Toshiba 2012 Annual Report Download - page 88

18 TOSHIBA Annual Report 2012
Management's Discussion and Analysis
interests in companies of Westinghouse group to a third party until October 1, 2012, the Minority Shareholders have been
given an option to sell all or part of their ownership interests to the Company (“Put Options”). However, since exercising
the Put Options held by some of the Minority Shareholders requires consent from a third party, such Minority
Shareholders are not able to exercise their Put Options at their own discretion.
The Group also has an option to purchase from the Minority Shareholders all or part of their respective ownership
interest in companies of Westinghouse group under certain conditions. These options are in place for the purpose of
protecting the interests of the Minority Shareholders, while preventing equity participation by a third party which may
put the Group at disadvantage. The Company makes every effort to maintain a favorable relationship with the Minority
Shareholders in connection with Westinghouse group's business. However in the event that the Minority Shareholders
exercise their respective Put Options, or the Group exercises its purchase option, the Group will seek investment from a
new strategic partner. Prior to such an investment, the Group may need to procure substantial funds in connection with
the exercise of Put Options or purchase options.
10. Others
(1) Measures against counterfeit products
While the Group protects and seeks to enhance the value of the Toshiba brand, counterfeit products created by third
parties are found worldwide. While the Group makes every effort to prevent counterfeit products, the heavy circulation
of counterfeit products may dilute the value of the Toshiba brand, and the Group's net sales may be adversely affected.
(2) Protection of intellectual property rights
The Group makes every effort to secure intellectual property rights. However, in some regions, it may not be possible to
secure sufficient protection.
The Group also uses the intellectual property of third parties pursuant to licenses. It is possible that the Group may fail
to receive the necessary third-party licenses for new technology or is unable to obtain the renewal of existing licenses or
receives them on unfavorable terms.
In addition, it is also possible that a suit or such similar action or proceeding may be brought against the Group in respect
of intellectual property rights or that the Group may itself have to file a suit in order to protect its intellectual property
rights. Such lawsuits may require time, costs and other management resources, and depending on the outcome of these
lawsuits, the Group may not be able to use important technology, or the Group may be found to be liable for damages.
(3) Political, economic and social conditions
The Group undertakes global business operations. Any changes in political, economic, and social conditions and policies,
legal or regulatory changes and exchange rate fluctuations, in Japan or overseas, may impact market demand and the
Group's business operations. The Group makes every effort to avoid these risks and to reduce any impact when such risks
emerge by continuously monitoring changes in the situation in each region where the Group operates, including legal
and regulatory changes, and by promptly initiating countermeasures.
(4) Sovereign Risk
In an environment marked by anxiety over the future financial condition of some of the European countries, concern over
the financial system is increasing, the influence of which is not only the direct influence within Europe, but also the
indirect influence on other regions, such as the deterioration in emerging economies due to fluctuation in exchange rates
or withdrawal of funds by European banks or economic stagnation in the Chinese economy. If the financial condition of
some countries should collapse, there is a possibility that the financial and capital markets and global economy will be
significantly affected, and the Group, letting the financial crisis in 2008 be a lesson, has been advancing the measures
therefor since last year, upon implementing the stress test and setting the trigger event.
(5) Natural disasters
Most of the Group's Japanese production facilities are located in the Keihin region of Japan, which includes Tokyo,
Kawasaki City, Yokohama City and the surrounding area, while key semiconductor production facilities are located in
Kyushu, Tokai, Hanshin and Tohoku. The Group is currently expanding its production facilities in Asia. As a result, any
occurrence of a wide-scale disaster, terrorism or epidemic illness, such as a new type of flu, particularly in any of these
areas could have a more significant adverse effect on the Group's results.
Additionally, large-scale disasters, such as earthquakes or typhoons, in regions where production or distribution sites
are located may damage or destroy production capabilities, suspend procurement of raw materials or components, and
cause transportation and sales interruptions or other similar disruptions, which could affect production capabilities
significantly. In the past, the businesses of the Group were affected to a certain extent by the Great East Japan Earthquake
and the floods in Thailand.
In order to manage these risks, the Group established the “Business Continuity Plan (BCP)” as part of its continuing
effort to avoid or minimize any impact from such disasters in addition to establishing the precautionary measures, such
as construction of earthquake-resistant buildings and emergency procedures responsive to large-scale disasters.