TomTom 2013 Annual Report Download - page 17

we are unable to source any critical components, particularly critical
single-source components, our business could be significantly
impaired and our financial condition, results of operations and
liquidity could be materially adversely affected.
Product quality
Our industry is characterised by frequent technological advances.
In order to remain competitive, we need to continuously innovate
to introduce new and upgraded products and services. Difficulties
may be experienced that delay the development, introduction or
market acceptance of our new or enhanced products.
Furthermore, we develop complex hardware and software
products, which may experience material defects, errors or failure.
We have internal quality control standards and procedures to
mitigate these risks. However, should any of our products fail to
operate as intended or otherwise experience quality problems, our
reputation and brand value may suffer and we may be exposed to
increased operating costs and the possibility of significant
consumer product liability, which could adversely affect our
financial condition, results of operations and liquidity.
Performance of real-time services
We provide fleet management services, live traffic information and
sales via our web store on a 24-hour basis. To provide these services
to our customers we rely on our own, as well as outsourced,
information technology, telecommunications and other
infrastructure systems.
A significant disruption to the availability of these systems could
cause interruptions in our service to customers that may cause
reputational damage for us and could trigger contractual penalties,
which could have a material adverse effect on our financial
condition and results of operations.
Disaster recovery planning
Unforeseen business disruptions could affect our service to
customers and cause loss of, or delays in TomTom's critical business
systems, our research and development work and/or product
shipments. Any permanent or temporary loss of these systems
would result in reputational damage, loss of revenue and liabilities
to our clients. In the case of a catastrophic disaster, our company's
success rests on our ability to restore our critical data and rebuild
our IT business systems.
We have business continuity and disaster recovery planning in place
for certain systems and various eventualities. However, we are
unable to plan for every possible disaster or incident. A major failure
of a critical business system from which we are not able to quickly
recover could have a material adverse effect on our financial
condition, results of operations and liquidity.
Legal and compliance risks
Intellectual property
We rely on a combination of trademarks, trade names, patents,
confidentiality and non-disclosure clauses and agreements,
copyrights and design rights, to defend and protect our trade
secrets and rights to the intellectual property in our products.
We may be faced with claims that we have infringed the intellectual
property rights or patents of others, which if successfully asserted
against us may result in us being ordered to pay substantial
damages or forced to stop or delay the development, manufacture
or sale of infringing products. Any such outcome could have a
material adverse effect on our financial condition, results of
operations and liquidity. Furthermore, even if we were to prevail,
any litigation could be costly and time-consuming.
Privacy of customer data
The focus of our business providing location-based products and
services to individual customers, growing public awareness and
increased scrutiny by regulatory authorities, means that compliance
with privacy regulations and customer expectations is increasingly
important in maintaining our competitive position. While we
anonymise the trace data we collect from our individual customers,
and our privacy programme is designed to ensure TomTom's
Privacy Principles are adhered to throughout our operations and in
the design of our products and services, our reputation and brand
may suffer if we fail to comply with privacy regulations or otherwise
fail to meet our customers' expectations in relation to privacy
matters.
Information security
Our business operations and reputation are substantially
dependent on our ability to maintain confidentiality, integrity and
availability over information regarding customers, employees,
suppliers, proprietary technologies, intellectual property and
business processes. Our information security programme requires
that we deploy and maintain information security controls,
processes and tools in our operations and products using a risk-
based approach. However, the volume and sophistication of
information security threats continue to grow. The leakage of
confidential information, unauthorised use of our systems and
networks or defective products could adversely affect our business
and could have a material adverse effect on our financial conditions,
results of operations and liquidity.
Financial risks
Financial risks are presented in note 3 - Financial risk management
in the consolidated financial statements.
Management Board Report / Continued
ANNUAL REPORT AND ACCOUNTS 2013 / 17