Travelers 2010 Annual Report Download - page 75

our service exceeds capacity or a third-party system fails or experiences an interruption. If our business
continuity plans did not sufficiently address such a business interruption, system failure or service
denial, this 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.
Our operations rely on the secure processing, storage and transmission of confidential and other
information in our computer systems and networks. Computer viruses, hackers, employee misconduct
and other external hazards could expose our data systems to security breaches. In addition, we
routinely transmit and receive personal, confidential and proprietary information by email and other
electronic means. While we attempt to develop secure transmission capabilities with third-party vendors
and others with whom we do business, we may be unable to put in place secure capabilities with all of
such vendors and third parties and, in addition, these third parties may not have appropriate controls in
place to protect the confidentiality of the information.
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
relationships, 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.
The acquired business may not perform as projected, and any cost savings and other synergies
anticipated from the acquisition may not materialize. There is no guarantee that any businesses
acquired in the future will be successfully integrated, and the ineffective integration of our businesses
and processes may result in substantial costs or delays and adversely affect our ability to compete.
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