SanDisk 2013 Annual Report Download - page 128

hedged our future equity investments, distributions and loans denominated in Japanese yen related to
Flash Ventures.
Our decisions and hedging strategy with respect to currency risks may not be successful, which could
harm our operating results. In addition, if we do not successfully manage our hedging program in
accordance with accounting guidelines, we may be subject to adverse accounting treatment, which could
harm our operating results. There can be no assurance that this hedging program will be economically
beneficial to us for numerous reasons, including that hedging may reduce volatility, but prevent us from
benefiting from a favorable market trend. Further, the ability to enter into foreign exchange contracts with
financial institutions is based upon our available credit from such institutions and compliance with
covenants and other restrictions. Operating losses, third-party downgrades of our credit rating or instability
in the worldwide financial markets, including the downgrade of the credit rating of the U.S. government,
could impact our ability to effectively manage our foreign currency exchange rate risk, which could harm
our business, operating results and financial condition.
Our global operations and operations at Flash Ventures and third-party subcontractors are subject to risks
for which we may not be adequately insured. Our global operations are subject to many risks, including but
not limited to errors and omissions, infrastructure disruptions, such as large-scale outages or interruptions
of service from utilities or telecommunications providers, supply chain interruptions, third-party liabilities
and fires or natural disasters. No assurance can be given that we will not incur losses beyond the limits of,
or outside the scope of, the coverage of our insurance policies. From time-to-time, various types of
insurance have not been available on commercially acceptable terms or, in some cases, at all. There can be
no assurance that in the future we will be able to maintain existing insurance coverage or that premiums
will not increase substantially. We maintain limited insurance coverage and, in some cases, no coverage at
all, for natural disasters and environmental damages, as these types of insurance are sometimes not
available or available only at a prohibitive cost. For example, our test and assembly facility in Shanghai,
China, on which we significantly rely, may not be adequately insured against all potential losses.
Accordingly, we may be subject to uninsured or under-insured losses. We depend upon Toshiba to obtain
and maintain sufficient property, business interruption and other insurance for Flash Ventures. If Toshiba
fails to do so, we could suffer significant unreimbursable losses, and such failure could also cause Flash
Ventures to breach various financing covenants. In addition, we insure against property loss and business
interruption resulting from the risks incurred at our third-party subcontractors; however, we have limited
control as to how those sub-contractors run their operations and manage their risks, and as a result, we
may not be adequately insured.
If our security measures or security measures of our suppliers, vendors and partners are breached and
unauthorized access to our or their information technology systems is obtained, we may lose proprietary data.
Our security measures and the security measures of our suppliers, vendors and partners may be breached
and our or their information technology systems accessed as a result of third-party action, including
computer hackers, employee error, malfeasance or otherwise, and result in unauthorized access to our
customers’ data or our data, including IP and other confidential business information. Because the
techniques used to obtain unauthorized access, or to sabotage systems, change frequently, we may be
unable to anticipate these techniques or to implement adequate preventative measures. Furthermore, we
have limited or no control over the implementation of preventative measures of our suppliers, vendors and
partners. Any security breach could result in disclosure of our trade secrets or confidential customer,
supplier or employee data, which could result in legal liability, harm to our reputation and other harm to
our business.
We may need to raise additional financing, which could be difficult to obtain, and which, if not obtained in
satisfactory amounts, may prevent us from funding Flash Ventures, increasing our wafer supply, developing or
enhancing our products, taking advantage of future opportunities, engaging in acquisitions of or investments in
companies, growing our business or responding to competitive pressures or unanticipated industry changes, any
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