Medtronic 2016 Annual Report Download - page 26

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Finally, changes in currency exchange rates may reduce the reported value of our revenues outside the U.S, net of expenses, and
cash flows. We cannot predict changes in currency exchange rates, the impact of exchange rate changes, nor the degree to which
we will be able to manage the impact of currency exchange rate changes.
The failure to comply with U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in non-U.S. jurisdiction could
materially adversely affect our business and result in civil and/or criminal sanctions.
The U.S. Foreign Corrupt Practices Act (FCPA) and similar anti-bribery laws in non-U.S. jurisdictions generally prohibit companies
and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining
business. Because of the predominance of government-sponsored healthcare systems around the world, many of our customer
relationships outside of the U.S. are with governmental entities and are therefore potentially subject to such laws.
Global enforcement of anti-corruption laws has increased substantially in recent years, with more frequent voluntary self-
disclosures by companies, aggressive investigations and enforcement proceedings by U.S. and non-U.S. governmental agencies,
and assessment of significant fines and penalties against companies and individuals. Our international operations create the risk
of unauthorized payments or offers of payments by one of our employees, consultants, sales agents, or distributors, because these
parties are not always subject to our control. It is our policy to implement safeguards to educate our employees and agents on
these legal requirements and prohibit improper practices. However, our existing safeguards and any future improvements may not
always be effective, and our employees, consultants, sales agents, or distributors may engage in conduct for which we might be
held responsible. In addition, the government may seek to hold us liable for successor liability FCPA violations committed by any
companies in which we invest or that we acquire. Any alleged or actual violations of these regulations may subject us to government
scrutiny, severe criminal or civil sanctions and other liabilities, including exclusion from government contracting, and could disrupt
our business, and result in a material adverse effect on our reputation, results of operations, financial condition, and cash flows.
Laws and regulations governing the export of our products could adversely impact our business.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the Bureau of Industry and Security at the
U.S. Department of Commerce (BIS), administer certain laws and regulations that restrict U.S. persons and, in some instances,
non-U.S. persons, in conducting activities, transacting business with or making investments in certain countries, governments,
entities and individuals subject to U.S. economic sanctions. Due to our international operations, we are subject to such laws and
regulations, which are complex, restrict our business dealings with certain countries and individuals, and are constantly changing.
Further restrictions may be enacted, amended, enforced or interpreted in a manner that materially impacts our operations.
From time to time, certain of our subsidiaries have limited business dealings in countries subject to comprehensive sanctions,
including Iran, Sudan, Syria, Cuba and those in the region of Crimea. Certain of our subsidiaries sell medical devices and surgical
tools, and may provide related services, to distributors and other purchasing bodies in such countries. These business dealings
represent an insignificant amount of our consolidated revenues and income, but expose us to a heightened risk of violating applicable
sanctions regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges,
injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal
fines and imprisonment. We have established policies and procedures designed to assist with our compliance with such laws and
regulations. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these
regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business,
financial condition, results of operations and cash flows.
Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.
In response to a variety of actions by legislators, regulators, and third party payers to reduce the perceived rise in healthcare costs,
many health care industry companies, including health care systems, are consolidating to create new companies with greater market
power. As the health care industry consolidates, competition to provide goods and services to industry participants will become
more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for medical
devices that incorporate components produced by us. If we are forced to reduce our prices because of consolidation in the health
care industry, our revenues would decrease and our consolidated earnings, financial condition, and/or cash flows would suffer.
Our business is indirectly subject to health care industry cost-containment measures that could result in reduced sales of
medical devices and medical devices containing our components.
Most of our customers, and the health care providers to whom our customers supply medical devices, rely on third-party payers,
including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which
medical devices that incorporate components we manufacture or assemble are used. The continuing efforts of governmental
authorities, insurance companies, and other payers of health care costs to contain or reduce these costs could lead to patients being
unable to obtain approval for payment from these third-party payers. If third-party payer payment approval cannot be obtained
by patients, sales of finished medical devices that include our components may decline significantly and our customers may reduce