BB&T 2011 Annual Report Download - page 24

Unpredictable catastrophic events could have a material adverse effect on BB&T.
The occurrence of catastrophic events such as hurricanes, tropical storms, tornados, and other large scale catastrophes
could adversely affect BB&T’s consolidated financial condition or results of operations. BB&T has operations and
customers along the Gulf and Atlantic coasts as well as other parts of the southeastern United States, which could be
adversely impacted by hurricanes and other severe weather in those regions. Unpredictable natural and other disasters
could have an adverse effect on BB&T in that such events could materially disrupt its operations or the ability or
willingness of its customers to access the financial services offered by BB&T. BB&T’s property and casualty insurance
operations also expose it to claims arising out of catastrophes. The incidence and severity of catastrophes are inherently
unpredictable. Although BB&T carries insurance to mitigate its exposure to certain catastrophic events, these events could
nevertheless reduce BB&T’s earnings and cause volatility in its financial results for any fiscal quarter or year and have a
material adverse effect on BB&T’s financial condition and/or results of operations.
BB&T faces significant operational risks related to its activities, which could expose it to negative publicity, litigation
and/or regulatory action.
BB&T is exposed to many types of risks, including operational, reputational, legal and compliance risk, the risk of fraud
or theft by employees or outsiders (including identity and information theft), unauthorized transactions by employees or
operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or
telecommunications systems. Negative public opinion can result from BB&T’s actual or alleged conduct in any number of
activities, including lending practices, corporate governance and acquisitions, activities related to asset sales and balance
sheet management and from actions taken by government regulators and community organizations in response to those
activities. Negative public opinion can adversely affect BB&T’s ability to attract and keep customers and can expose it to
litigation and regulatory action.
Because the nature of the financial services business involves a high volume of transactions, certain errors may be
repeated or compounded before they are discovered and successfully rectified. BB&T’s necessary dependence upon
automated systems to record and process its transaction volume may further increase the risk that technical flaws or
employee tampering or manipulation of those systems will result in losses that are difficult to detect. BB&T also may be
subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for
example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to
customers and to financial loss or liability. BB&T is further exposed to the risk that its external vendors may be unable to
fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective
employees as is BB&T) and to the risk that BB&T’s (or its vendors’) business continuity and data security systems prove
to be inadequate.
BB&T relies on other companies to provide certain key components of its business infrastructure.
Third party vendors provide certain key components of BB&T’s business infrastructure such as internet connections,
network access and mutual fund distribution. While BB&T has selected these third party vendors carefully, it does not
control their operations. Any problems caused by these third parties, including those which result from their failure to
provide services for any reason or their poor performance of services, could adversely affect BB&T’s ability to deliver
products and services to its customers and otherwise to conduct its business. Replacing these third party vendors could
also entail significant delay and expense.
Significant litigation could have a material adverse effect on BB&T.
BB&T faces legal risks in its business, and the volume of claims and amount of damages and penalties claimed in
litigation and regulatory proceedings against financial institutions remain high. Substantial legal liability or significant
regulatory action against BB&T may have material adverse financial effects or cause significant reputational harm to
BB&T, which in turn could seriously harm BB&T’s business prospects.
BB&T faces systems failure risks as well as security risks, including “hacking” and “identity theft.”
The computer systems and network infrastructure BB&T and others use could be vulnerable to unforeseen problems.
These problems may arise in both BB&T’s internally developed systems and the systems of its third-party service
providers. BB&T’s operations are dependent upon its ability to protect computer equipment against damage from fire,
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