Olympus 2008 Annual Report Download - page 29

Business Risks
> A variety of risk factors could affect significantly the busi-
ness performance of the Olympus Group. The following are
the main risk factors, other than management decisions,
that the Group has identified as having the potential to
impact the Group’s performance as of March 31, 2008.
Based on these possibilities, the Group addresses risk
prevention and takes countermeasures against such risks.
Risks Related to Sales Activities
> Price competition in the market for digital cameras is
increasingly severe, and a sharper than expected decline
in digital camera prices that cannot be offset through the
Group’s cost reduction measures may impact Group earn-
ings.
> In the Medical Systems Business, unexpected, large-scale
changes in health service policies brought about by
healthcare legislation reforms. Failure of the Group to
adapt to such changes may impact Group earnings.
> In the Bioscience Business, a high percentage of earnings
are generated by supplying systems for research funded by
the budgets of various nations. Accordingly, Group earnings
may be impacted in the event of smaller national budgets
that result from macroeconomic changes.
Risks Related to Production
and Development Activities
> In the Imaging Systems Business, core production opera-
tions are located in China. Accordingly, a rise in the value
of the yuan could lead to an increase in costs and impact
Group earnings. Moreover, production activities may be
impacted by anti-Japanese sentiment and/or a decline in
political or security conditions.
> Olympus depends upon certain suppliers to develop
and manufacture some products and components that
cannot be developed and produced inside of the Group.
Accordingly, the Group’s production and supply capacity
may be impacted in the event that it is able to procure
limited amounts of the products and components it needs
owing to conditions of suppliers.
> Olympus products are manufactured according to meticu-
lous quality-assurance standards, including products
consigned to outside suppliers. However, in the event
that product defects do arise, this situation may result in
product recalls and increased costs, as well as a loss of
consumer confidence in Olympus products, and earnings
may be impacted accordingly.
> Olympus is making continual advances in developing
digital products by applying its cutting-edge Opto-Digital
Technology. However, the progress of digital technology
is extremely rapid, and the Group’s earnings may be
BUSINESS RISKS
impacted in the event that it is unable to sufficiently
foresee market changes and develop new products that
meet customer needs in a timely manner.
> The Group applies a wide range of intellectual property in
its R&D and production activities, including intellectual
property that belongs to the Group and that which the
Group is licensed to use. However, the Group’s earnings
may be impacted in the event that it is unexpectedly
accused of having infringed upon the intellectual property
of a third party, resulting in litigation or other related
consequences.
Risks Related to Investments in Securities
> Olympus may not be able to achieve the capital gains it
expects on investments in the event that cultivating a
business takes longer than anticipated, or when such an
investment cannot be sold for the expected price.
> Stock prices are determined based upon market prin-
ciples, and Olympus may not be able to obtain the sort of
gains it expects on securities owing to changes in market
conditions.
Risks Related to Business Mergers
and Acquisitions
> Olympus has formed long-term, strategic partnerships
related to technologies and product development with
other leading companies in the industry. However, the
Group’s business activities may be adversely affected in
the event that financial or other business-related issues
arise in such strategic partnerships, and changes in goals
and objectives do not allow for the continuation of such
partnerships.
> Olympus may acquire total or partial ownership of other
companies for the purpose of business expansion.
However, the Group’s business may be impacted should
it prove unable to integrate acquired businesses accord-
ing to the Group’s management strategies or unable to
efficiently utilize the management resources of existing
businesses or businesses it has acquired. In addition, the
Group’s performance and/or financial position may be
affected due to the depletion of goodwill as well as the
aforementioned possibilities.
Other Risks
> Olympus is expanding its business activities in a number
of countries around the world, and the Group’s earnings
may be impacted by the occurrence of natural disasters,
disease, war, terrorist acts or other incidents in areas
where it operates, or by unforeseen increases in interest
rates or changes in currency exchange rates.
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