Brother International 2013 Annual Report Download - page 20

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(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 informa-
tion storage and equipment maintenance systems to be fully effective. However, network disconnections and system stoppages may adversely affect business activi-
ties. 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 nevertheless leaked, 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 and support information. It makes an
effort to maintain an adequate level of security on these websites, 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 businesses, the Brother Group engages in research and development and strategic
investment, including M&As.
The launch of new businesses may involve risk inherent to that particular business, which may adversely affect overall performance.
Also, M&As and other activity may entail unforeseen costs involved with the merging of operations that prevent the realization of initially forecasted returns on invest-
ment, 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 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, 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 Nankai Trough earthquakes. However, there is a possibility that the damage resulting from an earthquake may exceed the antici-
pated severity.
Management’s Discussion and Analysis