Toshiba 2006 Annual Report Download - page 59

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(15) Procurement of components and materials
It is important for the Group’s business activities to obtain materials, components, and other procured goods in a timely and
proper manner. Procured goods include products whose suppliers are limited due to the product’s particularity, and that are
difficult to replace. In cases of delay or other problems in receiving supply of such components and materials, shortages may
occur or procurement costs may rise. Also, it is necessary to procure components and materials at competitive costs and to
optimize the entire supply chain, including suppliers, in order for the Group to bring competitive products to market. Any
failure by the Group to achieve proper cooperation with key suppliers may impact on the Group’s competitiveness.
Any case of defective components and materials may also have an adverse effect on the reliability and reputation of the
Group and Toshiba brand products.
(16) Securing human resources
Success of the Group’s businesses depends in large part on securing excellent human resources in every business area and process,
including product development, production, marketing and business management. Competition to secure human resources is
intensifying, as the number of qualified personnel in each area and process is limited, and demand for human resources is increas-
ing as the economy recovers. Due to this, the Group may fail to retain existing employees or to obtain new human resources.
(17) Compliance and internal control
The Group is active in various businesses in various regions worldwide, and its business activities are subject to laws and reg-
ulations in each country or region. The Group puts in place appropriate internal control systems from perspectives that
include assuring management effectiveness and efficiency, assuring the reliability of business and financial reports, compli-
ance with laws and regulations, and risk management, and operates within those systems. However, by their nature, such
internal control systems may themselves have limitations, and it is not possible to guarantee that they will fully achieve their
objectives. Due to these inherent limitations, we cannot guarantee that there will never be any violation of laws and regula-
tions. Changes in laws and regulations or changes in interpretations of laws and regulations by the authorities may also cause
difficulty in achieving compliance with laws and regulations, or may result in increased compliance costs.
(18) Strategic concentrated investment
The Group makes strategic investments that concentrate on specific business areas, including NAND flash memory, nuclear
power and SED. While it is essential to allocate limited management resources to strategic, high growth areas and businesses
in which the Group enjoys competitiveness, in order to secure and maintain the Group’s advantages, the strategic businesses
in which such investments are made may not generate profit commensurate with the investments.
(19) Protection of intellectual property rights
The Group makes every effort to secure intellectual property rights. However, in some regions, it may not be possible to
secure sufficient protection.
Also, the Group may use intellectual property from third parties, for which the Group has acquired permission for use. It
could be possible that the Group fails to receive such third-party permission for an essential intellectual property, or receives
permission only on unfavorable terms.
It is also possible that the Group will have to file suit in order to protect its intellectual property rights, or that a suit for
breach of intellectual property rights may be brought against the Group. Such lawsuits may require time, costs and other
management resources, and, depending on the decision in such a lawsuit, it may become impossible for the Group to use an
important technology, or the Group may become liable for significant damages.
(20) Environment
In the Group’s global business activities, various environmental laws, including laws on air pollution, water pollution, toxic sub-
stances, waste disposal, and product recycling, are in force around the world. While the Group pays careful attention to those laws
and regulations, it may be possible that the Group discovers a legal or social liability for the environment, regardless of whether it is at
fault or not, in past, present or future business activities. It may also be possible that, in future, the Group will be required to remove
environmental hazards including toxic substances, as a result of the introduction of more demanding environmental regulations.
(21) Employee retirement benefit costs and obligations
The amount of the Group’s employee retirement benefit costs and obligations are calculated on assumptions used in the rele-
vant actuarial calculations. Those assumptions may change due to adverse economic or other factors, or returns on plan
assets may be lower than anticipated.
(22) Financing environment
The Group has substantial amounts of interest-bearing debt for financing, highly susceptible to the market environment, including
interest rate and supply and demand of funds. Changes in these factors may have an adverse effect on the Group’s funding activities.