Sharp 2013 Annual Report Download - page 26

24 SHARP CORPORATION
Risk Factors
(12) Laws and Regulations
The business activities of Sharp are subject to various regulations
in countries where it operates, including business and invest-
ment approval, export regulations, tariffs, accounting standards
and taxation. Sharp must also adhere to various laws and regu-
lations concerning trading, antitrust practices, product liability,
consumer protection, intellectual property rights, product safety,
the environment, recycling and internal control, and labor regu-
lations. Changes in such laws and regulations, or additional ex-
penses to comply with the amendments, or the occurrence of
violations of legal rules by persons in Sharp may affect Sharp’s
business results and financial position. Furthermore, in a case
where an accident occurs related to one of Sharp’s products,
report of said incident, based on the Consumer Product Safety
Law and related regulations in Japan, and disclosure of the ac-
cident information based on a system for public announcements
could diminish Sharp’s brand image.
(13) Litigation and Other Legal Proceedings
Sharp conducts business activities around the world, and as
such, there is a risk that Sharp could become involved with liti-
gation and other legal proceedings in each country. If Sharp be-
comes involved in litigation or other legal proceedings, with the
different legal and judicial systems in each country, depending
on the case, Sharp may be ordered to pay a significant amount
in damages or fines. Sharp is subject to investigations conducted
by the Directorate-General for Competition of the European
Commission, etc., with respect to its TFT LCD business. In ad-
dition, civil lawsuits seeking monetary damages resulting from
alleged anticompetitive behavior have been filed in North Amer-
ica and Europe against Sharp. Sharp also received a cease and
desist order and a surcharge payment order from the Japan Fair
Trade Commission. However, Sharp has submitted a complaint
to the Commission and the complaint is pending. With respect
to the result of these proceedings and litigation, Sharp has made
a reasonable estimate of potential future losses and provided a
reserve in the amount deemed necessary. However, it is difficult
to predict or estimate all results at this stage. An adverse result
could affect Sharp’s business results and financial position.
(14) Leakage of Personal Data and Other
Information
Sharp retains personal data and other confidential information
concerning its customers, business partners and employees. Ex-
treme care is taken to protect this information. A company-wide
management system promotes employee education, internal au-
diting, and other measures aimed at ensuring compliance with
management regulations. If information is leaked, however, it
may reduce confidence in Sharp or result in substantial costs (as-
sociated with leakage prevention measures or indemnification
for damages, for instance), which may affect Sharp’s business
results and financial position.
(15) Large-Scale Natural Disasters
Sharp has created and adopted preventative/emergency meas-
ures and a business continuity plan aimed at rapid recovery/res-
toration in order to be prepared and limit damage in the event of
large-scale natural disasters such as earthquakes and typhoons.
However, if Sharp or its partners’ business activities are impaired
due to the occurrence of a large-scale natural disaster, it may af-
fect Sharp’s business results and financial position.
(16) Risks Accompanying the Nuclear Power Plant
Disaster
The Tokyo Electric Power (TEPCO) Fukushima Daiichi Nuclear
Power Plant accident accompanying the Great East Japan Earth-
quake on March 11, 2011, has had various adverse effects on
both Japanese and overseas markets, which is affecting Sharp’s
business results and financial position. Moreover, in response to
electricity usage restrictions in the areas served by TEPCO and
Tohoku Electric Power, and energy-conservation requests in the
areas served by Kansai Electric Power (KEPCO) and elsewhere in
2011, we are promoting company-wide energy-saving efforts. In
the summer of 2012, Sharp responded to an energy-conserva-
tion request based on specific numerical targets determined by
KEPCO. In the winter of 2012, Sharp responded to an energy-
conservation request without numerical targets. In the future,
if electricity supply shortages escalate due to electricity usage
restrictions by the government or energy-conservation requests
from power companies, and Sharp is requested to significantly
reduce electricity usage amounts, or if a situation such as rolling
blackouts occurs, plant operations will be reduced or produc-
tion temporarily suspended, which may affect Sharp’s business
results and financial position. Moreover, substantial increases in
electricity prices by electric power companies may also affect
Sharp’s business results and financial position.
(17) Competition to Secure Skilled Personnel
To achieve future success, Sharp relies heavily on its ability to se-
cure exceptional human resources in such fields as science, tech-
nology, and management. However, since demand for talented
personnel in various fields exceeds supply, competition to secure
human resources is increasing. In the event that Sharp is unable
to attract personnel or prevent the departure of existing employ-
ees, its business results and financial position may be affected.
(18) Other Key Variable Factors
In addition to the aforementioned risks, Sharp’s business results
may be significantly affected by human-induced calamities such
as accidents, conflicts, insurrections or terrorism; the spread of