Toshiba 2012 Annual Report Download - page 86

16 TOSHIBA Annual Report 2012
Management's Discussion and Analysis
which the Group attempts to develop does not progress as planned, the Group may be adversely affected by incurring
investment expenses that do not lead to the anticipated results. In order to avoid these risks, the Group makes every
effort to resolve various technological issues and to develop and capture potential demand effectively in the new
business development process.
5. Risks related to trade practices
(1) Parent company's guarantees
When a subsidiary of the Company accepts an order for a large project, such as a plant, the Company, as the parent
company, may, at the request of the customer, provide guarantees with respect to the subsidiary's performance under the
contract. Such parent guarantees are made pursuant to standard business practices and in the ordinary course of
business. If the subsidiary subsequently fails to fulfill its obligations, the Company may be obligated to bear the resulting
loss. The Company makes every effort to conduct appropriate management by periodically monitoring the subsidiaries'
fulfillment of the contract requirements and by cooperating with such subsidiaries where necessary.
6. Risks related to new products and new technology
(1) Development of new products
It is critically important for the Group to offer innovative and attractive new products and services. The Group has exerted
its efforts to create “World-First” and “World No.1” products that deliver surprise and inspiration to customers, ahead of
the needs of customers. However, due to the rapid pace of technological innovation, the emergence of alternative
technologies and products and changes in technological standards, the optimum introduction of new products to the
market may not be accomplished, or new products may be accepted by the market for a shorter period than anticipated.
In addition, any failure on the part of the Group to continuously obtain sufficient funding and resources for development
of technologies may affect the Group's ability to develop new products and services and to introduce them to market.
From the viewpoint of enhancing concentration and selection of managerial resources, the Group now selects research
and development themes more rigorously, with a primary focus on developing original and advanced technologies, with
close consideration for the timing of market introduction. More rigorous selection of research and development items
may impair the Group's technological superiority in certain products and technological fields. In order to avoid these
risks, the Group intends to enhance the efficiency of research and development activities by sharing intellectual property
through the promotion of common platforms and using overseas resources more efficiently in system development.
7. Risks related to laws and regulations
(1) Information security
The Group maintains and manages personal information obtained through business operations, as well as trade secrets
regarding the Group's technology, marketing and other business operations. Even though the Group makes every effort
to manage this information appropriately, the Group's business performance and financial situation may be subject to
negative influences in the event of an unanticipated leak of such information and such information is obtained and used
illegally by a third party.
Additionally, the role of information systems in the Group is critical to carrying out business activities. While the Group
makes every effort to ensure the stable operation of its information systems, there is no assurance that their functionality
would not be impaired or destroyed by computer viruses, software or hardware failures, disaster, terrorism, or other
causes.
(2) Compliance and internal control
The Group is active in various businesses in regions worldwide, and its business activities are subject to the laws and
regulations of each region. The Group has implemented and operates necessary and appropriate internal control systems
for a number of purposes, including compliance with laws and regulations and strict reporting of business and financial
matters.
However, there can be no assurance that the Group will always be able to structure and operate effective internal
control systems. Furthermore, such internal control systems may themselves, by their nature, have limitations, and it is
not possible to guarantee that they will fully achieve their objectives. Therefore, there is no assurance that the Group will
not unknowingly and unintentionally violate laws and regulations in future. Changes in laws and regulations or changes
in Management's Discussion and Analysis interpretations of laws and regulations by the relevant authorities may also
cause difficulty in achieving compliance with laws and regulations or may result in increased compliance costs. On these
grounds, the Group makes every effort to minimize these risks by making periodic revisions to the internal control
systems, continuously monitoring operations, and so forth.
(3) The environment
The Group is subject to various environmental laws, including laws on air pollution, water pollution, toxic substances,
waste disposal, product recycling, prevention of global warming and energy policies, in its global business activities.
While the Group pays careful attention to these laws and regulations, it is possible that the Group may encounter legal or
social liability for environmental matters, such as liability for the clean up of land at manufacturing bases throughout the