Pitney Bowes 2014 Annual Report Download - page 20

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If we are unable to protect our information technology systems against service interruptions, misappropriation of data, or breaches of
security resulting from cyber-attacks or other events, or we encounter other unforeseen difficulties in the operation of our information
technology systems, our operations could be disrupted, our reputation may be harmed and we could be subject to legal liability or
regulatory enforcement action.
Several of our businesses use, process and store proprietary information and confidential data relating to our businesses, clients and
employees. Privacy laws and similar regulations in many jurisdictions where we do business, as well as customer demands, require that
we take significant steps to safeguard this information. Both customer demands and legal requirements continue to evolve. We have
security systems and procedures in place designed to protect against unauthorized access to such information. However, there is no
guarantee that experienced computer programmers or hackers will not be able to breach our security systems and misappropriate
confidential information. Breaches of our security systems could result in the loss of data or the unauthorized disclosure or misuse of
confidential information of our clients or our clients' customers. This could result in harm to our reputation, damage to our systems,
governmental inquiries, investigations or regulatory enforcement action, the payment of fines or other penalties, legal claims by our
clients and the payment of significant remediation costs.
We rely on the continuous and uninterrupted performance of our information technology systems to support numerous business processes
and activities, to support and service our clients and to support postal services. We maintain secure systems to collect revenue for certain
postal services, which is critical to enable both our systems and the postal systems to run reliably. These systems are subject to adverse
acts of nature, targeted or random security breaches, cyber-attacks, computer viruses, vandalism, power loss, computer or communications
failures and other unexpected events. We have disaster recovery plans in place to protect our business operations in case of such events;
however, there can be no guarantee that these plans will function as designed. If our information technology systems are damaged or
cease to function properly, we could be prevented from fulfilling orders and servicing clients and postal services. Also, we may have to
make a significant investment to repair or replace these systems, and could suffer loss of critical data and interruptions or delays in our
operations.
We depend on third-party suppliers and outsource providers and our business could be adversely affected if we fail to manage these
constituents effectively.
We depend on third-party suppliers and outsource providers for a variety of services, components and supplies, including a large portion
of our product manufacturing and some non-core functions and operations. In certain instances, we rely on single-sourced or limited-
sourced suppliers and outsourcing vendors around the world because doing so is advantageous due to quality, price or lack of alternative
sources. If production or services were interrupted and we were not able to find alternate third-party suppliers, we could experience
disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs. If outsourcing
services were interrupted, not performed, or the performance was poor, our ability to process, record and report transactions with our
clients and other constituents could be impacted. Such interruptions in the provision of supplies and/or services could impact our ability
to meet client demand, damage our reputation and client relationships and adversely affect our revenue and profitability.
Capital market disruptions and credit rating downgrades could adversely affect our ability to provide financing services to our clients
and to fund various discretionary priorities, including business investments, acquisitions and dividend payments.
We fund our financing activities with a combination of cash generated from operations, deposits held in the Bank and access to the U.S.
capital markets to facilitate short and long-term borrowings. Our ability to access the U.S. capital markets and the cost associated with
our funding activities is dependent on our credit ratings and market volatility.
A credit ratings downgrade, material capital market disruptions, significant withdrawals by depositors at the Bank, adverse changes to
our industrial loan charter or a significant decline in cash flow could impact our ability to provide competitive finance offerings to our
clients. In addition, if such events occurred, there can be no assurance that liquidity funding sources would be available or sufficient and
that related costs would not adversely impact our ability to fund various discretionary priorities, including business investments,
acquisitions and dividend payments.
The loss of any of the company’s largest clients or business partners in our DCS segment could have a material adverse effect on the
segment.
The DCS segment is dependent on a relatively small number of significant clients and business partners for a large portion of its revenue.
The loss of any of these larger clients or business partners, or a substantial reduction in their use of our products or services, could have
a material adverse effect on the revenue and profitability of the segment. There can be no assurance that our larger clients and business
partners will continue to utilize our products or services at current levels, or that we would be able to replace any of these clients or
business partners with others who can generate revenue at current levels.