Bridgestone 2004 Annual Report Download - page 25

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Operational Risk
Of special note is the risk of interrupted operations in the growing economies of Asia and Latin
America, where the Companies are rapidly expanding their investment. The political and economic
volatility in these regions amplify these risks.
In Japan, where the Companies have numerous important facilities, management systematically
promotes anti-seismic reinforcement by priorities determined on the basis of seismic diagnosis.
Earthquake researchers have long predicted a serious earthquake in Japan’s Tokai region, where
the Companies’ manufacturing facilities include the Iwata plant and Bridgestone Elastech Co., Ltd.,
and where the Companies have extensive sales and distribution facilities for both tire and diversified
operations. In that region, management is studying possible plans and procedures for anti-seismic
reinforcement and procedures for responding immediately to a serious earthquake and for restoring
the Companies’ operational capacity. Nonetheless, a serious earthquake there could interrupt opera-
tions, damage facilities, and necessitate expensive restoration work, which could adversely affect the
Companies’ operating results and financial condition.
In addition, the Companies may concentrate production of some products and raw materials at
one or two plants, and interrupted operations at one or more of those plants could result in a signif-
icant adverse effect on the Companies’ operating results and financial condition. An interruption in
such operations could prevent the Companies from fulfilling their supply obligations, resulting in
potential damage claims and an erosion of customers’ confidence in the Companies as a reliable
source of supply.
Information system failure
The Companies, as a sophisticated business enterprise, are increasingly dependent on information
systems. A failure of those systems for any reason, including natural or man-made disaster or
human error, could interrupt the Companies’ operations and could thus adversely affect the
Companies’ operating results and financial condition. The Companies endeavor to safeguard
information systems and data by upgrading network security to help minimize the risk posed
by an information system failure.
Strikes
Prolonged strikes or other labor unrest could interrupt the Companies’ operations and could thus
adversely affect the Companies’ operating results and financial condition. Management strives to
minimize the risk of labor unrest by fostering good labor-management relations.
Ethical lapses and industrial accidents serious enough to diminish the public’s confidence in the
Companies could adversely affect the Companies’ operating results and financial condition. The
Companies strive through their business activities to strengthen their corporate and brand image.
The Companies work systematically to ensure compliance with all applicable laws and regulations
and with the highest standards of corporate ethics. The Companies also work systematically to pre-
vent industrial accidents, such as fire incidents and labor accidents, and to respond immediately and
effectively to any accidents that might occur.
Fluctuations in currency exchange rates could affect the Companies’ operating results and financial
position. The Companies conduct research and development, manufacturing, logistics, marketing,
sales, and other activities globally and thus conduct transactions in numerous currencies. The
Companies employ forward exchange contracts to hedge exposure to exchange rate fluctuations
between the yen and the dollar, the euro, and other principal currencies. However, hedging cannot
completely insulate the Companies’ operations from negative trends in exchange rates, since the
Companies’ operations include extensive export and import activities worldwide.
In addition, the Companies maintain their consolidated accounts in yen, and fluctuations in
currency exchange rates affect the yen-converted values recorded for sales, expenses, assets, and
Corporate image
Currency exchange rates