Brother International 2011 Annual Report Download - page 18

To reduce interest rate fluctuation risk, the Group endeavors to raise funds at fixed interest rates, and employs interest rate swaps and
other financial instruments. Nevertheless, higher market interest rates could raise fund procurement costs.
(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, business 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 customers 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 the Brother Group’s manufacturing and sales facilities is located overseas. Our main manufacturing facilities are in China,
Malaysia and Vietnam, and the Group continues to establish sales bases 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, outbreaks of infectious diseases, strikes or other labor disputes, and natural
disasters of unforeseeable scale) may cause social unrest that can damage production and sales, including parts procurement systems,
which could adversely affect the Group’s operating performance. At the Group’s headquarters in Japan, the Group has established a crisis
management system in the event of a major earthquake in the Tokai region. However, there is a possibility that the damage resulting from
an earthquake may exceed the anticipated severity.
Management’s Discussion and Analysis
16 Brother Annual Report 2011