Travelers 2009 Annual Report Download - page 73

complete. In addition, system development projects may not deliver the benefits we expect once they
are complete, or may be replaced or become obsolete more quickly than expected, which could result
in accelerated recognition of expenses. If we do not effectively and efficiently manage and upgrade our
technology portfolio, or if the costs of doing so are higher than we expect, our ability to provide
competitive services to new and existing customers in a cost effective manner and our ability to
implement our strategic initiatives could be adversely impacted.
If we experience difficulties with technology, data security and/or outsourcing relationships our
ability to conduct our business could be negatively impacted. While technology can streamline many
business processes and ultimately reduce the cost of operations, technology initiatives present certain
risks. Our business is highly dependent upon our employees’ ability to perform, in an efficient and
uninterrupted fashion, necessary business functions. A shut-down of, or inability to, access one or more
of our facilities, a power outage or a failure of one or more of our information technology,
telecommunications or other systems could significantly impair our ability to perform such functions on
a timely basis. In addition, because our information technology and telecommunications systems
interface with and depend on third-party systems, we could experience service denials if demand for
such service exceeds capacity or a third-party system fails or experiences an interruption. If sustained or
repeated, such a business interruption, system failure or service denial could result in a deterioration of
our ability to write and process new and renewal business, provide customer service, pay claims in a
timely manner or perform other necessary business functions. Computer viruses, hackers and other
external hazards could expose our data systems to security breaches. These increased risks, and
expanding regulatory requirements regarding data security, could expose us to data loss, monetary and
reputational damages and significant increases in compliance costs. As a result, our ability to conduct
our business might be adversely affected.
We outsource certain technology and business process functions to third parties and may do so
increasingly in the future. If we do not effectively develop, implement and monitor our outsourcing
strategy, third party providers do not perform as anticipated or we experience technological or other
problems with a transition, we may not realize productivity improvements or cost efficiencies and may
experience operational difficulties, increased costs and a loss of business. Our outsourcing of certain
technology and business process functions to third parties may expose us to enhanced risk related to
data security, which could result in monetary and reputational damages. In addition, our ability to
receive services from third party providers outside of the United States might be impacted by cultural
differences, political instability, unanticipated regulatory requirements or policies inside or outside of
the United States. As a result, our ability to conduct our business might be adversely affected.
Acquisitions and integration of acquired businesses may result in operating difficulties and other
unintended consequences. From time to time we may investigate and pursue acquisition opportunities
if we believe that such opportunities are consistent with our long-term objectives and that the potential
rewards of an acquisition exceed the risks. The process of integrating an acquired company or business
can be complex and costly, however, and may create unforeseen operating difficulties and expenditures.
For example, acquisitions may present significant risks, including:
• the potential disruption of our ongoing business;
• the ineffective integration of underwriting, claims handling and actuarial practices;
• the uncertainty of an acquiree’s reserve estimates;
• the diversion of management time and resources to acquisition integration challenges;
• the loss of key employees;
• the cultural challenges associated with integrating employees; and
• the impact of an acquisition on our financial position and/or credit ratings.
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