Sallie Mae 2014 Annual Report Download - page 26

estimates, we may under- or overstate reported financial results, which could materially and adversely affect our business,
financial condition and results of operations.
Our framework for managing risks may not be effective in mitigating our risk of loss.
Our risk management framework seeks to mitigate risk and appropriately balance risk and return. We have established
processes and procedures intended to identify, measure, monitor, control and report the types of risk to which we are subject.
We seek to monitor and control our risk exposure through a framework of policies, procedures, limits and reporting
requirements. Management of risks in some cases depends upon the use of analytical and/or forecasting models. If the models
that we use to mitigate these risks are inadequate, we may incur increased losses. In addition, there may be risks that exist, or
that develop in the future, that we have not appropriately anticipated, identified or mitigated. If our risk management framework
does not effectively identify or mitigate our risks, we could suffer unexpected losses and our financial condition and results of
operations could be materially adversely affected.
Risks Related to the Spin-Off
The actions required to implement the complete separation of our pre-Spin-Off businesses into two, distinct, publicly traded
entities have and will continue to take significant management time and attention and could disrupt operations. Our success
is highly dependent on hiring, training and retaining new employees in numbers sufficient to sustain the growth of our
business.
The complete separation of the pre-Spin-Off organization into two publicly traded companies will continue to require
significant ongoing execution and administration at all levels of the internal organization. A team of employees is charged with
implementing the Spin-Off, reporting frequently to management on status and progress of the project. High-level employees
and management continue to dedicate a significant amount of time to the implementation of the Spin-Off to ensure it is carried
out timely and appropriately. We must also hire and train significant numbers of new employees to build out and operate our
stand alone operations which could impinge on the time spent on managing our business. Our inability to hire, train, and retain
new employees sufficient to support our stand alone operations could disrupt or impair current and future operations.
We will incur significant costs in connection with being a stand-alone company and lose the advantage of our larger size
and purchasing power that existed prior to the Spin-Off.
We will incur significant costs in connection with the transition to being a stand-alone public company and implementing
the Spin-Off, including costs to separate information systems, accounting, tax, legal and other professional services costs and
recruiting and relocation costs associated with hiring key senior management personnel new to us. In addition, the businesses
we operate have historically taken advantage of our larger size and purchasing power prior to the Spin-Off in procuring goods
and services. After the Spin-Off, we are no longer able to rely on this purchasing power and, as a result, we may not be able to
obtain goods and services from third-party service providers and vendors at prices or on terms as favorable as those we
obtained prior to the Spin-Off. Furthermore, prior to the Spin-Off, our businesses have obtained services from, or engaged in
transactions with, our affiliates under intercompany agreements. Navient and its affiliates will provide services to us and our
affiliates following the Spin-Off under a transition services agreement for a transition period and potentially thereafter. The fees
charged by Navient and its affiliates for the provision of these services to us and our affiliates may be higher than those charged
prior to the Spin-Off. All of these factors will result in costs that are higher than the amounts reflected in historical financial
statements which could cause our profitability to decrease.
We continue to have significant exposures to risks related to Navient’s loan servicing operations and its creditworthiness. If
we are unable to obtain services, complete the transition of our origination operations as planned, or obtain indemnification
payments from Navient, we could experience higher than expected costs and operating expenses and our results of
operations and financial condition could be materially and adversely affected.
At the time of this filing, our loan origination capabilities continue to be provided by Navient pursuant to a transition
services agreement. Pursuant to the Separation and Distribution Agreement and transition services agreement, Navient will also
continue to bear significant responsibility for its activities undertaken for the Bank during this transition period. We are
continuing to work with Navient to complete an orderly and staged transition to our own separate, stand-alone loan origination
platform. Any unexpected delays or additional costs or expenses to complete this transition or to provide the origination
activities conducted by Navient on our behalf, whether or not due to Navient’s actions, could significantly affect our operating
expenses and earnings.
Navient has also agreed to be responsible, and indemnify us, for all claims, actions, damages, losses or expenses that may
arise from the conduct of all activities of pre-Spin-Off SLM occurring prior to the Spin-Off other than those specifically
24