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24 | 2008 Annual Report United States Postal Service
Risk Factors
Our operations and financial results are subject to
various risks and uncertainties, including those de-
scribed below, that could adversely affect our busi-
ness, financial condition, results of operations and cash
flows. The remainder of this report, including sections en-
titled “Business” and “Management’s Discussion and Anal-
ysis of Financial Condition and Results of Operations,” will
provide the reader with a more complete understanding of
the risks and uncertainties we confront.
Adverse changes in the economy directly impact our
business, adversely affecting our results of operations.
The demand for postal services is heavily influenced by
changes in the economy. A continuation of the slowdown
in the economy is expected to impact nearly every class of
mail negatively. The continual decline in employment, last-
ing since January 2008, has been indicative of this eco-
nomic malaise. In recent months, turmoil in the financial
markets has resulted in a worldwide credit crisis, which
raises economic risk significantly. Moreover, a long run-up
in commodities prices — including, most notably, energy
prices — was followed by a rapid decline in energy prices
beginning in mid-summer 2008. Volatile market conditions
such as these are expected to have an adverse impact on
retail sales, investment, consumer spending, and consum-
er confidence. Adverse trends in retail sales, investment
spending, and employment are all likely to depress the de-
mand for postal services.
Expanding use of electronic communications methods
and other commercial services compete with some of
our principal services. If we do not compete effectively
with these services, our business and results of opera-
tions will be adversely affected.
The Internet continues to change the communications mar-
ket. Within the next decade, further innovations in mobile
commerce, broadband, interactive TV, data-mining software,
and new printing technologies will continue to affect the way
businesses and consumers interact. Of greatest impact on
the Postal Service are electronic alternatives to correspon-
dence and transactions, particularly for First-Class Mail and
Standard Mail items such as business correspondence, bills,
statements and customer payments and, increasingly, ad-
vertising. First-Class Mail volume has already been affected
by the Internet, automatic deductions, direct deposit, tele-
phone, fax machines, and other electronic communications.