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Item 1A. Risk Factors

2021-02-24 compared with 2020-02-26 · 163 added, 141 removed, 203 unchanged (60% of the section changed)

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Risks Related to Our Business and Industry

The impact of the COVID-19 pandemic and the measures implemented to contain the spread of the virus have had, and could continue to have, an impact on our business and results of operations.

The COVID-19 pandemic and resulting containment measures have caused economic and financial disruptions that have adversely affected, and could continue to affect, our business and results of operations.

The extent to which the pandemic will continue to affect our business and results of operations will depend on future developments that we are not able to predict, including the duration, spread and severity of the outbreak;

the nature, extent and effectiveness of containment measures;

the extent and duration of the effect on the economy;

and how quickly and to what extent normal economic and operating conditions can resume.

It is also possible that any adverse impacts of the pandemic and containment measures may continue once the pandemic is controlled.

The COVID-19 pandemic and resulting containment measures have contributed to among other things:

• Adverse impacts on our daily business operations and our ability to perform necessary business functions, including as a result of illness or as a result of restrictions on movement, which has caused expected delays in collections;

• Widespread changes to financial and economic conditions of consumers;

• Uncertainty in certain jurisdictions with respect to near-term availability of receivable portfolios that meet our purchasing standards;

• Governmental actions discussed, proposed or taken to provide forms of relief, such as limiting debt collections efforts and encouraging or requiring extensions, modifications or forbearance, with respect to certain loans and fees;

• Impacts on the court system and the legal process, which have impacted our ability to collect through the litigation process;

• Adverse impacts on third-party service providers;

• Impacts on capital and credit market conditions, which may limit our access to funding, increase our cost of capital, and affect our ability to meet liquidity needs;

• Increased spending on business continuity efforts and readiness efforts for returning to our offices, which may in turn require that we cut costs and investments in other areas;

• An increased risk of an information or cyber-security incident, fraud or a failure in the effectiveness of our compliance programs due to, among other things, an increase in remote work.

On January 1, 2020 we adopted the new accounting standard for Financial Instruments - Credit Losses (or “CECL”).

Our ability to accurately forecast future losses under CECL may be impaired by the significant uncertainty surrounding the COVID-19 pandemic and containment measures and the lack of comparable precedent.

See “ Note 1:

Ownership, Description of Business, and Summary of Significant Accounting Policies ” to our consolidated financial statements for our accounting policy under CECL.

We do not yet know the full extent of how the COVID-19 pandemic could affect our business, results of operations and financial condition.

However, the effects could have a material impact on our business and results of operations and heighten many of the other risks described in this “ Risk Factors ” section.

Financial and economic conditions affect the ability of consumers to pay their obligations, which could harm our financial results.

Economic conditions globally and locally directly affect unemployment, credit availability, and real estate values.

Economic conditions globally and locally directly affect unemployment and credit availability.

Adverse conditions, economic changes, and financial disruptions place financial pressure on the consumer, which may reduce our ability to collect on our consumer receivable portfolios and may adversely affect the value of our consumer receivable portfolios.

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Our ability to continue to operate profitably depends upon the continued availability of receivable portfolios that meet our purchasing standards and are cost-effective based upon projected collections exceeding our costs.

Due, in part, to fluctuating prices for receivable portfolios and competition within the marketplace, there has been considerable variation in our purchasing volume and pricing from quarter to quarter and we expect that to continue.

Due, in part, to fluctuating prices for receivable portfolios, fluctuating supply and competition within the marketplace, there has been considerable variation in our purchasing volume and pricing from quarter to quarter and we expect that to continue.

The volume of our portfolio purchases may be limited when prices are high and may or may not increase when portfolio pricing is more favorable to us.

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In addition, because of the length of time involved in collecting charged-off consumer receivables on acquired portfolios and the volatility in the timing of our collections, we may not be able to identify trends and make changes in our purchasing strategies in a timely manner.

Ultimately, if we are unable to continually purchase and collect on a sufficient volume of

receivables to generate cash collections that exceed our costs or to generate satisfactory returns, our business, financial condition and operating results will be adversely affected.

Ultimately, if we are unable to continually purchase and collect on a sufficient volume of receivables to generate cash collections that exceed our costs or to generate satisfactory returns, our business, financial condition and operating results will be adversely affected.

A significant portion of our portfolio purchases during any period may be concentrated with a small number of sellers, which could adversely affect our volume and timing of purchases.

