Brother International 2010 Annual Report Download - page 15

(6) Raw Materials Cost Increases
Higher prices on resins, steel plates and other raw materials push up the cost of manufacturing Group products.
The Group may be unable to pass on such rises through higher product prices, or to fully absorb higher costs by
reducing expenses or boosting efficiencies, all of which have the potential to impact future earnings.
(7) Statutory Regulations
The Group conducts its business according to the laws and regulations of each country in which it operates. In
addition to strengthening the internal controls that ensure compliance throughout the Group, the Group has
created a risk management system. If an event arises where the Group is unable to comply with regulations,
Group business activities may be restricted, which may result in cost increases.
(8) Information Network
The Brother Group employs a network to manage information related to production and sales management, as
well as financial matters. The Group expects its information storage and equipment maintenance systems to be
fully effective. However, network disconnections and system stoppages may adversely affect business activities.
Furthermore, although the Group takes ample precautions to prevent infections from computer viruses and
hackers, in the event of infiltration or attacks from the outside, depending on the scale of the interruption, busi-
ness activities may be adversely affected.
Reflecting its internal controls, while maintaining and enhancing the reliability of financial information, the
Group is also involved in ongoing quality improvements in development, maintenance and operation from the
perspective of overall IT controls. However, in the event that procedural guidelines are not followed, a situation
may arise where the Group is unable to guarantee the reliability of its financial information.
(9) Information Security
The Brother Group, having established the Information Management Committee and defined regulations for the
management of information, has created information security operation rules for ongoing information risk
management activities. The Group makes a thorough effort to prevent the leakage of personal and confidential
information through internal training based on these operational rules. It controls access to personal information
and maintain an access log to avoid the mishandling of this information. However, if personal information is leaked
nevertheless, the Group may lose the confidence of its customers and its brand image may suffer, which could
adversely affect Group business activities and performance.
In addition, to provide comprehensive customer services, the Group established websites that provide cus-
tomers with product information and support. It makes an effort to maintain an adequate level of security on this
website, but in the event of an unforeseen attack from the outside, website content falsification or the addition of
links to fraudulent websites may adversely affect its business activities.
(10) Future Business Developments and Forecasts
To expand its operations by growing existing businesses and developing new business, the Brother Group
engages in research and development and strategic investment, including M&A.
The launch of new businesses may involve risk inherent to that particular business, which may adversely affect
overall performance.
Also, M&A and other activity may entail unforeseen costs involved with the merging of operations that
prevent the realization of initially forecasted returns on investment, which could adversely affect Group
performance and financial conditions.
(11) Natural Disasters and Other Threats
The majority of Group production and sales facilities is located overseas. Its main production facilities are in China,
Malaysia and Vietnam, and the Group continues to establish sales facilities in countries throughout the world. To
mitigate damage from natural disasters at these facilities, the Group has formulated response procedures in the
event of fire, earthquakes, typhoons and other disasters. However, unforeseen events (such as war, terrorism or
outbreaks of infectious diseases) may cause social unrest that can damage production and sales, which could
adversely affect Group performance. At Group headquarters in Japan, the Group has established a crisis manage-
ment system assuming a major earthquake in the Tokai or Tonankai regions. However, there is a possibility of
damage resulting from an earthquake that exceeds the anticipated severity of these predictions.
13Brother Annual Report 2010