Discover 2015 Annual Report Download - page 55

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We rely on technology to deliver services. If key technology platforms become obsolete, or if we experience
disruptions, including difficulties in our ability to process transactions, our revenue or results of operations could be
materially adversely affected.
Our ability to deliver services to our customers and run our business in compliance with applicable laws and
regulations may be affected by the functionality of our technology systems. The implementation of technology changes
and upgrades to maintain current and integrated systems may result in compliance issues and may, at least temporarily,
cause disruptions to our business, including, but not limited to, systems interruptions, transaction processing errors and
system conversion delays, all of which could have a negative impact on us. In addition, our transaction processing
systems and other operational systems may encounter service interruptions at any time due to system or software failure,
natural disaster or other reasons. Such services could be disrupted at any of our primary or back-up facilities or our
other owned or leased facilities. Third parties to whom we outsource the maintenance and development of certain
technological functionality may experience errors or disruptions that could adversely impact us and over which we may
have limited control. In addition, there is no assurance that we will be able to sustain our investment in new technology
to avoid obsolescence of critical systems and applications. A failure to maintain current technology, systems and
facilities or to control third-party risk, could cause disruptions in the operation of our business, which could materially
adversely affect our transaction volumes, revenues, reputation and/or our results of operations.
Merchant defaults may adversely affect our business, financial condition, cash flows and results of operations.
As an issuer and merchant acquirer in the United States on the Discover Network, and as a holder of certain
merchant agreements internationally for the Diners Club network, we may be contingently liable for certain disputed
credit card sales transactions that arise between customers and merchants. If a dispute is resolved in the customer's
favor, we will cause a credit or refund of the amount to be issued to the customer and charge back the transaction to
the merchant or merchant acquirer. If we are unable to collect this amount from the merchant or merchant acquirer, we
will bear the loss for the amount credited or refunded to the customer. Where the purchased product or service is not
provided until some later date following the purchase, such as an airline ticket, the likelihood of potential liability
increases. For the years ended December 31, 2015 and 2014 losses related to merchant chargebacks were not
material.
Our success is dependent, in part, upon our executive officers and other key employees. If we are unable to recruit,
retain and motivate key officers and employees to manage our business well, our business could be materially
adversely affected.
Our success depends, in large part, on our ability to retain, recruit and motivate key officers and employees to
manage our business. Our senior management team has significant industry experience and would be difficult to
replace. We believe we are in a critical period of competition in the financial services and payments industry. The
market for qualified individuals is highly competitive, and we may not be able to attract and retain qualified personnel
or candidates to replace or succeed members of our senior management team or other key personnel or it may be
expensive to do so. We may be subject to restrictions under future legislation or regulation limiting executive
compensation. For example, the federal banking agencies issued guidance on incentive compensation policies at
banking organizations. These requirements could negatively impact our ability to compete with other companies in
recruiting and retaining key personnel and could impact our ability to offer incentives that motivate our key personnel to
perform. If we are unable to recruit, retain and motivate key personnel to manage our business well, our business could
be materially adversely affected.
Damage to our reputation could damage our business.
In recent years, financial services companies have experienced increased reputational risk as consumers protest
and regulators scrutinize business and compliance practices of such companies. Maintaining a positive reputation is
critical to attracting and retaining customers, investors and employees. Damage to our reputation can therefore cause
significant harm to our business and prospects. Harm to our reputation can arise from numerous sources, including,
among others, employee misconduct, litigation or regulatory outcomes, failing to deliver minimum standards of service
and quality, compliance failures, and the activities of customers, business partners and counterparties. Social media
also can cause harm to our reputation. By its very nature, social media can reach a wide audience in a very short
amount of time, which presents unique corporate communications challenges. Negative or ‘wrong’ type of publicity
generated through unexpected social media coverage can damage Discover’s reputation and brand. Negative publicity
regarding us, whether or not true, may result in customer attrition and other harm to our business prospects.