A significant percentage of our portfolio purchases for any given fiscal quarter or year may be concentrated with a few large sellers, some of which may also involve forward flow arrangements.

We cannot be certain that any of our significant sellers will continue to sell charged-off receivables to us on terms or in quantities acceptable to us, or that we would be able to replace these purchases with purchases from other sellers.

A significant decrease in the volume of portfolio available from any of our principal sellers on terms acceptable to us would force us to seek alternative sources of charged-off receivables.

Further, we have historically complemented our portfolio purchases from credit originators by purchasing portfolios from resellers or through the acquisition of portfolios from competitors looking to exit the market.

As a result of consolidation in the market, there are fewer competitors to acquire on favorable terms.

In addition, as the regulatory market continues to evolve, increased documentation requirements for collecting on portfolios may make purchasing accounts through resellers more difficult.

Several larger issuers have also begun to prohibit resale of portfolios.

We cannot be certain that any of our significant sellers will continue to sell charged-off receivables to us, that such sales would be on terms or in quantities acceptable to us, or that we would be able to replace these purchases with purchases from other sellers.

A significant decrease in the volume of portfolio available from any of our principal sellers would force us to seek alternative sources of charged-off receivables.

We may be unable to find alternative sources from which to purchase charged-off receivables, and even if we could successfully replace these purchases, the search could take time and the receivables could be of lower quality, cost more, or both, any of which could adversely affect our business, financial condition and operating results.

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Our lack of experience with these assets may hinder our ability to generate expected levels of profits from these portfolios.

Further, our existing methods of collections

may prove ineffective for these new receivables, and we may not be able to collect on these portfolios.

Further, our existing methods of collections may prove ineffective for these new receivables, and we may not be able to collect on these portfolios.

Our inexperience with these receivables may have an adverse effect on our business, financial condition and operating results.

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We use internally developed models to project the remaining cash flows from our receivable portfolios.

These models consider known data about our consumers’ accounts, including, among other things, our collection experience and changes in external consumer factors, in addition to data known when we acquired the accounts.

However, we may not be able to achieve the collections forecasted by our models.

If we are not able to achieve the levels of forecasted collection, our revenues will be reduced or we may be required to record an allowance charge, which may adversely affect our business, financial condition and operating results.

Our models also consider data provided by third parties including public sources.

We may not be able to achieve the collections forecasted by our models.

Our models may not appropriately identify or assess all material factors and yield correct or accurate forecasts as our historical collection experience may not reflect current or future realities.

We also have no control over the accuracy of information received from third parties.

If such information is not accurate our models may not accurately project estimated remaining cash flows.

If we are not able to achieve the levels of forecasted collection, our revenues will be reduced or we may be required to record a charge, which may adversely affect our business, financial condition and operating results.

A significant portion of our collections relies upon our success in individual lawsuits brought against consumers and our ability to collect on judgments in our favor.

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A decrease in the willingness of courts to grant these judgments, a change in the requirements for filing these cases or obtaining these judgments, or a decrease in our ability to collect on these judgments could have an adverse effect on our business, financial condition and operating results.

As we increase our use of the legal channel for collections, our short-term margins may decrease as a result of an increase in upfront court costs and costs related to counter claims.

As we increase our use of the legal channel for collections, our short-

term margins may decrease as a result of an increase in upfront court costs and costs related to counter claims.

We may not be able to collect on certain aged accounts because of applicable statutes of limitations and we may be subject to adverse effects of regulatory changes.

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We have substantial collection activity through our legal collections channel and, as a consequence, increases in upfront court costs, costs related to counterclaims, and other court costs may increase our total cost in collecting on accounts in this channel, which may have an adverse effect on our business, financial condition and operating results.

Our business, financial condition and operating results may be adversely affected if consumer bankruptcy filings increase or if bankruptcy laws change.

Our business model may be uniquely vulnerable to an economic recession, which typically results in an increase in the amount of defaulted consumer receivables, thereby contributing to an increase in the amount of personal bankruptcy filings.

Under certain bankruptcy filings, a consumer’s assets are sold to repay credit originators, with priority given to holders of secured debt.

Since the defaulted consumer receivables we purchase are generally unsecured, we often are not able to collect on those receivables.

In addition, since we purchase receivables that may have been delinquent for a long period of time, this may be an indication that many of the consumers from whom we collect will be unable to pay their debts going forward and are more likely to file for bankruptcy in an economic recession.

Furthermore, potential changes to existing bankruptcy laws could contribute to an increase in consumer bankruptcy filings.

