Huawei 2012 Annual Report Download - page 86

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83 Risk Factors
External Risks
Economic environment: The global economic
downturn could cause telecom carriers to postpone
investments or initiate other cost-cutting measures
to improve their financial conditions. These factors
could result in reduced demand for network
infrastructures and services, which would in turn
affect Huawei’s operating results.
Country-specific risks: Huawei conducts business
in more than 140 countries. Operating in these
countries involves certain risks, such as civil unrest,
economic and political instability, imposition of
exchange controls, nationalization of private
assets, and debts. All these risks require Huawei
to have a high aptitude for risk management. In
addition, there may be uncertainties in the legal
environment in certain regions. Although we strive
to comply with all such laws and regulations,
unintentional violations could have material
adverse effects on our business.
Trade barriers: Today, the complex international
economic and financial conditions along with
increasingly fierce industry competition may
challenge Huawei with different types of trade
barriers in the countries it operates. Measures
resulting in trade barriers have become more
complicated and include trade investigations,
the imposing of large amounts of anti-dumping
and anti-subsidy duties, and setting special
product quality and technical specifications and
requirements. All of these measures may impact
the import of Huawei products. Although we
proactively respond to mitigate risks from such
trade barriers, these barriers may still adversely
affect Huawei’s operating results.
Natural disasters: Earthquakes, floods, and other
natural disasters may impact the company’s supply
chain operations, and slow down or even prevent
delivery in a certain region or even all regions.
Operational Risks
Business continuity: Although Huawei strives to
avoid single-source supplier solutions, it is not
always possible. Finding an alternative supplier
or redesigning products may be time-consuming.
As such, supply and delivery of our products
to our customers could be disrupted if any of
our single-source suppliers were to meet with
difficulties. To mitigate this risk, we periodically
assess and conduct audits on our suppliers, and
initiate product replacements or redesign.
Rising labor costs: Increasing labor costs in China
may offset the company’s efforts to improve
efficiency and ultimately affect our profitability.
Information security: While Huawei has judiciously
adopted information security measures to protect
our intellectual property rights, they may not be
adequate to prevent infringement or improper
use of our information, patents, or licenses.
Misappropriations of this nature will cause losses
to Huawei even though we may be protected to
some extent by intellectual property law.
Financial Risks
For further information on financial risks, see
“Financial Risk Management” on pages 25 to 27
of this Annual Report.