Rue 21 2012 Annual Report Download - page 21

addition, we rely on third party technology and systems in certain aspects of our businesses, including to securely
transmit confidential information. Despite instituted safeguards for the protection of such information, security
could be compromised and confidential customer or business information misappropriated. Loss of customer or
business information could disrupt our operations, damage our reputation, and expose us to claims from customers,
financial institutions, payment card associations and other persons, any of which could have an adverse effect on our
business, financial condition and results of operations. In addition, compliance with more stringent privacy and
information security laws and standards may result in significant expense due to increased investment in technology
and the development of new operational processes.
There are claims made against us from time to time that can result in litigation or regulatory proceedings
which could distract management from our business activities and result in significant liability or damage to
our brand image.
As a growing company with expanding operations, we increasingly face the risk of litigation and other claims
against us. Our business is subject to the risk of litigation by employees, consumers, suppliers, competitors,
stockholders, government agencies and others through private actions, class actions, administrative proceedings,
regulatory actions or other litigation. The number of employment-related class actions filed each year has continued
to increase, and recent changes and proposed changes in Federal and state laws may cause claims to rise even more.
The outcome of litigation, particularly class action lawsuits, regulatory actions and intellectual property claims, is
difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate
amounts, and the magnitude of the potential loss relating to these lawsuits may remain unknown for substantial
periods of time. In addition, certain of these lawsuits, if decided adversely to us or settled by us, may result in
liability material to our financial statements as a whole or may negatively affect our operating results if changes to
our business operation are required. The cost to defend future litigation may be significant. There also may be
adverse publicity associated with litigation that could negatively affect customer perception of our business,
regardless of whether the allegations are valid or whether we are ultimately found liable. We cannot predict or
determine the ultimate outcome of any legal or administrative proceedings to which we are now subject or may
become subject in the future or quantify the loss, expense or other amounts attributable to any such matter. The
resolution of any future legal claims and administrative proceedings, if unfavorable, could have a material adverse
effect on our business and results of operations.
The investments we make to successfully execute our e-commerce business could strain our resources and
have an adverse impact on our results of operations.
The Company has begun planning, designing, and constructing an e-commerce business. The resources we
intend to dedicate to building and executing an e-commerce business could place a strain on management and other
initiatives. The failure to successfully implement and execute an e-commerce business could negatively affect our
growth and profitability. Finally, an e-commerce business is subject to a number of risks and uncertainties which are
beyond our control, including the following:
• changes in consumer willingness to purchase goods via the internet;
• increases in software filters that may inhibit our ability to market our products through e-mail messages to
our customers and increases in consumer privacy concerns relating to the Internet;
• changes in technology;
• changes in applicable federal and state regulation, such as the Federal Trade Commission Act, the Children’s
Online Privacy Act, the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act and similar types of
laws;
• breaches of internet security;
• failure of our internet service providers to perform their services properly and in a timely and efficient
manner;
• failures in our e-commerce infrastructure or the failure of systems or third parties, such as telephone or
electric power service, resulting in website downtime or other problems;
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