We cannot be certain that our collection experience would not decline with an increase in consumer bankruptcy filings.

If our actual collection experience with respect to a defaulted consumer receivable portfolio is significantly lower than we projected when we purchased the portfolio, our business, financial condition and operating results could be adversely affected.

We are subject to audits conducted by sellers of debt portfolios and may be required to implement specific changes to our policies and practices as a result of adverse findings by such sellers as a part of the audit process, which could limit our ability to purchase debt portfolios from them in the future, which could materially and adversely affect our business.

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In addition, to the extent that we are unable to satisfy the requirements of a particular seller, such seller could remove us from their panel of preferred purchasers, which could limit our ability to purchase debt portfolios from that seller in the future, which could adversely affect our business, financial condition and operating results.

We are dependent upon third parties to service a substantial portion of our consumer receivable portfolios.

We rely on third parties to provide us with services in connection with certain aspects of our business, and any failure by these third parties to perform their obligations, or our inability to arrange for alternative third-party providers for such services, could have an adverse effect on our business, financial condition and operating results.

We use outside collection services to collect a substantial portion of our charged-off receivables.

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Any of the foregoing factors could cause our business, financial condition and operating results to be adversely affected.

We are dependent on our data gathering systems, proprietary consumer profiles, and if access to such data was lost or became public, our business could be materially and adversely affected.

We have entered into agreements with third parties to provide us with services in connection with our business, including payment processing, credit card authorization and processing, payroll processing, record keeping for retirement and benefit plans and certain information technology functions.

Any failure by a third party to provide us with contracted services on a

timely basis or within service level expectations and performance standards may have an adverse effect on our business, financial condition and operating results.

In addition, we may be unable to find, or enter into agreements with, suitable replacement third party providers for such services, which could adversely affect our business, financial condition and operating results.

We are dependent on our data gathering systems and proprietary consumer profiles, and if access to such data was lost or became public, our business could be materially and adversely affected.

Our models and consumer databases provide information that is critical to our business.

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If we become unable to continue to acquire or use information and data in the manner in which it is currently acquired and used, or if we were prohibited from accessing or aggregating the data in these systems or profiles for any reason, we may lose a significant competitive advantage, in particular if our competitors continue to be able to acquire and use such data, and our business could be materially and adversely affected .

If our technology and telecommunications systems were to fail, or if we are not able to successfully anticipate, invest in, or adopt technological advances within our industry, it could have an adverse effect on our operations.

Our success depends in large part on sophisticated computer and telecommunications systems.

The temporary or permanent loss of our computer and telecommunications equipment and software systems, through casualty, operating malfunction, software virus, or service provider failure, could disrupt our operations.

In the normal course of our business, we must record and process significant amounts of data quickly and accurately to properly bid on prospective acquisitions of receivable portfolios and to access, maintain, and expand the databases we use for our collection activities.

Any simultaneous failure of our information systems and their backup systems would interrupt our business operations.

In addition, our business relies on computer and telecommunications technologies, and our ability to integrate new technologies into our business is essential to our competitive position and our success.

We may not be successful in anticipating, investing in, or adopting technological changes on a timely or cost-effective basis.

Computer and telecommunications technologies are evolving rapidly and are characterized by short product life cycles.

We continue to make significant modifications to our information systems to ensure that they continue to be adequate for our current and foreseeable demands and continued expansion, and our future growth may require additional investment in these systems.

These system modifications may exceed our cost or time estimates for completion or may be unsuccessful.

If we cannot update our information systems effectively, our business, financial condition and operating results may be adversely affected.

In the event of a cyber security breach or similar incident, our business and operations could suffer.

We rely on information technology networks and systems to process and store electronic information.

We collect and store sensitive data, including personally identifiable information of our consumers, on our information technology networks.

Despite the implementation of security measures, our information technology networks and systems have been, and in the future may be, vulnerable to disruptions and shutdowns due to attacks by hackers or breaches due to malfeasance by contractors, employees and others who have access to our networks and systems.

The occurrence of any of these cyber security events could compromise our networks and the information stored on our networks could be accessed.

Any such access could disrupt our operations, adversely affect the willingness of sellers to sell to us or result in legal claims, liability, reputational damage or regulatory penalties under laws protecting the privacy of personal information, any of which could adversely affect our business, financial condition and operating results.

We have significant international operations, which exposes us to additional risks and uncertainties.

