US Bank 2014 Annual Report Download - page 164

Operational risks for large institutions such as the
Company have generally increased in recent years in part
because of the proliferation of new technologies, the use of
internet services and telecommunications technologies to
conduct financial transactions, and the increased
sophistication and activities of organized crime, hackers,
terrorists, activists, and other external parties. If personal,
confidential or proprietary information of customers or
clients in the Company’s possession were to be mishandled
or misused, the Company could suffer significant regulatory
consequences, reputational damage and financial loss. This
mishandling or misuse could include, for example, situations
in which the information is erroneously provided to parties
who are not permitted to have the information, either by fault
of the Company’s systems, employees, or vendors, or where
the information is intercepted or otherwise inappropriately
taken by third parties. In the event of a breakdown in the
internal control system, improper operation of systems or
improper employee or third party actions, the Company could
suffer financial loss, face legal or regulatory action and
suffer damage to its reputation.
The Company could lose market share and experience
increased costs if it does not effectively develop and
implement new technology The financial services industry
is continually undergoing rapid technological change with
frequent introductions of new technology-driven products
and services, including innovative ways that customers can
make payments or manage their accounts. The Company’s
continued success depends, in part, upon its ability to
address customer needs by using technology to provide
products and services that customers want to adopt, and
create additional efficiencies in the Company’s operations.
Developing and deploying new technology-driven products
and services can also involve costs that the Company may
not recover and divert resources away from other product
development efforts. The Company may not be able to
effectively develop and implement profitable new technology-
driven products and services or be successful in marketing
these products and services to its customers. Failure to
successfully keep pace with technological change affecting
the financial services industry could harm the Company’s
competitive position and negatively affect its revenue and
profit.
Negative publicity could damage the Company’s
reputation and adversely impact its business and
financial results Reputation risk, or the risk to the
Company’s business, earnings and capital from negative
public opinion, is inherent in the Company’s business and
increased substantially because of the financial crisis
beginning in 2008. The reputation of the financial services
industry in general has been damaged as a result of the
financial crisis and other matters affecting the financial
services industry, including mortgage foreclosure issues.
Negative public opinion about the financial services industry
generally or the Company specifically could adversely affect
the Company’s ability to keep and attract customers, and
expose the Company to litigation and regulatory action.
Negative public opinion can result from the Company’s
actual or alleged conduct in any number of activities,
including lending practices, mortgage servicing and
foreclosure practices, corporate governance, regulatory
compliance, mergers and acquisitions, and related
disclosure, sharing or inadequate protection of customer
information, and actions taken by government regulators and
community organizations in response to that conduct.
Because most of the Company’s businesses operate under
the “U.S. Bank” brand, actual or alleged conduct by one
business can result in negative public opinion about other
businesses the Company operates. Although the Company
takes steps to minimize reputation risk in dealing with
customers and other constituencies, the Company, as a large
diversified financial services company with a high industry
profile, is inherently exposed to this risk.
The Company’s business and financial performance could
be adversely affected, directly or indirectly, by disasters,
by terrorist activities or by international hostilities
Neither the occurrence nor the potential impact of disasters,
terrorist activities or international hostilities can be
predicted. However, these occurrences could impact the
Company directly (for example, by interrupting the
Company’s systems, which could prevent the Company from
obtaining deposits, originating loans and processing and
controlling its flow of business, causing significant damage
to the Company’s facilities or otherwise preventing the
Company from conducting business in the ordinary course),
or indirectly as a result of their impact on the Company’s
borrowers, depositors, other customers, suppliers or other
counterparties (for example, by damaging properties pledged
as collateral for the Company’s loans or impairing the ability
of certain borrowers to repay their loans). The Company
could also suffer adverse consequences to the extent that
disasters, terrorist activities or international hostilities affect
the financial markets or the economy in general or in any
particular region. These types of impacts could lead, for
example, to an increase in delinquencies, bankruptcies or
defaults that could result in the Company experiencing
higher levels of nonperforming assets, net charge-offs and
provisions for credit losses.
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