Fujitsu 2013 Annual Report Download - page 95

stages as well as in manufacturing by setting rules on quality
control throughout the company. We are also promoting strict
quality control when purchasing components from external
suppliers. These efforts notwithstanding, it is impossible to
totally eliminate the possibility of deficiencies or flaws occurring
in products, including software. While the Group is also setting
rules on quality control throughout the company, promoting
software modularization, standardization of development work,
and enhanced security measures in order to improve the quality
of system development and other services in the technology
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 addition, in our cloud services, the Fujitsu Group
positions “high reliability” as the most important value, and
maintains earthquake resistant and highly secure facilities.
However, we cannot totally exclude the possibility of service
suspension. In the event of deficiencies or flaws, or services are
suspended, the Group may have to initiate product recalls or
repairs, engage in system recovery work, pay damages to cus-
tomers 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
increasing complexity, 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 work-
ing to manage risk from the business 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 development 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 and the occur-
rence 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. The Fujitsu Group is carrying
out essential structural reforms, including those currently being
undertaken for the LSI device business. Accordingly, the success
or failure of these initiatives has a profound effect on the busi-
ness 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 perfor-
mance of acquisition candidates and our business portfolio.
There is, however, the risk that markets and technologies, as well
as acquisition candidates deemed attractive by the Group, may
fail to grow as anticipated, or that supply and demand imbal-
ances or price erosion may be more severe than expected. The
Group takes a number of steps to mitigate this risk, including the
consideration of investment efficiency and responding to inher-
ent 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
program in the future in accordance with related laws and regu-
lations. Nevertheless, the Group faces potential risk from lawsuits
initiated by employees in regard to compensation for innovation
created in the workplace.
5) Human Resources
The growth and profitability of the Fujitsu Group depends heavily
on human resources. As such, a major issue for the Group is the
ability to recruit, foster, and prevent the attrition of talented
technical experts, system engineers, managers and other key
personnel. The inability to do so could negatively impact the
Group’s growth and profitability. Implementation of personnel
rationalization following the structural reforms currently in prog-
ress may accelerate the above trends.
6) Environment
Making contributions to society and protecting the environment
are part of the corporate values of the Fujitsu Group, as set forth
in the Fujitsu Way. The Group regards environmental protection
as one of its most important management items and is commit-
ted to minimizing environmental burden and preventing envi-
ronmental pollution. However the Group cannot guarantee that
environmental pollution will not occur as a result of its opera-
tions. Moreover, although we monitor soil and wastewater as
well as engage in clean-up activities at former factory sites, this
does not mean that pollution will not be found at such sites in
the future. In the event that environmental pollution were to
occur or be identified, social trust in the Group may weaken, and
clean up and other costs could be incurred, which would
adversely affect the Group’s earnings.
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FUJITSU LIMITED ANNUAL REPORT 2013
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