Walgreens 2014 Annual Report Download - page 23

systems, making changes to existing systems, or cost-effectively acquiring new systems with new
functionality. Implementing new systems carries significant potential risks, including failure to operate as
designed, potential loss or corruption of data or information, cost overruns, implementation delays, disruption of
operations, and the potential inability to meet business and reporting requirements. While we are aware of
inherent risks associated with replacing these systems and believe we are taking reasonable action to mitigate
known risks, there can be no assurance that these technology initiatives will be deployed as planned or that they
will be timely implemented without disruption to our operations.
If we do not maintain the privacy and security of sensitive customer and business information, we could
damage our reputation, incur substantial additional costs and become subject to litigation.
The protection of customer, employee, and company data is critical to our business. A significant breach of
customer, employee, or company data could attract a substantial amount of media attention, damage our
customer relationships and reputation and result in lost sales, fines or lawsuits. Throughout our operations, we
receive, retain and transmit certain personal information that our customers provide to purchase products or
services, enroll in promotional programs, participate in our customer loyalty program, register on our websites,
or otherwise communicate and interact with us. In addition, aspects of our operations depend upon the secure
transmission of confidential information over public networks. Although we deploy a layered approach to
address information security threats and vulnerabilities designed to protect confidential information against data
security breaches, a compromise of our data security systems or of those of businesses with whom we interact,
which results in confidential information being accessed, obtained, damaged or used by unauthorized or improper
persons, could harm our reputation and expose us to regulatory actions and claims from customers, financial
institutions, payment card associations and other persons, any of which could materially and adversely affect our
business, financial position and results of operations. In addition, a security breach could require that we expend
substantial additional resources related to the security of information systems and disrupt our business.
The regulatory environment surrounding information security and privacy is increasingly demanding, with the
frequent imposition of new and changing requirements across business units. Compliance with changes in
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. If we or those with whom we share
information fail to comply with these laws and regulations or experience a data security breach, our reputation
could be damaged and we could be subject to additional litigation and regulatory risks. Our security measures
may be undermined due to the actions of outside parties, employee error, malfeasance, or otherwise, and, as a
result, an unauthorized party may obtain access to our data systems and misappropriate business and personal
information. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage
systems change frequently and may not immediately produce signs of intrusion, we may be unable to anticipate
these techniques or to implement adequate preventative measures. Any such breach or unauthorized access could
result in significant legal and financial exposure, damage to our reputation, and potentially have an adverse effect
on our business.
Our growth strategy is partially dependent upon acquisitions, joint ventures and other strategic
investments, some of which may not prove to be successful.
We have grown our business, in part, through acquisitions in recent years and expect to continue to acquire or
invest in drugstore chains, independent drugstores, health and well-being businesses and other businesses in the
future. Acquisitions involve numerous risks, including difficulties in integrating the operations and personnel of
the acquired companies, distraction of management from overseeing our existing operations, difficulties in
entering markets or lines of business in which we have no or limited direct prior experience, the possible loss of
key employees and customers and difficulties in achieving the synergies we anticipated. These transactions may
also cause us to significantly increase our interest expense, leverage and debt service requirements if we incur
additional debt to pay for an acquisition or investment, issue common stock that would dilute our current
shareholders’ percentage ownership, or incur asset write-offs and restructuring costs and other related
expenses. Acquisitions, joint ventures and strategic investments involve numerous other risks, including potential
15