Olympus 2010 Annual Report Download - page 29

BUSINESS RISKS
Business Risks
A variety of risk factors could significantly affect the busi-
ness performance of the Olympus Group. The following are
the main risk factors, other than management decisions,
that the Group has identified as having the potential to
impact the Group’s performance as of March 31, 2009. Based
on these possibilities, the Group addresses risk prevention
and takes countermeasures against such risks.
Forward-looking statements in this section are based on
the Group’s assessments as of the end of the fiscal year
under review.
Risks Related to Sales Activities
Price competition in the market for digital camera is increas-
ingly severe, and a sharper than expected decline in digital
camera prices that cannot be offset through the Group’s cost
reduction measures may impact Group earnings.
In the Medical Systems Business, there may be unex-
pected, large-scale changes in health and service policies
brought about by healthcare legislation reforms. Failure of
the Group to adapt to such changes may impact Group
earnings.
In the Micro-Imaging (microscopes) Business, a high
percentage of earnings is generated by supplying systems
for research funded by the budgets of various nations.
Accordingly, Group earnings may be impacted in the event of
national budgets shrinking as a result from macroeconomic
changes.
Risks Related to Production and Development Activities
In the Imaging System Business, core production operations
are located in China. Accordingly, a rise in the value of the
yuan could lead to an increase in costs and impact Group
earnings. Moreover, production activities may be impacted
by anti-Japanese sentiment and/or a decline in political or
security conditions.
Olympus depends upon certain suppliers to develop and
manufacture some products and components that cannot
be developed and produced inside of the Group. Accordingly,
the Group’s production and supply capacity may be impacted
in the event that it is able to procure limited amounts of the
products and components it needs owing to the condition of
suppliers.
Olympus products, including products consigned to
outside suppliers, are manufactured in accordance with
meticulous quality-assurance standards. However, in the
event that product defects do arise, this situation may result
in product recalls and increased costs, as well as a loss of
consumer confidence in Olympus products, and earnings
may be impacted accordingly.
Olympus is making continual advances in developing
digital products by applying its cutting-edge Opto-Digital
Technology. However, the progress of digital technology is
extremely rapid, and the Group’s earnings may be impacted
in the event that it is unable to sufficiently foresee market
changes and develop new products that meet customer
needs in a timely manner.
The Group applies a wide range of intellectual property
in its R&D and production activities, including intellectual
property that belongs to the Group and that which the Group
is licensed to use. However, the Group’s earnings may be
impacted in the event that it is unexpectedly accused of hav-
ing infringed upon the intellectual property of a third party,
resulting in litigation or other related consequences.
Risks Related to Investments in Securities
Stock prices are determined based upon market prin-
ciples, and Olympus may not be able to obtain the sort of
gains it expects on securities owing to changes in market
conditions.
Risks Related to Business Mergers and Acquisitions
Olympus has formed long-term strategic partnerships
related to technologies and product development with other
leading companies in the industry. However, the Group’s
business activities may be adversely affected in the event
that financial or other business-related issues arise to
hinder such strategic partnerships and if changes in goals
and objectives do not allow for the continuation of such
partnerships.
Olympus may acquire total or partial ownership of other
companies for the purposes of business expansion. However,
the Group’s business may be impacted should it prove
unable to integrate acquired businesses according to the
Group’s management strategies or unable to efficiently uti-
lize the management resources of existing business or busi-
nesses it has acquired. In addition, the Group’s performance
and/or financial position may be affected by the depletion of
goodwill as well as the aforementioned possibilities.
Other Risks
Olympus is expanding its business activities in a number
of countries around the world, and the Group’s earnings may
be impacted by the occurrence of natural disasters, disease,
war, terrorist acts or other incidents in areas where it oper-
ates or by unforeseen increases in interest rates or changes
in currency exchange rates.
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