Restoration Hardware 2015 Annual Report Download - page 22

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In addition, our success depends in part upon our ability to attract, motivate and retain a sufficient number of store employees
who understand and appreciate our corporate culture and customers. Turnover in the retail industry is generally high. Excessive store
employee turnover will result in higher employee costs associated with finding, hiring and training new store employees. If we are
unable to hire and retain store personnel capable of consistently providing a high level of customer service, our ability to open new
stores may be impaired, the performance of our existing and new stores could be materially adversely affected and our brand image
may be negatively impacted.
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, and we may be exposed to risks and costs associated with protecting the integrity and security of
our customers’ information.
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 several years or are in the midst of implementing in connection with rebuilding
our supply chain and infrastructure. Additionally, in light of the various initiatives in which we are engaged in order to improve
customer satisfaction, we are evaluating further new systems to enhance customer service. 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 the affected system, 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.
Additionally, a significant number of customer purchases across all of our channels are made using credit cards, and a
significant number of our customer orders are placed through our websites. We process, store, and transmit large amounts of data,
including personal information, for our customers. Also, we depend in part throughout our operations on the secure transmission of
confidential information over public networks. In addition, security breaches can also occur as a result of non-technical issues,
including vandalism, catastrophic events, and human error. Our information systems, however, are subject to the above delineated
risks. Our operations may further be impacted by security breaches that occur at third party vendors.
In order for our business to function successfully, we and other market participants must be able to handle and transmit
confidential and personal information securely. That data may include data about our customers, including credit card information.
From time to time, we may implement strategic initiatives related to elevating our customer service experience such as customer
membership programs where we collect and maintain increasing amounts of customer data. We also handle and transmit sensitive
information about our vendors and workforce, including social security numbers and bank account information.
We cannot provide assurance that our measures, however reasonable, to secure credit card information and other personal data
to meet current and evolving industry security standards, including Payment Card Industry (PCI) Standards, the standards that protect
credit card data. There can be no assurance that we will be able to operate our facilities and our customer service and sales operations
in accordance with or in continued compliance with Payment Card Industry, or PCI, Data Security Standards or other industry
recommended practices. We expect to incur expenses to maintain compliance with applicable industry standards and practices. Given
the challenges of keeping networks and systems secure and the evolving nature of the standards, we cannot provide absolute assurance
of our ability to maintain and achieve compliance with future security standards or that meeting those standards will in fact prevent a
data breach.
Further, there is increased litigation over personally identifiable information and other data breaches and we may be subject to
one or more claims or lawsuits related to the intentional or unintentional release of confidential or personal information, including
personally identifiable information about our customers, vendors or workforce.
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 third party is able to circumvent our security measures, he or she could destroy or steal valuable information
or disrupt our operations. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and often
are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate
preventative measures. 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 expend significant resources 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.