Nintendo 2016 Annual Report Download - page 10

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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 Internet services, including Internet-based competition games, download sales of
digital software and service provision via Internet servers, in addition to providing information via the Internet.
If a cyber-attack were launched against these systems resulting in the termination or destruction of the
systems, or the leakage or unauthorized use of 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, there
are geographical regions in which it is difficult to effectively tackle unauthorized uploading via the Internet
and copied products, which may have a negative impact on Nintendo’s operating performance and financial
position in the future.
• 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.