Our international operations subject us to a number of additional risks and uncertainties, including:

• compliance with and changes in international laws, including regulatory and compliance requirements that could affect our business;

• differing accounting standards and practices;

• increased exposure to U.S.

laws that apply abroad, such as the Foreign Corrupt Practices Act, and exposure to other anti-corruption laws such as the U.K.

• social, political and economic instability or recessions;

• fluctuations in foreign economies and currency exchange rates;

• difficulty in hiring, staffing and managing qualified and proficient local employees and advisors to run international operations;

• the difficulty of managing and operating an international enterprise, including difficulties in maintaining effective communications with employees due to distance, language, and cultural barriers;

• difficulties implementing and maintaining effective internal controls and risk management and compliance initiatives;

• potential disagreements with our joint venture business partners;

• differing labor regulations and business practices;

• foreign and, in some circumstances, U.S.

tax consequences.

Each of these could adversely affect our business, financial condition and operating results.

We may not be able to adequately protect the intellectual property rights upon which we rely and, as a result, any lack of protection may diminish our competitive advantage.

We rely on proprietary software programs and valuation and collection processes and techniques, and we believe that these assets provide us with a competitive advantage.

We consider our proprietary software, processes, and techniques to be trade secrets, but they are not protected by patent or registered copyright.

We may not be able to protect our technology and data resources adequately, which may diminish our competitive advantage, which may, in turn, adversely affect our business, financial condition and operating results.

The United Kingdom’s exit from the European Union could have a material adverse effect on our business, financial condition and results of operations.

In June 2016, the United Kingdom held a referendum in which voters approved the United Kingdom’s exit from the E.U., commonly referred to as “Brexit.” The United Kingdom formally exited the European Union on January 31, 2020 although an agreement was not reached until the end of the allocated transition period in December 31, 2020.

Even though an agreement has been reached there remains a significant lack of clarity over the terms of the United Kingdom’s future relationship with the European Union in certain key areas including financial services where a temporary additional transition period has been assigned while negotiations continue.

These developments may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets or restrict our access to capital.

In addition, Brexit has caused, and may continue to cause, both significant volatility in global stock markets and currency exchange rate fluctuations, as well as create significant uncertainty among United Kingdom businesses and investors.

In particular, the pound sterling has lost a significant amount of its value against the U.S.

dollar and the euro respectively since the referendum.

We generate a significant portion of our earnings in the United Kingdom, and any significant change in the value of the pound and/or recession in the United Kingdom or any of the foregoing factors could have a material adverse effect on our business, financial condition and operating results.

Exchange rate fluctuations could adversely affect our business, financial condition and operating results.

Because we conduct some business in currencies other than U.S.

dollars, primarily the British Pound, but report our financial results in U.S.

dollars, we face exposure to fluctuations in currency exchange rates upon translation of these business results into U.S.

In the normal course of business, we may employ various strategies to manage these risks, including the use of derivative instruments.

These strategies may not be effective in protecting us against the effects of fluctuations from movements in foreign exchange rates.

Fluctuations in the foreign currency exchange rates could adversely affect our financial condition and operating results.

Risks Related to Government Regulation and Litigation

Our business is subject to extensive laws and regulations, which have increased and may continue to increase.

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These negative effects could result from changes in collection laws and guidance, laws related to credit reporting, consumer bankruptcy laws, laws related to the management and enforcement of consumer debt, court and enforcement procedures, the statute of limitation for debts, accounting standards, taxation requirements, employment laws, communications laws, data privacy and protection laws, anti-bribery and corruption laws and anti-money laundering laws.

For example, on October 30, 2020, the CFPB issued final rules in the form of new Regulation F to implement the Fair Debt Collection Practices Act, which rules restate and clarify prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt.

The rules included provisions related to, among other things, the use of newer technologies (text, voicemail and email) to communicate with consumers and limits relating to telephonic communications.

On December 18, 2020, the CFPB also announced that it issued an additional debt collection final rule focused on consumer disclosures.

This final rule amends Regulation F to provide additional requirements regarding validation information and disclosures provided at the outset of debt collection communications, prohibit suits and threats of suits regarding time-barred debt, and identify actions that must be taken before a debt collector may report information about a debt to consumer reporting agencies.

The rules will each become effective on November 30, 2021.

We sometimes purchase accounts in asset classes that are subject to industry-specific and/or issuer-specific restrictions that limit the collection methods that we can use on those accounts.

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If credit originators or portfolio resellers are unable or unwilling to meet these evolving requirements, we may be unable to collect on certain accounts.

