Northrop Grumman 2011 Annual Report Download - page 25

NORTHROP GRUMMAN CORPORATION
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 those regarding
investment, procurement and repatriation of earnings. Our international business may also be impacted by
changes in foreign national priorities and government budgets and may be further impacted by global
economic conditions and fluctuations in foreign currency exchange rates. In addition, our international
contracts may include industrial cooperation agreements requiring specific in-country purchases, investments,
manufacturing agreements or other financial obligations, known as offset obligations, and provide for penalties
if we fail to meet such requirements.
The services and products we provide internationally, including those provided by 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 harm or loss of life to our employees, subcontractors or other third
parties or damage to our products. We maintain insurance and take other steps to mitigate the risk and
potential liabilities related to our international operations, but these steps may not be adequate to prevent loss
or to cover resulting claims and liabilities, and we may be forced to bear substantial costs (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
attract and retain employees or result in the loss of existing and future contracts. The impact of these factors is
difficult to predict, but one or more of them could adversely affect our financial position, results of operations,
or cash flows.
䡲Our reputation and our ability to do business may be impacted by the improper conduct of employees, agents or
business partners.
We have implemented extensive policies, procedures, training and other compliance controls to prevent
misconduct by employees, agents or others with whom we are doing business that would violate the applicable
laws of the jurisdictions in which we operate, including laws governing improper payments to government
officials, the protection of export controlled or classified information, cost accounting and billing, competition
and data privacy. However, we cannot ensure that we will prevent all such misconduct committed by our
employees, agents or others with whom we are doing business. Such improper actions could subject us to
administrative, civil or criminal investigations and monetary and non-monetary penalties, including suspension
and debarment,that could negatively impact our reputation and ability to conduct business and could have a
material adverse effect on our financial position, results of operations or cash flows.
䡲Our business could be negatively impacted by security threats, including physical and cybersecurity threats, and
other disruptions.
As a defense contractor, we face various security threats, including cybersecurity threats to gain unauthorized
access to sensitive information; threats to the safety of our directors, officers, and employees; threats to the
security of our facilities and infrastructure; and threats from terrorist acts. Although we utilize various
procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures
and controls will be sufficient to prevent security threats from materializing. If any of these events were to
materialize, they could lead to losses of sensitive information or capabilities, harm to personnel or
infrastructure, or damage to our reputation, and could have a material adverse effect on our financial position,
results of operations, or cash flows.
Cybersecurity threats are evolving and include, but are not limited to, malicious software, attempts to gain
unauthorized access to data, and other electronic security breaches that could lead to disruptions in mission
critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
These events could damage our reputation and lead to financial losses from remedial actions, loss of business or
potential liability.
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