ING Direct 2013 Annual Report Download - page 377

Risk factors continued
storage and transmission of confidential and other information in our computer systems and networks. The equipment and software used
in our computer systems and networks may not always be capable of processing, storing or transmitting information as expected. Despite
our business continuity plans and procedures, certain of our computer systems and networks may have insufficient recovery capabilities in
the event of a malfunction or loss of data. In addition, whilst we have policies and processes to protect our systems and networks, they
may be vulnerable to unauthorised access, computer viruses or other malicious code, cyberattacks and other external attacks or internal
breaches that could have a security impact and jeopardise our confidential information or that of our clients or our counterparties. These
events can potentially result in financial loss and harm to our reputation, and hinder our operational effectiveness.
We also face the risk that the design and operating effectiveness of our controls and procedures prove to be inadequate. Widespread
outbreaks of communicable diseases, such as the outbreak of the H1N1 influenza virus, may impact the health of our employees,
increasing absenteeism, or may cause a significant increase in the utilisation of health benefits offered to our employees, either or both of
which could adversely impact our business. Unforeseeable and/or catastrophic events can lead to an abrupt interruption of activities, and
our operations may be subject to losses resulting from such disruptions. Losses can result from destruction or impairment of property,
financial assets, trading positions, and the loss of key personnel. If our business continuity plans are not able to be implemented or do not
sufficiently take such events into account, losses may increase further. We have suffered losses from operational risk in the past and there
can be no assurance that we will not suffer material losses from operational risk in the future.
Reinsurance may not be available, affordable or adequate to protect us against losses. We may also decide to reduce,
eliminate or decline primary insurance or reinsurance coverage.
As part of our overall risk and capacity management strategy, we purchase reinsurance for certain risks underwritten by our various
insurance business segments. Market conditions beyond our control determine the availability and cost of the reinsurance protection we
purchase. Accordingly, we may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance
on acceptable terms, which could adversely affect our ability to write future business.
In addition, we determine the appropriate level of primary insurance and reinsurance coverage based on a number of factors and from
time to time decide to reduce, eliminate or decline coverage based on our assessment of the costs and benefits involved. In such cases, the
uninsured risk remains with us.
Adverse publicity, claims and allegations, litigation and regulatory investigations and sanctions may have a material adverse
effect on our business, revenues, results of operations, financial condition and/or prospects.
We are subject to litigation, arbitration and other claims and allegations in the ordinary course of business, including in connection with
our activities as financial services provider, insurer, employer, investor and taxpayer. Adverse publicity and damage to our reputation arising
from our failure or perceived failure to comply with legal and regulatory requirements, financial reporting irregularities involving other large
and well-known companies, possible findings of government authorities in various jurisdictions which are investigating several rate-setting
processes, increasing regulatory and law enforcement scrutiny of ‘know your customer’ anti-money laundering, prohibited transactions
with countries subject to sanctions, and bribery or other anti-corruption measures and anti-terrorist-financing procedures and their
effectiveness, regulatory investigations of the mutual fund, banking and insurance industries, and litigation that arises from the failure or
perceived failure by us to comply with legal, regulatory and compliance requirements could result in adverse publicity and reputational
harm, lead to increased regulatory supervision, affect our ability to attract and retain customers and maintain access to the capital
markets, result in cease and desist orders, claims, enforcement actions, fines and civil and criminal penalties, other disciplinary action or
have other material adverse effects on us in ways that are not predictable. Some claims and allegations may be brought by or on behalf of
a class and claimants may seek large or indeterminate amounts of damages, including compensatory, liquidated, treble and punitive
damages. See ‘—ING is exposed to the risk of mis-selling claims’. Our reserves for litigation liabilities may prove to be inadequate. Claims
and allegations, should they become public, need not be well founded, true or successful to have a negative impact on our reputation. In
addition, press reports and other public statements that assert some form of wrongdoing could result in inquiries or investigations by
regulators, legislators and law enforcement officials, and responding to these inquiries and investigations, regardless of their ultimate
outcome, is time-consuming and expensive. Adverse publicity, claims and allegations, litigation and regulatory investigations and sanctions
may have a material adverse effect on our business, revenues, results of operations, financial condition and/or prospects in any given
period. For additional information with respect to specific proceedings, see note 54 to the consolidated financial statements of ING Group.
RISKS RELATED TO THE RESTRUCTURING PLAN
The implementation of the Restructuring Plan and the divestments anticipated in connection with that plan will significantly
alter the size and structure of the Group and involve significant costs and uncertainties that could materially impact the Group.
In November 2008, the Dutch State purchased the Core Tier 1 Securities, and in the first quarter of 2009, we entered into the Illiquid Asset
Back-up Facility (‘IABF’) with the Dutch State, the structure of which has been since then terminated as of 1 November 2013.
As a result of having received state aid through the Dutch State Transactions, we were required to submit a restructuring plan to the EC in
connection with obtaining final approval for the Dutch State Transactions under the EC state aid rules. On 26 October 2009, we
announced our restructuring plan (‘Initial Restructuring Plan’), pursuant to which we were required to divest by the end of 2013 all of our
insurance business, including the investment management business, as well as ING Direct USA, which operated our direct banking
business in the U.S., and certain portions of our retail banking business in the Netherlands. The EC’s approval of the Initial Restructuring
Plan was issued on 18 November 2009. On 28 January 2010, ING lodged an appeal with the General Court of the European Union
375ING Group Annual Report 2013
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information