Paychex 2016 Annual Report Download - page 26

Meeting of Stockholders, will be made available, free of charge, upon written request submitted to Paychex, Inc.,
c/o Corporate Secretary, 911 Panorama Trail South, Rochester, New York 14625-2396.
Item 1A. Risk Factors
Our future results of operations are subject to a number of risks and uncertainties. These risks and
uncertainties could cause actual results to differ materially from historical and current results, and from our
projections. The risk factors described below represent our current view of some of the most important risks
facing our business and are important to understanding our business. The risks described below are not the only
risks we face. Additional factors not presently known to us or that we currently deem to be immaterial also may
adversely affect, possibly to a material extent, our business, cash flows, financial condition, or results of
operations in future periods. In addition, you should refer to the description of forward-looking statements at the
beginning of Part I of this Form 10-K.
Our services may be adversely impacted by changes in government regulations and policies: Many of
our services, particularly payroll tax administration services and employee benefit plan administration services,
are designed according to government regulations that continually change. Changes in regulations could affect
the extent and type of benefits employers are required, or may choose, to provide employees or the amount and
type of taxes employers and employees are required to pay. Such changes could reduce or eliminate the need for
some of our services and substantially decrease our revenue. Added requirements could also increase our cost of
doing business. Failure to educate and assist our clients regarding new or revised legislation that impacts them
could have an adverse impact on our reputation. Failure by us to modify our services in a timely fashion in
response to regulatory changes could have a material adverse effect on our business and results of operations.
Our clients and our business could be adversely impacted by health care reform: The ACA was enacted
in March 2010 and entails sweeping health care reforms with staggered effective dates from 2010 through 2018.
As a service provider, we have a responsibility to our clients to help them understand their increased obligations
under the federal and state regulations facing employers under the ACA. Failure to provide clients with
appropriate information or solutions to effectively manage their health care benefits and related costs could have
an adverse impact on our reputation and a negative impact on our client base. There is no guarantee that solutions
we have developed to help clients navigate health care legislation will continue to be readily accepted by clients,
which could have a material adverse impact on our insurance services business. Insurance services revenue is at
risk for lower commission revenue from underwriters if clients move away from traditional insurance policies
utilized in the past or as a result of pressure on commission rates, driven by restrictions on insurers as to use of
premiums. Refer to the discussion later in this section on changes in health insurance and workers’ compensation
insurance rates and underlying claim trends for a discussion of health care reform as it impacts our PEO.
We may not be able to keep pace with changes in technology or provide timely enhancements to our
products and services: To maintain our growth strategy, we must adapt and respond to technological advances
and technological requirements of our clients. Our future success will depend on our ability to enhance
capabilities and increase the performance of our internal systems, particularly our systems that meet our clients’
requirements. We continue to make significant investments related to the development of new technology. If our
systems become outdated, we may be at a disadvantage when competing in our industry. There can be no
assurance that our efforts to update and integrate systems will be successful. If we do not integrate and update
our systems in a timely manner, or if our investments in technology fail to provide the expected results, there
could be a material adverse effect to our business and results of operations.
Cyber-attacks and security vulnerabilities could lead to reduced revenues, increased costs, liability
claims, or harm to our competitive position: We rely upon information technology (“IT”) networks, cloud-
based platforms, and systems to process, transmit, and store electronic information, and to support a variety of
business processes. Cyber-attacks and security threats are a risk to our business and reputation. A privacy or IT
security breach could have a material adverse effect on our business.
Data Security and Privacy Leaks: We collect, use, and retain increasingly large amounts of personal
information about our clients, employees of our clients, and our employees, including: bank account numbers,
credit card numbers, social security numbers, tax return information, health care information, retirement account
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