Our inability to collect sufficient amounts from these accounts, through available collections methods, could adversely affect our business, financial condition and operating results.

Our inability to collect sufficient amounts from these accounts, through available collection methods, could adversely affect our business, financial condition and operating results.

In addition, the CFPB has engaged in enforcement activity in sectors adjacent to our industry, impacting credit originators, collection firms, and payment processors, among others.

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Further, our ability to collect our receivables may be affected by state laws, which require that certain types of account documentation be presented prior to the institution of any collection activities.

Our failure or the failure of third-party agencies and attorneys, or the credit originators or portfolio resellers selling receivables to us, to comply with existing or new laws, rules, or regulations could limit our ability to recover on receivables, affect the willingness of financial institutions to sell portfolios to us, cause us to pay damages to consumers or result in fines or penalties, which could reduce our revenues, or increase our expenses, and consequently adversely affect our business, financial condition and operating results.

penalties, which could reduce our revenues, or increase our expenses, and consequently adversely affect our business, financial condition and operating results.

For example, on September 8, 2020, the CFPB filed a lawsuit alleging that Encore and certain of its US subsidiaries had violated a consent order (the “2015 Consent Order”) pursuant to which we had previously settled allegations raised by the CFPB arising from practices during the period between 2011 and 2015.

In the lawsuit, the CFPB alleged that we did not perfectly adhere to certain operational provisions of the 2015 Consent Order, leading to alleged violations of federal consumer financial law.

On October 15, 2020, we entered into a stipulated judgment (“Stipulated Judgment”) with the CFPB to resolve the lawsuit.

The Stipulated Judgment requires us to, among other things:

(1) continue to follow a narrow subset of the operational requirements contained in the 2015 Consent Order, all of which have long been part of the Company’s routine practices;

(2) pay a $15.0 million civil monetary penalty;

and (3) provide redress of approximately $9,000 to 14 affected consumers, which is in addition to approximately $70,000 of redress that the Company had previously voluntarily provided.

In addition, new federal, state or local laws or regulations, or changes in the ways these rules or laws are interpreted or enforced, could limit our activities in the future and/or significantly increase the cost of regulatory compliance.

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Any of the foregoing could have an adverse effect on our business, financial condition and operating results.

The United Kingdom’s exit from the European Union could have a material adverse effect on our business, financial condition and results of operations.

In June 2016, the United Kingdom held a referendum in which voters approved the United Kingdom’s exit from the E.U., commonly referred to as “Brexit.” The United Kingdom formally exited the European Union on January 31, 2020 and a transition period is in place until December 31, 2020 during which time the United Kingdom will remain in both the EU customs union and single market and follow EU rules.

There is a significant lack of clarity over the terms of the United Kingdom’s future relationship with the European Union after this date.

In particular, the pound sterling has lost a significant amount of its value against the U.S.

Dollar and the euro respectively since the referendum.

Our business, financial condition and operating results may be adversely affected if consumer bankruptcy filings increase or if bankruptcy laws change.

Under certain bankruptcy filings, a consumer’s assets are sold to repay credit originators, with priority given to holders of secured debt.

Since the defaulted consumer receivables we purchase are generally unsecured, we often are not able to collect on those receivables.

Furthermore, potential changes to existing bankruptcy laws could contribute to an increase in consumer bankruptcy filings.

We cannot be certain that our collection experience would not decline with an increase in consumer bankruptcy filings.

We are subject to ongoing risks of regulatory investigations and litigation, including individual and class action lawsuits, under consumer credit, consumer protection, theft, privacy, collections, and other laws, and we may be subject to awards of substantial damages or be required to make other expenditures or change our business practices as a result.

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We are subject to ongoing risks of regulatory investigations, inquiries, litigation, and other actions by the CFPB, FTC, FCA, state Attorneys General, Central Bank of Ireland or other governmental bodies relating to our activities.

For example, on September 8, 2020, the CFPB filed a lawsuit alleging that Encore and certain of its US subsidiaries had violated the 2015 Consent Order.

On October 15, 2020, we entered into the Stipulated Judgment with the CFPB to resolve the lawsuit.

These litigation and regulatory actions involve potential compensatory or punitive damage claims, fines, costs, sanctions, civil monetary penalties, consumer restitution, or injunctive relief, as well as other forms of relief, that could require us to pay damages, make other expenditures or result in changes to our business practices.

