Huawei 2013 Annual Report Download - page 108

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External Risks
Economic environment: Many uncertainties and
downside risks will persist in the global economy in
the future. To improve financial conditions, telecom
carriers may postpone investments or initiate other
cost-cutting measures. 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 170 countries and regions. Operating
in these countries involves certain risks, such as
civil unrest, economic and political instability,
imposition of exchange controls, sovereign debt
crisis, supervision over the right of operations, and
labor issues. All these risks require Huawei to have
a high aptitude for risk management.
Legal risks: In certain regions where we operate,
the complex legal environments may pose various
adverse impacts although we strive to comply with
all local laws and regulations.
Trade barriers: Today, as Huawei conducts business
around the world, the complex international
economic and financial conditions along with
increasingly fierce industry competition may
challenge Huawei with different types of trade
barriers in some countries. 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. All of these measures may impact
the free trade 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
Supply continuity: Although Huawei strives to avoid
procurement from single-source suppliers, it is not
always possible due to objective factors. Finding
an alternative supplier or redesigning products may
be time-consuming and costly. As such, supply and
delivery of our products to our customers could
be seriously affected if any of our single-source
suppliers were unable to ensure continuous supply
or met with product quality issues. To mitigate this
risk, we periodically assess and conduct audits on
our suppliers, and preemptively initiate component
replacements or solution 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 and intellectual property
right (IPR): While Huawei has judiciously adopted
information security measures to protect our IPR,
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 40 to 43
of this Annual Report.
107
Risk Factors