SanDisk 2014 Annual Report Download - page 101

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,
theft 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. Due to market availability, pricing or other reasons, we may elect not to
purchase insurance coverage or to purchase only limited coverage. 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 facilities 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. Attempts by others
to gain unauthorized access to information technology systems are increasingly more sophisticated. These
attempts, which might be related to industrial or other espionage, include covertly introducing malware to
computers and networks and impersonating authorized users, among others. We seek to detect and
investigate all security incidents and to prevent their recurrence, but in some cases, we might be unaware
of an incident or its magnitude and effects. Moreover, 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. While we have identified
several incidents of unauthorized access, to date none have caused material damage to our business.
Security breaches could result in disclosure of our IP, 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 expect to continue to devote additional resources to the security of our information technology
systems.
31
Annual Report