Fujitsu 2009 Annual Report Download - page 75

2) Project Management
Due to such factors as the increasing scale of systems and more rig-
orous demands from customers, as well as the advance of open
system environments, system development work is becoming
increasingly complex. At the same time, greater competition is lead-
ing to increasingly intense pricing pressures. To deal with this situa-
tion and prevent incidences of loss-generating projects, we have
been revising our approach to making contracts with customers,
advancing the standardization of sales and system engineering busi-
ness processes, and working to manage risk from the business nego-
tiation stage through actual project implementation. The Group
continues to maintain reserves for losses as necessary. In addition, we
are striving to industrialize the system development process in order
to strengthen our cost competitiveness. Nevertheless, in spite of
these measures, there is a possibility that we may be unable to com-
pletely prevent the occurrence of loss-generating projects.
3) Investment Decisions
In the IT industry, large investments in R&D, capital expenditure, and
business acquisitions are necessary to maintain competitiveness.
Accordingly, the success or failure of investment choices has a pro-
found effect on the business results of the Fujitsu Group. When
making such investment decisions, we give ample consideration to
a range of factors such as market trends, customer needs, the supe-
riority of Group technologies, the financial performance of acquisi-
tion candidates and our business portfolio. There is, however, the
risk that markets and technologies, as well as acquisition candidates
deemed attractive by the Group may fail to grow as anticipated, or
that supply and demand imbalances or price erosion may be more
severe than expected. Investment in semiconductor facilities and
equipment represents one such area with a high degree of risk. In
addition to substantial funding requirements, this field is character-
ized in particular by short product cycles, major changes in the
market landscape and stiff competition from other companies. The
Group takes a number of steps to mitigate this risk, including
responding to these inherent fluctuations by dividing investment
into multiple phases and forging agreements with customers prior
to investment. Nonetheless, there is no guarantee that the Group
can generate sufficient returns on such investments.
4) Intellectual Property Rights
The Fujitsu Group has accumulated technologies and expertise that
help distinguish its products from those of other companies. Legal
restrictions in certain regions, however, may impair our ability to
fully protect some of the Group’s proprietary technologies, with the
result that we could be unable to effectively prevent the manufac-
ture and sale of similar products developed by third parties using
5. Public Regulations, Public Policy, and
Tax Matters
The business operations of the Fujitsu Group are impacted by a vari-
ety of public regulations and trends in public policy, as well as laws
pertaining to taxation. Specifically, wherever it operates, the Group
must comply with a variety of regulations, such as authorizations for
business or investment, import/export regulations and restrictions,
as well as laws pertaining to antimonopoly policies, intellectual
property rights, consumers, the environment and recycling, labor
conditions, and taxation. Earnings might be affected by increased
compliance costs associated with measures to make stricter or oth-
erwise revise such laws and regulations. We also provide solutions in
certain fields and business domains such as healthcare and com-
munications that are subject to other public regulations, meaning
that regulatory trends in these sectors may potentially impact the
Group’s business.
6. Other Operational Risks
The Fujitsu Group makes every effort to eliminate known risks but
can offer no guarantee of its ability to always achieve every desired
outcome in the course of executing business operations. Some of
the specific risks faced in this respect are detailed below.
1) Deficiencies or Flaws in Products and Services
Quality is a core value of the Fujitsu Group. We are committed to
improving quality at the design and development stages as well as
in manufacturing. We are also promoting stricter quality control
when purchasing components from external suppliers. These efforts
notwithstanding, it is impossible to totally eliminate the possibility
of deficiencies or flaws occurring in products, including software.
While the Group is also promoting software modularization, stan-
dardization of development work, and enhanced security measures
in order to improve the quality of system development and other
services, the possibility of defects arising cannot be excluded. With
respect to systems that play a critical role in supporting social infra-
structure, following the incidents involving system problems at the
Tokyo Stock Exchange in November 2005, we have been checking
for any potential problems in these systems, including the operating
environment, software and hardware, in cooperation with our cus-
tomers. We cannot, however, entirely eliminate the possibility of
deficiencies or flaws. In the event that such deficiencies or flaws
occur, the Group may have to initiate product recalls or repairs,
engage in system recovery work, pay damages to customers or
suffer opportunity losses, all of which would negatively impact
Group sales and profitability.
RESPONSIBILITY Business and Other Risks
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ANNUAL REPORT 2009
FUJITSU LIMITED