Pier 1 2016 Annual Report Download - page 17

ITEM 1A. RISK FACTORS.
implemented processes to collect and protect the integrity and security of personal and payment information, there can be no
assurance that this information will not be obtained by unauthorized persons, or collected or used inappropriately. If the security
and information systems of the Company or of its internal or external business partners are compromised or its internal or external
business associates fail to comply with these laws and regulations and this information is obtained by unauthorized persons, or
collected or used inappropriately, it could negatively affect the Company’s reputation and marketing initiatives, as well as
operations and financial results, and could result in litigation and/or regulatory action against the Company including the
imposition of penalties and fines. In addition, a compromise of the Company’s systems could result in a disruption to operations
and require expanded resources to remediate, investigate, correct and upgrade systems. As privacy and information security
laws and regulations change, the Company will incur additional costs to remain in compliance.
Failure to successfully implement new information technology systems and enhance
existing systems could negatively impact the business and its financial results.
The Company regularly invests in new information technology systems and implements modifications and upgrades to existing
systems. These investments include replacing legacy systems, making changes to existing systems, building redundancies,
acquiring new systems and hardware with updated functionality and cloud-based solutions such as software-as-a-service
solutions and data storage. The Company believes it is taking appropriate actions to ensure the successful implementation of
these initiatives, including the testing of new systems and the transfer of existing data, with minimal disruptions to the business.
However, there can be no assurance the Company has anticipated all potential risks. Failure to successfully implement these
initiatives could negatively impact the business and its financial results.
The Company’s business operations, including the expansion of the Company’s
e-Commerce website, are subject to inherent cybersecurity risks and e-Commerce related
fraud that may disrupt its business and negatively impact the Company’s financial results
and reputation.
The Company’s e-Commerce functionality has increased the Company’s exposure to cybersecurity risks and e-Commerce
related fraud. A compromise of its security systems could result in a service disruption, or customers’, associates’ or vendors’
personal or payment information or the Company’s proprietary information being obtained by unauthorized users. Although the
Company has implemented processes to mitigate the risks of security breaches, cyber incidents and e-Commerce related fraud,
there can be no assurance that such events will not occur. These events could result in violation of privacy laws, potential
litigation or regulatory action, increased costs and a loss of consumer confidence in its security measures, all of which could have
a negative impact on the Company’s financial results and its reputation.
Failure to maintain positive brand perception and recognition could have a negative impact
on the Company’s financial results and reputation.
Maintaining a good reputation is critical to the Company’s business. The considerable expansion in the use of social media over
recent years has increased the risk that the Company’s reputation could be negatively impacted in a short amount of time. If the
Company is unable to quickly and effectively respond to occurrences of negative publicity through social media or otherwise, it
may suffer declines in customer loyalty and traffic, vendor relationship issues, diversion of management’s time to respond and
other adverse effects, all of which could negatively impact the Company’s financial results and its reputation.
Regulatory Risks
The Company is subject to laws and regulatory requirements in many jurisdictions. Changes
in these laws and requirements, or interpretations of them, may result in additional costs to
the Company, including the costs of compliance as well as potential penalties and fines for
non-compliance.
Legislation on a local, regional, state, national or global level has the potential to have a negative effect on the Company’s
profitability or ability to operate its business. Compliance with certain legislation carries with it significant costs. The Company is
subject to oversight by many governmental and quasi-governmental agencies in the course of operating its business because of
its numerous locations, large number of associates, contact with consumers and importation and exportation of product. In
addition, the Company is subject to regulations regarding consumer product quality and safety standards. Complying with
regulations may cause the Company to incur significant expenses, including the costs associated with periodic audits and
recalls. Failure to comply may also result in damage to the Company’s reputation or additional costs in the form of litigation,
financial penalties and fines or business interruptions.
PIER 1 IMPORTS, INC. 2016 Form 10-K 11