Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in Item 1A of our Form 10-K for the fiscal year ended December 31, 2020 and our Form 10-Q for the quarter ended March 31, 2021, other than as described below. Additional risks and uncertainties, including risks and uncertainties not presently known to us, or that we currently deem immaterial, could also have an adverse effect on our business, financial condition and/or results of operations.
Our software products may contain undetected defects, or errors may occur when our services are provided, which could damage our reputation with customers, decrease profitability, and expose us to liability.
Our software products are complex. Software may contain bugs or defects that could unexpectedly interfere with the operation of the software products when first introduced or as new versions are released. Additionally, errors could occur in the provision of our services, including processing services such as our bill payment services and other services delivered through the ACI On Demand platform. Software defects or service errors may result in the loss of, or delay in, market acceptance of our products and services and a corresponding loss of sales or revenues.
Customers depend upon our products and services for mission-critical applications, and product defects or service errors may hurt our reputation with customers. In addition, software product defects or errors could subject us to liability for damages, performance and warranty claims, and fines or penalties from governmental authorities, which could be material.
For example, in April 2021, erroneous ACH files associated with one of our mortgage services customers were inadvertently transmitted to a processing bank while conducting a test of our ACH file production system. We processed reversal files at the first available opportunity to correct the error and worked diligently to ensure that any impacts to consumers were addressed and corrected. We nonetheless have been contacted by state and federal consumer protection and regulatory agencies about this matter. We are cooperating with these government authorities in their inquiries, which could result in fines or penalties. Any such fines or penalties could be material individually or in the aggregate. Additionally, our affected customer or consumers whose mortgage accounts were affected may make claims against us arising out of this incident. Any such claims, with or without merit, could be time consuming and result in costly litigation. The failure to successfully defend ourselves against such claims could have a material adverse effect on us.
We have a few new members on our senior management team, which coupled with the announced strategy to realign our organization structure and geographic footprint, may pose challenges to our operations as we transition to the new business model.
As a result of our Fit for Growth strategy which includes a realignment of our organizational structure and geographic footprint, we may experience personnel changes. We may face difficulties finding comparably experienced replacement employees exacerbated by the remaining impact of the COVID-19 pandemic and especially many employees continued remote working situation. Failure to meet these challenges successfully may have a material adverse effect on us.
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