Northrop Grumman 2012 Annual Report Download - page 23

NORTHROP GRUMMAN CORPORATION
-13-
Our international business exposes us to additional risks.
Our international business remains subject to numerous political and economic factors, regulatory requirements and
other risks associated with doing business in foreign countries. Our international business is subject to U.S. and
foreign laws and regulations, including, without limitation, regulations relating to import-export control, technology
transfer restrictions, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and certain other
anti-corruption laws, and the anti-boycott provisions of the U.S. Export Administration Act. Failure by us, our
employees, or others working on our behalf to comply with these laws and regulations could result in administrative,
civil, or criminal liabilities, including suspension or debarment from government contracts or suspension of our
export privileges, which could have a material adverse effect on us. Changes in regulations, political environments
or security risks may affect our ability to conduct business in foreign markets, including those regarding investment,
procurement and repatriation of earnings. Our international business may also be impacted by changes in foreign
national priorities and government budgets and may be further impacted by global economic conditions and
fluctuations in foreign currency exchange rates. In addition, our international contracts may include industrial
cooperation agreements requiring specific in-country purchases, investments, manufacturing agreements or other
financial obligations, known as offset obligations, and provide for penalties if we fail to meet such requirements.
The services and products we provide internationally, including those provided by subcontractors, are sometimes in
countries with unstable governments, in areas of military conflict or at military installations. This increases the risk
of an incident resulting in harm or loss of life to our employees, subcontractors or other third parties or damage to
our products. We maintain insurance and take other steps to mitigate the risk and potential liabilities related to our
international operations, but these steps may not be adequate to prevent loss or to cover resulting claims and
liabilities, and we may be forced to bear substantial costs (see additional discussion of possible inadequacy of our
insurance coverage below). In addition, any accidents or incidents that occur in connection with our international
operations could result in negative publicity for the company, which may adversely affect our reputation and make it
more difficult for us to compete for future contracts or attract and retain employees or result in the loss of existing
and future contracts. The impact of these factors is difficult to predict, but one or more of them could adversely
affect our financial position, results of operations, or cash flows.
Our reputation and our ability to do business may be impacted by the improper conduct of employees, agents or
business partners.
We have implemented extensive policies, procedures, training and other compliance controls to prevent misconduct
by employees, agents or others with whom we are doing business that would violate the applicable laws of the
jurisdictions in which we operate, including laws governing improper payments to government officials, the
protection of export controlled or classified information, cost accounting and billing, competition and data privacy.
However, we cannot ensure that we will prevent all such misconduct committed by our employees, agents or others
with whom we are doing business, and the risk of improper conduct may increase in the current environment. Such
improper actions could subject us to administrative, civil or criminal investigations and monetary and non-monetary
penalties, including suspension and debarment, which could negatively impact our reputation and ability to conduct
business and could have a material adverse effect on our financial position, results of operations, or cash flows.