Sallie Mae 2011 Annual Report Download - page 15

Operations.
Given the highly competitive markets in which we operate, a failure of our operating systems or
infrastructure, or those of our third-party vendors, could disrupt our business, result in disclosure of
confidential customer information, damage our reputation, cause significant losses and provide our
competitors an opportunity to enhance their position at our expense.
A failure of our operating systems or infrastructure, or those of our third-party vendors, could disrupt our
business. Our business is dependent on our ability to process and monitor large numbers of daily transactions in
compliance with legal and regulatory standards and our product specifications, which we change to reflect our
business needs. As processing demands change and our loan portfolios grow in both volume and differing terms
and conditions, developing and maintaining our operating systems and infrastructure becomes increasingly
challenging and there is no assurance that we can adequately or efficiently develop and maintain such systems.
Our loan originations and conversions and the servicing, financial, accounting, data processing or other
operating systems and facilities that support them may fail to operate properly or become disabled as a result of
events that are beyond our control, adversely affecting our ability to process these transactions. Any such failure
could adversely affect our ability to service our clients, result in financial loss or liability to our clients, disrupt
our business, result in regulatory action or cause reputational damage. Despite the plans and facilities we have in
place, our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports
our businesses. This may include a disruption involving electrical, communications, internet, transportation or
other services used by us or third parties with which we conduct business. Notwithstanding our efforts to
maintain business continuity, a disruptive event impacting our processing locations could adversely affect our
business, financial condition and results of operations.
Our operations rely on the secure processing, storage and transmission of personal, confidential and other
information in our computer systems and networks. Although we take protective measures, our computer systems,
software and networks may be vulnerable to unauthorized access, computer viruses, malicious attacks and other
events that could have a security impact beyond our control. If one or more of such events occur, personal,
confidential and other information processed and stored in, and transmitted through, our computer systems and
networks, could be jeopardized or could cause interruptions or malfunctions in our operations that could result in
significant losses or reputational damage. We also routinely transmit and receive personal, confidential and
proprietary information, some through third parties. We have put in place secure transmission capability, and work
to ensure third parties follow similar procedures. An interception, misuse or mishandling of personal, confidential or
proprietary information being sent to or received from a customer or third party could result in legal liability,
regulatory action and reputational harm. In the event personal, confidential or other information is jeopardized,
intercepted, misused or mishandled, we may be required to expend significant additional resources to modify our
protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to
fines, penalties, litigation costs and settlements and financial losses that are either not insured against or not fully
covered through any insurance maintained by us. If one or more of such events occur, our business, financial
condition or results of operations could be significantly and adversely affected.
We continue to undertake numerous cost-cutting initiatives to realign and restructure our business in light of
significant legislative changes in the past several years. Our business, results of operations and financial
condition could be adversely affected if we do not effectively align our cost structure with our current business
operations and future business prospects.
In response to significant legislative changes in the past several years, we have undertaken and continue to
undertake cost-cutting initiatives, including workforce reductions, servicing center closures, restructuring and
transfers of business functions to new locations, enhancements to our web-based customer services, adoption of
new procurement strategies and investments in operational efficiencies. Our business and financial condition
could be adversely affected by these cost-cutting initiatives if cost reductions taken are so dramatic as to cause
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