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All of these factors could have an adverse effect on our business, financial condition and operating results.

Negative publicity associated with litigation, governmental investigations, regulatory actions, and other public statements could damage our reputation.

Negative publicity associated with litigation, governmental investigations, regulatory actions, cyber security breaches and other public statements could damage our reputation.

From time to time there are negative news stories about our industry or company, especially with respect to alleged conduct in collecting debt from consumers.

These stories may follow the announcements of litigation or regulatory actions involving us or others in our industry.

Negative publicity about our alleged or actual debt collection practices or about the debt collection industry in general could adversely affect our stock price, our position in the marketplace in which we compete, and our ability to purchase charged-off receivables, any of which could have an adverse effect on our business, financial condition and operating results.

We may make acquisitions that prove unsuccessful and any mergers, acquisitions, dispositions or joint venture activities may change our business and financial results and introduce new risks.

From time to time, we may make acquisitions of, or otherwise invest in, other companies that could complement our business, including the acquisition of entities in diverse geographic regions and entities offering greater access to businesses and markets that we do not currently serve.

The acquisitions we make may be unprofitable or may take some time to achieve profitability.

In addition, we may not successfully operate the businesses that we acquire, or may not successfully integrate these businesses with our own, which may result in our inability to maintain our goals, objectives, standards, controls, policies, culture, or profitability.

Through acquisitions, we may enter markets in which we have limited or no experience.

Any acquisition may result in a potentially dilutive issuance of equity securities, and the incurrence of additional debt which could reduce our profitability.

We also pursue dispositions and joint ventures from time to time.

Any such transactions could change our business lines, geographic reach, financial results or capital structure.

Our company could be larger or smaller after any such transactions and may have a different investment profile.

We may consume resources in pursuing business opportunities, financings or other transactions that are not consummated, which may strain or divert our resources.

time and attention and substantial costs for financial advisors, accountants, attorneys and other advisors.

If a decision is made not to consummate a specific transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable.

Furthermore, even if an agreement is reached relating to a specific transaction, we may fail to consummate the transaction for any number of reasons, including those beyond our control.

Any such event could consume significant management time and result in a loss to us of the related costs incurred, which could adversely affect our financial position and our business.

We are dependent on our management team for the adoption and implementation of our strategies and the loss of its services could have an adverse effect on our business.

Our management team has considerable experience in finance, banking, consumer collections, and other industries.

We believe that the expertise of our executives obtained by managing businesses across numerous other industries has been critical to the enhancement of our operations.

Our management team has created a culture of new ideas and progressive thinking, coupled with increased use of technology and statistical analysis.

The management teams at each of our operating subsidiaries are also important to the success of their respective operations.

The loss of the services of one or more key members of management could disrupt our collective operations and seriously impair our ability to continue to acquire or collect on portfolios of charged-off receivables and to manage and expand our business, any of which could have an adverse effect on business, financial condition and operating results.

We may not be able to manage our growth effectively, including the expansion of our foreign operations.

We have expanded significantly in recent years.

Continued growth will place additional demands on our resources, and we cannot be sure that we will be able to manage our growth effectively.

For example, continued growth could place strains on our management, operations, and financial resources that our infrastructure, facilities, and personnel may not be able to adequately support.

In addition, the expansion of our foreign operations subjects us to a number of additional risks and uncertainties, including:

• compliance with and changes in international laws, including regulatory and compliance requirements that could affect our business;

• differing accounting standards and practices;

• increased exposure to U.S.

laws that apply abroad, such as the Foreign Corrupt Practices Act, and exposure to other anti-corruption laws such as the U.K.

• social, political and economic instability or recessions;

• fluctuations in foreign economies and currency exchange rates;

• difficulty in hiring, staffing and managing qualified and proficient local employees and advisors to run international operations;

• difficulties implementing and maintaining effective internal controls and risk management and compliance initiatives;

• potential disagreements with our joint venture business partners;

• differing labor regulations and business practices;

• foreign and, in some circumstances, U.S.

tax consequences.

To support our growth and improve our international operations, we continue to make investments in infrastructure, facilities, and personnel in our operations;

however, these additional investments may not be successful or our investments may not produce profitable results.

If we cannot manage our growth effectively, our business, financial condition and operating results may be adversely affected.

Our success depends in large part on sophisticated computer and telecommunications systems.

The temporary or permanent loss of our computer and telecommunications equipment and software systems, through casualty, operating

malfunction, software virus, or service provider failure, could disrupt our operations.