Cigna 2012 Annual Report Download - page 45

PART I
ITEM 1A Risk Factors
Cigna’s business; retaining and growing membership; renewing or processed as quickly as clients desire, decreased levels of client service
successfully rebidding for contracts with CMS, including maintaining and client satisfaction, and harm to Cigna’s reputation. Because
or improving upon the CMS performance plan star ratings; leveraging Cigna’s information technology and telecommunications systems
the information technology platform of the acquired businesses; and interface with and depend on third-party systems, Cigna could
unanticipated issues, costs, obligations and liabilities. If Cigna is experience service denials if demand for such service exceeds capacity
unable to integrate the HealthSpring business successfully, or if the or a third-party system fails or experiences an interruption. If
acquired business’ performance evaluations under contracts with sustained or repeated, such a business interruption, systems failure or
CMS are adverse, these factors could have a material adverse effect on service denial could result in a deterioration of Cigna’s ability to pay
Cigna’s business, results of operations, financial condition and claims in a timely manner, provide customer service, write and process
liquidity and could affect expectations for future revenue and earnings new and renewal business, or perform other necessary corporate
growth. functions, and could have a material adverse effect on Cigna’s
business, results of operations, financial condition and liquidity.
Effective internal controls are necessary for the Company to provide
reliable and accurate financial reports and to mitigate the risk of fraud. Like other companies in our industry, we have been and may in the
The integration of acquired businesses is likely to result in Cigna’s future be the subject of cybersecurity breaches. Computer systems
systems and controls becoming increasingly complex and more may be vulnerable to physical break-ins, computer viruses,
difficult to manage. Any difficulties in the assimilation of acquired programming errors, attacks by third parties or similar disruptive
businesses into the Company’s control system could cause it to fail to problems. If a cybersecurity breach of Cigna’s computer systems or the
meet its financial reporting obligations. Ineffective internal controls computer systems of a third-party service provider occurs, it could also
could also cause investors to lose confidence in the Company’s interrupt Cigna’s operations and damage Cigna’s reputation. Cigna
reported financial information, which could have a negative effect on could also be subject to liability if sensitive customer information is
the trading price of Cigna’s stock and its access to capital. misappropriated. Any publicized compromise of security could result
in a loss of existing or new customers, increased operating expenses,
financial losses, and additional litigation or other claims that could
Cigna’s business depends on its ability to properly
have a material adverse effect on Cigna’s business, results of
maintain the integrity of its data and the
operations, financial condition and liquidity.
uninterrupted operation of its systems and business
functions, including information technology and Effective investment in and execution of
other business systems. improvements in the Company’s information
Cigna’s business depends on effective information systems and the
technology infrastructure and functionality are
integrity and timeliness of the data it uses to run its business. Cigna’s
important to its strategy and failure to do so may
business strategy requires providing customers and health care
impede its ability to deliver the services required in
professionals with Internet-enabled products and information to meet
the evolving marketplace at a competitive cost.
their needs. Cigna’s ability to adequately price its products and
services, establish reserves, provide effective and efficient service to its Cigna’s information technology strategy and execution are critical to
customers, and to timely and accurately report its financial results also the continued success of the Company. Increasing regulatory and
depends significantly on the integrity of the data in its information legislative mandated changes will place additional demands on Cigna’s
systems. If the information Cigna relies upon to run its businesses information technology infrastructure, which could have a direct
were found to be inaccurate or unreliable due to fraud or other error, impact on available resources for projects more directly tied to
or if Cigna (or the third-party service parties it utilizes) were to fail to strategic initiatives. The Company must continue to invest in
maintain information systems and data integrity effectively, the long-term solutions that will enable it to anticipate customer needs
Company could experience difficulties with: operational disruptions and expectations, enhance the customer experience and act as a
(that may impact customers and health care professionals); differentiator in the market. Cigna’s success is dependent, in large
determining medical cost estimates and establishing appropriate part, on maintaining the effectiveness of existing technology systems
pricing; retaining and attracting customers; regulatory compliance and continuing to deliver and enhance technology systems that
and other challenges. support the Company’s business processes in a cost-efficient and
resource-efficient manner. Cigna also must develop new systems to
In addition, Cigna’s business is highly dependent upon its ability to meet current market standards and keep pace with continuing
perform, in an efficient and uninterrupted fashion, its necessary changes in information processing technology, evolving industry and
business functions, such as: claims processing and payment; internet regulatory standards and customer needs. Failure to do so may impede
support and customer call centers; and the processing of new and the Company’s ability to deliver services at a competitive cost.
renewal business. Failure to comply with relevant regulations, a power Furthermore, system development projects are long-term in nature,
outage, pandemic, cyber-attack or other failure of one or more of may be more costly than expected to complete and may not deliver the
information technology, telecommunications or other systems could expected benefits upon completion.
cause slower system response times resulting in claims not being
CIGNA CORPORATION - 2012 Form 10-K 23