Sallie Mae 2015 Annual Report Download - page 29

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We depend significantly on third-parties for a wide array of our operations and customer services and key components of
our information technology infrastructure, and a breach of security or service levels, or violation of law by one of these
third-parties, could disrupt our business or provide our competitors with an opportunity to enhance their position at our
expense.
We depend significantly on third-parties for a wide array of our operations and customer services and key components of
our information technology and security infrastructures. Third-party vendors are significantly involved in aspects of our
servicing for Private Education Loans and FFELP Loans, Bank deposit-taking activities, software and systems development,
data center and operations, including the timely and secure transmission of information across our data communication
network, and for other telecommunications, email, processing, storage, remittance and technology-related services in
connection with our business. If a service provider fails to provide the services we require or expect, or fails to meet applicable
regulatory or contractual requirements, such as service levels, protection of our customers’ personal and confidential
information, or compliance with applicable laws, that failure could negatively impact our business by adversely affecting our
ability to process customers’ transactions in a timely and accurate manner, otherwise hampering our ability to serve our
customers and investors, or subjecting us to litigation and regulatory risk for matters as diverse as poor vendor oversight,
improper release or protection of personal information, or release of incorrect information. Such a failure could adversely affect
the perception of the reliability of our networks and services, and the quality of our brands, and could materially adversely
affect our business, financial condition or results of operations.
We may face risks from our operations related to litigation or regulatory actions that could result in significant legal
expenses and settlement or damage awards.
Navient has 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
excluded in the Separation and Distribution Agreement, provided Navient receives notice of such claims or potential claims
from us on or before April 30, 2017, the third anniversary of the Spin-Off. Consequently, due to Navient’s indemnification and
the smaller, relatively younger vintages of our Private Education Loans, over the near term our dispute-related expenses may be
lower than might otherwise be expected. As our business grows, we will likely be subject to additional claims and litigation,
which could seriously harm our business and require us to incur significant costs. Defending against litigation may require
significant attention and resources of management and, regardless of the outcome, such actions could result in significant
expenses. If we are a party to material litigation and if the defenses we assert are ultimately unsuccessful, or if we are unable to
achieve a favorable settlement, we could be liable for large damages and that could have a material adverse effect on our
business, results of operations and financial condition. Likewise, similar material adverse effects could occur if Navient is
unwilling or unable to honor its indemnification obligations under the Separation and Distribution Agreement.
New products and services may subject us to additional risks.
In 2016, we intend to focus more attention on expanding the suite of products and services that we provide to our
customers. While we do not expect significant financial contributions from these products in the near term, there may be
substantial regulatory and operational challenges, risks and uncertainties associated with these efforts and we may invest
significant time and resources in developing and launching any new products or services. In addition, our initial timetables for
the introduction and development of new products or services may not be met, market acceptance may fall short of our
expectations, and price and profitability targets may not prove achievable, which could in turn unnecessarily divert
management’s attention and focus and have a material negative effect on our perception in the marketplace and our operating
results.
Incorrect estimates and assumptions by management in connection with the preparation of our consolidated financial
statements could adversely affect our reported assets, liabilities, income and expenses.
The preparation of our consolidated financial statements requires management to make critical accounting estimates and
assumptions that affect the reported amounts of assets, liabilities, income and expenses during the reporting periods. Incorrect
estimates and assumptions by management in connection with the preparation of our consolidated financial statements could
adversely affect the reported amounts of assets, liabilities, income and expenses. A description of our critical accounting
estimates and assumptions may be found in Part I, Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Critical Accounting Policies and Estimates” and Notes to Consolidated Financial Statements, Note 2,
“Significant Accounting Policies” to the consolidated financial statements included in this Form 10-K. If we make incorrect