Cigna 2014 Annual Report Download - page 54

PART I
ITEM 1A. Risk Factors
an efficient and effective manner. We could also face challenges in
We are dependent on the success of our relationships
implementing business plans; changes in laws and regulations or
with third parties for various services and functions,
conditions imposed by regulators applicable to the business; retaining
including, but not limited to, pharmacy benefit
key employees; and general competitive factors in the marketplace.
management services.
These events could result in increased costs, decreases in expected
revenues, earnings or cash flow, and goodwill or other intangible asset
To improve operating costs, productivity and efficiencies, we
impairment charges. Further, we may finance transactions by issuing
outsource to, or enter into partnership arrangements with, third
common stock for some or all of the purchase price, which could
parties for selected services and functions, such as pharmacy benefit
dilute the ownership interests of our shareholders, or by incurring
management, information technology, independent practice
additional debt that could impact our ability to access capital in the
associations, medical management, call centers and claim services.
future.
Our operations may be vulnerable if these third parties fail to satisfy
their obligations to us or if the arrangement is terminated in whole or In addition, effective internal controls are necessary to provide reliable
in part for any reason or if there is a contractual dispute between us and accurate financial reports and to mitigate the risk of fraud. The
and these third parties. Even though contracts are intended to provide integration of businesses is likely to result in our systems and internal
certain protections, we have limited control over the actions of third controls becoming increasingly complex and more difficult to
parties. For example, noncompliance with any privacy or security laws manage. Any difficulties in assimilating businesses into our control
and regulations or any security breach involving one of our third-party system could cause us to fail to meet our financial reporting
vendors or a dispute between us and a third party vendor related to obligations. Ineffective internal controls also could cause investors to
our arrangement could have a material adverse effect on our business, lose confidence in our reported financial information, which could
results of operations, financial condition, liquidity and reputation. In negatively impact the trading price of our stock and our access to
addition, with respect to outsourced services or functions to third capital.
parties in foreign jurisdictions, we also are exposed to risks inherent in
conducting business outside of the United States.
Our business depends on our ability to effectively
Outsourcing also may require us to change our existing operations,
invest in, implement improvements to and properly
adopt new processes for managing these providers and/or redistribute
maintain the uninterrupted operation and data
responsibilities to realize the potential productivity and operational
integrity of our information technology and other
efficiencies. If there are delays or difficulties in changing business
business systems.
processes or our third party vendors do not perform as expected, we
may not realize, or realize on a timely basis, the anticipated economic Our business is highly dependent on maintaining both effective
and other benefits of these relationships. This could result in information systems and the integrity and timeliness of the data we
substantial costs or regulatory compliance issues, divert management’s use to serve our customers and health care professionals and to operate
attention from other strategic activities, negatively affect employee our business. If our data were found to be inaccurate or unreliable due
morale or create other operational or financial problems for us. to fraud or other error, or if we or the third-party service providers
Terminating or transitioning in whole or in part arrangements with were to fail to maintain information systems and data integrity
key vendors could result in additional costs or penalties, risks of effectively, we could experience operational disruptions that may
operational delays or potential errors and control issues during the impact our customers and health care professionals and hinder our
termination or transition phase. We may not be able to find an ability to establish appropriate pricing for products and services, retain
alternative vendor in a timely manner or on acceptable terms. If there and attract customers, establish reserves and report financial results
is an interruption in business or loss of access to data resulting from a timely and accurately and maintain regulatory compliance, among
termination or transition, we may not be able to meet the demands of other things.
our customers and, in turn, our business and results of operations Our information technology strategy and execution are critical to our
could be unfavorably impacted. continued success. Increasing regulatory and legislative mandated
changes will place additional demands on our information technology
Acquisitions, joint ventures and other transactions
infrastructure that could have a direct impact on available resources
involve risks and we may not realize the expected
for projects more directly tied to strategic initiatives. We must
benefits because of integration difficulties,
continue to invest in long-term solutions that will enable us to
underperformance relative to our expectations and
anticipate customer needs and expectations, enhance the customer
experience, act as a differentiator in the market and protect against
other challenges.
cybersecurity risks and threats. Our success is dependent, in large part,
As part of our growth strategy, we regularly consider and enter into on maintaining the effectiveness of existing technology systems and
strategic transactions, including mergers, acquisitions, joint ventures, continuing to deliver and enhance technology systems that support
licenses and other relationships (collectively referred to as our business processes in a cost-efficient and resource-efficient
‘‘transactions’’), with the expectation that these transactions will result manner. We also must develop new systems to meet current market
in various benefits. Our ability to achieve the anticipated benefits of standards and keep pace with continuing changes in information
these transactions is subject to numerous uncertainties and risks, processing technology, evolving industry and regulatory standards and
including our ability to integrate operations, resources and systems in customer needs. Failure to do so may impede our ability to deliver
22 CIGNA CORPORATION - 2014 Form 10-K