Nissan 2007 Annual Report Download - page 46

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Group has developed risk management guidelines relating to
earthquake damage and the CEO has organized a global task force
to direct disaster prevention and recovery activities. In addition, the
Group has been strengthening its manufacturing facilities with anti-
seismic reinforcement. However, if a severe earthquake were to hit
one of the Group’s key facilities causing a halt in production, this
would adversely affect the Group’s financial position and results of
operations.
(11) Sales Financing Business Risk
Sales financing is an integral part of the Group’s core business,
providing strong support to its automotive sales, while maintaining
high profitability and a sound and stable financial condition through
strict risk management policies. However, the sales financing
companies have a high exposure to interest-rate risk, residual value
risk, and credit risk, any one of which may adversely affect the
Group’s financial position and results of operations.
(12) Counterparty Credit Risk
The Group does business with a variety of counterparties and
manages its counterparty credit risk by conducting a comprehensive
annual assessment of its customers’ financial condition based on
their financial information. Nonetheless, any significant default by a
counterparty would adversely affect the Group’s financial position and
results of operations.
(13) Employee Retirement Benefit Expenses and Obligations
The amounts of retirement benefit obligation and related expenses of
the Group are calculated using various actuarial assumptions
including the discount rate applied, the projected rate of return on
plan assets, and so forth. If the Group’s actual results differ from
those assumptions or if the assumptions are changed, the resulting
effects will be accumulated and recognized systematically over future
periods. The cumulative effect could adversely impact the recognition
of expenses and liabilities recorded in future periods.
(14) Purchase of Raw Materials and Parts
The Group purchases raw materials and parts from many suppliers.
Market conditions that the Group can’t control and whether or not the
suppliers can procure raw materials and parts continuously may
adversely affect the Group’s financial position and results of
operations.
Nissan Annual Report 2006-2007
44
»FINANCIAL SECTION