actions.
Our business, like that of most retailers, involves the receipt, storage and transmission of customers’ personal information,
consumer preferences and payment card information, as well as confidential information about our associates, our suppliers
and our Company, some of which is entrusted to third-party service providers and vendors. We also work with third-party
service providers and vendors that provide technology, systems and services that we use in connection with the receipt,
storage and transmission of this information. Our information systems, and those of our third-party service providers and
vendors, are vulnerable to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt
to gain access to these systems or our information through fraud or other means of deceiving our associates, third-party
service providers or vendors. Hardware, software or applications we develop or obtain from third parties may contain defects
in design or manufacture or other problems that could unexpectedly compromise information security. The methods used to
obtain unauthorized access, disable or degrade service or sabotage systems are also constantly changing and evolving and
may be difficult to anticipate or detect for long periods of time. We have implemented and regularly review and update
processes and procedures to protect against unauthorized access to or use of secured data and to prevent data loss. However,
the ever-evolving threats mean we and our third-party service providers and vendors must continually evaluate and adapt our
respective systems and processes, and there is no guarantee that they will be adequate to safeguard against all data security
breaches or misuses of data. Any future significant compromise or breach of our data security, whether external or internal, or
misuse of customer, associate, supplier or Company data, could result in additional significant costs, lost sales, fines,
lawsuits, and damage to our reputation. In addition, as the regulatory environment related to information security, data
collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to
our business, compliance with those requirements could also result in additional costs.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to
potential liability and potentially disrupt our business.
We accept payments using a variety of methods, including cash, checks, credit and debit cards, PayPal, our private label
credit cards and installment loan program, and gift cards, and we may offer new payment options over time. Acceptance of
these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including
payment network rules and operating guidelines, data security standards and certification requirements, and rules governing
electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or
costly. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase
over time and raise our operating costs. We rely on third parties to provide payment processing services, including the
processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide
these services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods that
we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking
to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems, as reflected in our recent Data
Breach. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related
data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks
and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of
payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a
shift to other payment types or potential changes to our payment systems that may result in higher costs. As a result, our
business and operating results could be adversely affected.
Uncertainty regarding the housing market, economic conditions and other factors beyond our control could adversely
affect demand for our products and services, our costs of doing business and our financial performance.
Our financial performance depends significantly on the stability of the housing, residential construction and home
improvement markets, as well as general economic conditions, including changes in gross domestic product. Adverse
conditions in or uncertainty about these markets or the economy could adversely impact our customers’ confidence or
financial condition, causing them to determine not to purchase home improvement products and services or delay purchasing
or payment for those products and services. Other factors beyond our control – including high levels of unemployment and
foreclosures; interest rate fluctuations; fuel and other energy costs; labor and healthcare costs; the availability of financing;
the state of the credit markets, including mortgages, home equity loans and consumer credit; weather; natural disasters and