Fujitsu 2012 Annual Report Download - page 93

subcontracting, and taxation. The Fujitsu Group’s earnings might
be affected by increased compliance costs associated with mea-
sures to make stricter or otherwise revise such policies, laws, and
regulations, or by liabilities stemming from fines in cases where
the company is found to have committed a violation. We also
provide solutions in certain fields and business domains such as
healthcare, communications, and construction that are subject to
other public regulations, meaning that regulatory trends in these
sectors may potentially impact the Group’s business.
6. Others
The Fujitsu Group makes every effort to eliminate known risks
but can offer no guarantee of its ability to always achieve every
desired outcome in the course of executing business operations.
Some of the specific risks faced in this respect are detailed below.
1) Deficiencies or Flaws in Products and Services
The Fujitsu Group builds and supports the infrastructure behind
the modern network society, which has become increasingly
global and sophisticated. In accordance with our corporate phi-
losophy the Fujitsu Way, quality is one of our most important
values, and it underpins the trust that customers and society
place in us.
We are committed to improving quality at the design and
development stages as well as in manufacturing by setting rules
on quality control throughout the company. We are also promot-
ing strict quality control when purchasing components from
external suppliers. These efforts notwithstanding, it is impossible
to totally eliminate the possibility of deficiencies or flaws occur-
ring in products, including software. While the Group is also
setting rules on quality control throughout the company, promot-
ing software modularization, standardization of development
work, and enhanced security measures in order to improve the
quality of system development and other services in the technol-
ogy solutions business, the possibility of defects arising cannot
be excluded. With respect to systems that play a critical role in
supporting social infrastructure, we have been checking for any
potential problems in these systems, including the operating
environment, software and hardware, in cooperation with our
customers. In addition, we have continuously made improve-
ments to the quality, contracts, and related rules in order to
ensure the stable operation of social infrastructure systems. We
cannot, however, entirely eliminate the possibility of deficiencies
or flaws. In the event that such deficiencies or flaws occur in the
products or services, the Group may have to initiate product
recalls or repairs, engage in system recovery work, pay damages
to customers or suffer opportunity losses, all of which would
negatively impact Group sales and profitability.
2) Project Management
Due to such factors as the increasing scale and sophistication of
systems and more rigorous demands from customers, as well as
the advance of open system environments, system development
work is becoming increasingly complex. At the same time,
greater competition is leading to increasingly intense pricing
pressures. To deal with this situation and prevent incidences of
delayed delivery and loss-generating projects, we have been
revising our approach to making contracts with customers,
advancing the standardization of sales and system engineering
business processes, and working to manage risk from the busi-
ness negotiation stage through actual project implementation.
The Group continues to maintain reserves for losses as necessary.
In addition, we are striving to industrialize the system develop-
ment process in order to strengthen our cost competitiveness.
Nevertheless, in spite of these measures, there is a possibility
that we may be unable to completely prevent incidences of
delayed delivery the occurrence of loss-generating projects.
3) Investment Decisions and Business Restructuring
In the ICT industry, large investments in R&D, capital expendi-
ture, business acquisitions, and business restructuring are neces-
sary to maintain competitiveness. Accordingly, the success or
failure of these initiatives has a profound effect on the business
results of the Fujitsu Group. When making such investment and
restructuring decisions, we give ample consideration to a range
of factors such as market trends, customer needs, the superiority
of the Group’s own technologies, the financial performance of
acquisition candidates and our business portfolio. There is, how-
ever, the risk that markets and technologies, as well as acquisi-
tion candidates, deemed attractive by the Group, may fail to
grow as anticipated, or that supply and demand imbalances or
price erosion may be more severe than expected. The Group
takes a number of steps to mitigate this risk, including the con-
sideration of investment efficiency and responding to inherent
fluctuations by dividing investment into multiple phases and
forging agreements with customers prior to investment. None-
theless, there is no guarantee that the Group can generate suf-
ficient returns on such investments.
4) Intellectual Property Rights
The Fujitsu Group has accumulated technologies and expertise
that help distinguish its products from those of other companies.
Legal restrictions in certain regions, however, may impair our
ability to fully protect some of the Group’s proprietary technolo-
gies, with the result that we could be unable to effectively pre-
vent the manufacture and sale of similar products developed by
third parties using the Group’s own intellectual property. More-
over, the creation of comparable or superior technologies by
other companies could erode the value of the Group’s intellectual
property. The Group has instituted internal policies, including
stringent clearance procedures prior to launching new products
and services, to ensure that no infringement of other companies’
intellectual property occurs. However, there is the possibility that
the Group’s products, services, or technologies may be found to
infringe on other companies’ intellectual property, and that
earnings may be impacted by such consequences as the need to
pay for usage rights or cover costs associated with modifying
designs. In addition, the Group has previously instituted a pro-
gram to compensate employees for innovations that they make
in the course of their work, and will continue to implement this
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FUJITSU LIMITED ANNUAL REPORT 2012
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