Dow Chemical 2011 Annual Report Download - page 53

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Operational Event: A significant operational event could negatively impact the Company's results of operations.
As a diversified chemical manufacturing company, the Company's operations, the transportation of products, cyber attacks, or
severe weather conditions and other natural phenomena (such as drought, hurricanes, earthquakes, tsunamis, floods, etc.) could
result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors or the public at
large, which could have a negative impact on the Company's results of operations.
In the past, major hurricanes have caused significant disruption in Dow's operations on the U.S. Gulf Coast, logistics
across the region, and the supply of certain raw materials, which had an adverse impact on volume and cost for some of Dow's
products. Due to the Company's substantial presence on the U.S. Gulf Coast, similar severe weather conditions or other natural
phenomena in the future could negatively affect Dow's results of operations.
Company Strategy: Implementing certain elements of the Company's strategy could negatively impact the Company's
financial results.
The Company formed a new joint venture and is evaluating the formation of other joint ventures in emerging geographies to
build and operate integrated, world-scale facilities. Large projects like these, as well as other proposed and existing projects of
varying size in these geographies, are accompanied by uncertainty and risks including: navigating different government
regulatory environments; relationships with new, local partners; project funding commitments and guarantees; war, terrorism
and political instability; uninsurable risks; and determining raw material supply and other details regarding product movement.
If the implementation of these projects is not successful, it could adversely affect the Company's financial condition and results
of operations.
Goodwill: An impairment of goodwill would negatively impact the Company's financial results.
The April 1, 2009 acquisition of Rohm and Haas Company increased the Company's goodwill by $9.7 billion. At least annually,
the Company assesses goodwill for impairment. If an initial qualitative assessment identifies that it is more likely than not that
the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. If the
quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value with a
charge against earnings. Since the Company utilizes a discounted cash flow methodology to calculate the fair value of its
reporting units, continued weak demand for a specific product line or business could result in an impairment. Accordingly, any
determination requiring the write-off of a significant portion of goodwill could negatively impact the Company's results of
operations.
Implementation of ERP system: The Company's implementation of a new enterprise resource planning
(“ERP”) system may adversely affect the Company's business and results of operations or the effectiveness of
internal control over financial reporting.
During the first quarter of 2011, the Company began implementing a new ERP system that will deliver a new generation of
work processes and information systems. ERP implementations are complex and time-consuming projects that involve
substantial expenditures on system software and implementation activities that take several years. ERP implementations
also require transformation of business and financial processes in order to reap the benefits of the ERP system. If the
Company does not effectively implement the ERP system as planned or if the system does not operate as intended, it could
adversely affect financial reporting systems, the Company's ability to produce financial reports, and/or the effectiveness of
internal control over financial reporting.