Northrop Grumman 2010 Annual Report Download - page 26

쐍Our international business exposes us to additional risks.
Although our international business constitutes only 5 percent of total revenues, we are subject to numerous
U.S. and foreign laws and regulations, including, without limitation, regulations relating to import-export
control, technology transfer restrictions, repatriation of earnings, exchange controls, the Foreign Corrupt
Practices Act and the anti-boycott provisions of the U.S. Export Administration Act. Failure by us or our
sales representatives or consultants to comply with these laws and regulations could result in administrative,
civil, or criminal liabilities and could, in the extreme case, result in suspension or debarment from
government contracts or suspension of our export privileges, which could have a material adverse effect on
us. Changes in regulation or political environment may affect our ability to conduct business in foreign
markets, including investment, procurement and repatriation of earnings.
The services and products we provide internationally, including through the use of subcontractors, are
sometimes in countries with unstable governments, in areas of military conflict or at military installations.
This increases the risk of an incident resulting in damage or destruction to our products or resulting in injury
or loss of life to our employees, subcontractors or other third parties. We maintain insurance to mitigate risk
and potential liabilities related to our international operations, but our insurance coverage may not be
adequate to cover these claims and liabilities and we may be forced to bear substantial costs arising from those
claims. (See additional discussion of possible inadequacy of our insurance coverage below). In addition, any
accidents or incidents that occur in connection with our international operations could result in negative
publicity for the company, which may adversely affect our reputation and make it more difficult for us to
compete for future contracts or result in the loss of existing and future contracts. The impact of these factors
is difficult to predict, but any one or more of them could adversely affect our financial position, results of
operations, or cash flows.
쐍Our reputation and our ability to do business may be impacted by the improper conduct of employees, agents or
business partners.
We have implemented extensive compliance controls, policies and procedures to prevent and detect reckless
or criminal acts committed by employees, agents or business partners that would violate the laws of the
jurisdictions in which we operate, including laws governing payments to government officials, security
clearance breaches, cost accounting and billing, competition and data privacy. However, we cannot ensure
that we will prevent all such reckless or criminal acts committed by our employees, agents or business
partners. Any improper actions could subject us to civil or criminal investigations and monetary and non-
monetary penalties and could have a material adverse effect on our ability to conduct business, our results of
operations and our reputation.
쐍Our business could be negatively impacted by security threats and other disruptions.
As a defense contractor, we face certain security threats, including threats to our information technology
infrastructure and unlawful attempts to gain access to our proprietary or classified information. Our
information technology networks and related systems are critical to the smooth operation of our business and
essential to our ability to perform day-to-day operations. Loss of security within this critical operational
infrastructure could disrupt our operations, require significant management attention and resources and could
have a material adverse effect on our performance.
We also manage information technology systems for various customers. While we maintain information
security policies and procedures for managing these systems, we generally face the same security threats for
these systems as for our own systems. Computer viruses, attempts to gain access to our customers’ data or
other electronic security breaches could lead to disruptions in mission critical systems for our customers,
unauthorized release of confidential or personally identifiable information and corruption of customer data.
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NORTHROP GRUMMAN CORPORATION