Sharp 2012 Annual Report Download - page 37

Annual Report 2012 35
(7) Product Liability
Sharp manufactures products in accordance with strict
quality control standards to ensure the utmost in qual-
ity. In order to fulfill its responsibility as a manufacturer
in case product defects do arise, Sharp has taken out
insurance to cover compensations based on product
liability. Nonetheless, there is still a risk of a large-scale
product recall or litigation caused by unforeseen events,
which may adversely affect Sharp’s brand image or in-
fluence its business results and financial position.
(8) Laws and Regulations
The business activities of Sharp are subject to various
regulations in countries where it operates, including
business and investment approval, export regulations,
tariffs, accounting standards and taxation. Sharp must
also adhere to various laws and regulations concerning
trading, antitrust practices, product liability, consumer
protection, intellectual property rights, product safety,
the environment and recycling and internal control.
Changes in such laws and regulations, and additional
expenses to comply with the amendments may affect
Sharp’s business results and financial position. Further,
in a case where an accident occurs related to one of
Sharp’s products, report of said incident, based on the
Consumer Product Safety Law and related regulations
in Japan, and disclosure of the accident information
based on a system for public announcements could di-
minish Sharp’s brand image.
(9) Litigation and Other Legal Proceedings
Sharp conducts business activities around the world,
and as such, there is a risk that Sharp could become
involved with litigation and other legal proceedings in
each country. If Sharp becomes involved in litigation
or other legal proceedings, with the different legal and
judicial systems in each country, depending on the
case, Sharp may be ordered to pay a significant amount
in damages or fines. Sharp is subject to investigations
conducted by the Directorate-General for Competition
of the European Commission, etc., with respect to its
TFT LCD business. In addition, civil lawsuits seeking
monetary damages resulting from alleged anticom-
petitive behavior have been filed in North America and
Europe against Sharp. Sharp also received a cease
and desist order and a surcharge payment order from
the Japan Fair Trade Commission. However, Sharp
has submitted a complaint to the Commission and the
complaint is pending. It is difficult to predict the result
of these proceedings and litigation at this stage. An ad-
verse result could affect Sharp’s business results and
financial position.
(10) Leakage of Personal Data and Other Information
Sharp retains personal data and other confidential in-
formation concerning its customers, business partners
and employees. Extreme care is taken to protect this
information. A company-wide management system
promotes employee education, internal auditing, and
other measures aimed at ensuring compliance with
management regulations. If information is leaked,
however, it may reduce confidence in Sharp or result
in substantial costs (associated with leakage preven-
tion measures or indemnification for damages, for
instance), which may affect Sharp’s business results
and financial position.
(11) Large-Scale Natural Disasters
Sharp has created and adopted preventative/emergency
measures and a business continuity plan aimed at rapid
recovery/restoration in order to be prepared and limit
damage in the event of large-scale natural disasters
such as earthquakes and typhoons. However, if Sharp or
its partners’ business activities are impaired due to the
occurrence of a large-scale natural disaster, it may affect
Sharp’s business results and financial position.
(12) Risks Accompanying the Nuclear Power Plant
Disaster
The Tokyo Electric Power (TEPCO) Fukushima Daiichi
Nuclear Power Plant accident accompanying the Great
East Japan Earthquake on March 11, 2011, has had
various adverse effects on both Japanese and overseas
markets, which may affect Sharp’s business results
and financial position. Moreover, in response to elec-
tricity usage restrictions in the areas served by TEPCO
and Tohoku Electric Power and energy-conservation
requests in the areas served by Kansai Electric Power
and elsewhere in 2011, we are promoting company-
wide energy-saving efforts. In the future, if electricity
supply shortages due to electricity usage restrictions
by the government, energy-conservation requests from
various power companies, etc., escalate and Sharp
is requested to significantly reduce electricity usage
amounts, or if a situation such as rolling blackouts oc-
curs, plant operations will be reduced or production
temporarily suspended, which may affect Sharp’s busi-
ness results and financial position.
(13) Other Key Variable Factors
In addition to the aforementioned risks, Sharp’s busi-
ness results may be significantly affected by human-
induced calamities such as accidents, conflicts,
insurrections or terrorism; the spread of a new strain of
influenza or other infectious disease; or major fluctua-
tions in the stock and bond markets.
Risk Factors