Brother International 2014 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 compli-
ance 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. Furthermore, unexpected changes in regulatory and tax regimes, particularly in emerging nations, including but not limited to
regulations regarding imports and exports, investment and overseas remittances, and transfer price taxation could potentially impact Group business performance.
(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 develop-
ment, 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 investment, which
could adversely affect Group performance and financial conditions.
(11) Environmental Regulations
The Brother Group is subject to a variety of environmental regulations regarding wastes and atmospheric emissions generated during the course of its business activities. Actions
by the Group to protect the environment include the development of products with reduced environmental impact, reduction of energy consumed by manufacturing and product
usage processes, and the collection and recycling of post-consumer products. Nevertheless, Group business management could be affected by expenses required for regulatory
conformance and environmental remediation related to future environmental problems.
(12) 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 Vietnam and the Philippines, 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 anticipated severity.
Management’s Discussion and Analysis