Honda 2016 Annual Report Download - page 29

Honda relies on external suppliers for the provision of certain raw
materials and parts
Honda purchases raw materials and parts from numerous external suppliers, and
relies on certain suppliers for some of the raw materials and parts which it uses in
the manufacture of its products. Honda’s ability to continue to obtain these sup-
plies in an efficient and cost-effective manner is subject to a number of factors,
some of which are outside of Honda’s control. These factors include the ability of
its suppliers to provide a continued source of raw materials and parts and Honda’s
ability to compete with other users in obtaining the supplies. In particular, the loss
of a key supplier could affect our production and increase our costs.
Honda relies on business alliances and joint ventures with
other companies
Honda engages in business operations through alliances and joint ventures with
other companies in expectation of synergy effects and increased efficiency, or in
accordance with requirements from the countries in which Honda conducts its
businesses. However, if disagreements occur between the parties to an alliance or
joint venture, or if an alliance or joint venture is changed or cancelled, it may have
an adverse effect on Honda’s business, financial condition, or results.
Honda may be adversely affected by wars, terrorism, political
uncertainty and labor strikes
Honda conducts business operations in countries worldwide and is exposed to
risks including wars, terrorism, political uncertainty and labor strikes in those
countries or neighboring regions. If such unforeseeable events occur, and opera-
tions are delayed or suspended, Honda’s business, financial condition, or results
could be adversely affected.
Honda may be adversely affected by natural disasters
In order to minimize the impact on its business operations when events such as
large-scale natural disasters, accidents, or the outbreak of infectious diseases
occur, Honda conducts a risk evaluation of these events and constructs business
continuity plans (BCPs) in each region. However, if operations are delayed or sus-
pended due to the occurrence of disasters, accidents, or the outbreak of infec-
tious diseases that exceed assumptions, Honda’s business, financial condition or
results could be adversely affected.
Honda’s operations rely on information systems and networks
Honda uses a range of information systems and networks relating to information
services and operational support in its business activities and its products, includ-
ing in areas managed by subcontractors. To protect the confidentiality of
information handled by these systems and networks, Honda implements a range
of security measures both in hardware and software, such as building manage-
ment systems including those of subcontractors, information-handling procedures
and training of staff. However, there is a risk of leakage of confidential information,
suspension of important operations and services, improper administrative pro-
cessing, or destruction or alteration of important data or other adverse develop-
ments. These may be the result of external cyber-attacks, equipment malfunction,
or management deficiencies and human error, as well as natural disasters, infra-
structure failures, or other unforeseen events within Honda or at its subcontrac-
tors. In such cases, Honda’s business activities and performance could be
adversely affected in terms of damage to its brand image or social reputation,
liability to customers or parties affected, and a loss of Honda’s competitiveness.
Honda is subject to risks relating to its obligations to provide
post-employment benefits
Honda has various pension plans and provides other post-employment benefits,
in which the amount of benefits is basically determined based on the level of
salary, service years, and other factors. Contributions are also regularly reviewed
and adjusted as necessary to the extent permitted by laws and regulations.
Defined benefit obligations and defined benefit costs are based on assumptions of
many factors, including the discount rate and the rate of salary increase. Changes
in assumptions could affect Honda’s defined benefit costs and obligations, includ-
ing Honda’s cash requirements to fund such obligations in the future, which could
materially affect Honda’s financial condition and results.
Honda’s success depends in part on the value of its brand image,
which could be diminished by product defects
One of the important factors behind corporate sustainability is trust and support
for the Honda brand from our customers, society and the communities in which
Honda conducts business operations. With respect to the quality of our products,
which serves as the pillar of our brand image, we recognize that our mainstay
products provide personal mobility and touch human lives, so we place top priority
on the safety and security of our customers and constantly strive to further
enhance the quality of our development, production and service-related activities.
However, if for some unforeseeable reason a product defect does occur, from the
standpoint of assuring the safety and security of our customers, it is possible that
Honda will issue a recall or take some other action considered to be appropriate.
In such an event, the Honda brand image could be damaged and this could
adversely impact Honda’s business operations as well as our results.
Honda Motor Co., Ltd. Annual Report 2016 28
7Financial Section
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1The Power of
Dreams
2Financial Highlights
3To Our Shareholders
4CFO Interview
5Review of
Operations
6Corporate
Governance
8Investor Relations
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