Nintendo 2014 Annual Report Download - page 10

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components or manufacturing its products. In addition, suppliers may be unable to provide necessary
components on a timely basis. A shortage of key components could cause marginal decline due to higher costs,
shortage of products and quality control issues. These issues may impair the relationship between Nintendo
and its customers.
Furthermore, as many suppliers’ production facilities are located overseas, potential production interruptions
caused by societal violence, natural disasters or any other accidents in the area could negatively affect
Nintendo’s operating performance.
• Business operations affected by seasonal fluctuation
A major portion of demand for Nintendo’s products is focused around the holiday season. Should Nintendo
fail to release attractive new products or supply hardware during that period, it would suffer unfavorable
operating performance.
• Unauthorized access to systems
Nintendo operates various online systems including the “Nintendo Network” for sales of digital software as
well as to offer network-enabled entertainment services. If a cyber-attack were launched against these systems
resulting in the termination or destruction of the systems, or the unauthorized use of system data, it could have
an adverse effect on Nintendo’ s future operating results, share price and financial condition.
(3) Risks around legal regulations and litigation
• Product liability
Nintendo manufactures its products in accordance with applicable quality control standards in locations of
sale. However, large-scale product recalls may occur, and any such recalls would likely be primarily caused
by discovery of defective products. Also, the defect of a product may lead to product reimbursement
compensation resulting in additional expenses, and Nintendo’s reputation as well as its operating performance
and financial position may suffer.
• Limitations of enforcing intellectual property rights
Although Nintendo continues to accumulate various intellectual properties to produce different products,
counterfeit products and unlawful software already have gone into circulation in some regions and (becomes
available on the internet which) violate Nintendo’s intellectual property rights. In the future, it may continue
to be a challenging task to take full action against every infringement of Nintendo’s intellectual property
rights.
• Leakage or unauthorized access of personal or confidential information
Nintendo possesses personally identifiable information about its consumers, as well as confidential
information concerning development and business operations. If such personally identifiable information or
confidential information were ever leaked outside of Nintendo, due to breach or other unauthorized access or
disclosure, it could have an adverse effect on Nintendo’s future operating performance, share price and
financial condition.
• Changes in accounting standards and taxation systems
Unpredicted adoptions of or changes in accounting standards or taxation systems could have an effect on
Nintendo’s performance and financial position. Conflict of views between Nintendo and the tax authorities
may cause additional tax costs.
• Litigation
Nintendo’s operations in Japan and overseas may be subject to litigation, disputes and other legal procedures.
These issues may affect Nintendo’s operating performance.
(4) Other risks
Other than the risks set forth above, factors such as uncollectibility of notes and accounts receivable - trade,
collapse of financial institutions and environmental restrictions may adversely affect Nintendo’s operating
performance and financial position.