Restoration Hardware 2012 Annual Report Download - page 87

operate our facilities and our customer service and sales operations in accordance with PCI or other industry
recommended practices. We intend to obtain compliance with PCI Data Security Standards and will incur
additional expenses to attain and maintain PCI compliance. Further, there is increased litigation over personally
identifiable information and we may be subject to one or more claims or lawsuits related to intentional or
unintentional exposure of our customer’s personally identifiable information. Even if we are compliant with such
standards, we still may not be able to prevent security breaches involving customer transaction data. Any breach
could cause consumers to lose confidence in the security of our website and choose not to purchase from us. If a
computer hacker or other criminal is able to circumvent our security measures, he or she could destroy or steal
valuable information or disrupt our operations. Any security breach could expose us to risks of data loss, fines,
litigation and liability and could seriously disrupt our operations and harm our reputation, any of which could
adversely affect our business. In addition to the possibility of fines, lawsuits and other claims, we could be
required to change our business practices or modify our service offerings in connection with the protection of
personally identifiable information, which could have a material adverse effect on our business.
In addition, states and the federal government have enacted additional laws and regulations to protect
consumers against identity theft, including laws governing treatment of personally identifiable information. We
collect and store personal information from consumers in the course of doing business. These laws have
increased the costs of doing business and, if we fail to implement appropriate safeguards or we fail to detect and
provide prompt notice of unauthorized access as required by some of these laws, we could be subject to potential
claims for damages and other remedies. If we were required to pay any significant amounts in satisfaction of
claims under these laws, or if we were forced to cease our business operations for any length of time as a result
of our inability to comply fully with any such law, our business, operating results and financial condition could
be adversely affected.
Material damage to, or interruptions in, our information systems as a result of external factors, staffing
shortages and difficulties in updating our existing software or developing or implementing new software could
have a material adverse effect on our business or results of operations.
We depend largely upon our information technology systems in the conduct of all aspects of our operations,
many of which we have only adopted and implemented within the past five years in connection with rebuilding
our supply chain and infrastructure. Such systems are subject to damage or interruption from power outages,
computer and telecommunications failures, computer viruses, security breaches and natural disasters. Damage or
interruption to our information systems may require a significant investment to fix or replace them, and we may
suffer interruptions in our operations in the interim. Management information system failures or
telecommunications system problems may disrupt operations. In addition, costs and potential problems and
interruptions associated with the implementation of new or upgraded systems and technology or with
maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our
operations. Any material interruptions or failures in our systems may have a material adverse effect on our
business or results of operations.
We also rely heavily on our information technology staff. If we cannot meet our staffing needs in this area,
we may not be able to fulfill our technology initiatives while continuing to provide maintenance on existing
systems.
We rely on certain software vendors to maintain and periodically upgrade many of these systems so that
they can continue to support our business. The software programs supporting many of our systems were licensed
to us by independent software developers. The inability of these developers or us to continue to maintain and
upgrade these information systems and software programs would disrupt or reduce the efficiency of our
operations if we were unable to convert to alternate systems in an efficient and timely manner.
We are vulnerable to various risks and uncertainties associated with our websites, including changes in
required technology interfaces, website downtime and other technical failures, costs and technical issues as we
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Form 10-K