Philips 2012 Annual Report Download - page 91

7 Risk management 7.4 - 7.5
Annual Report 2012 91
Due to the fact that Philips is dependent on its personnel
for leadership and specialized skills, the loss of its ability
to attract and retain such personnel would have an
adverse effect on its business.
The attraction and retention of talented employees in
sales and marketing, research and development, finance
and general management, as well as of highly specialized
technical personnel, especially in transferring technologies
to low-cost countries, is critical to Philips’ success. This is
particularly valid in times of economic recovery. The loss
of specialized skills could also result in business
interruptions. There can be no assurance that Philips will
continue to be successful in attracting and retaining all the
highly qualified employees and key personnel needed in
the future.
Warranty and product liability claims against Philips could
cause Philips to incur significant costs and affect Philips’
results as well as its reputation and relationships with key
customers.
Philips is from time to time subject to warranty and
product liability claims with regard to product
performance and effects. Philips could incur product
liability losses as a result of repair and replacement costs
in response to customer complaints or in connection with
the resolution of contemplated or actual legal proceedings
relating to such claims. In addition to potential losses
arising from claims and related legal proceedings, product
liability claims could affect Philips’ reputation and its
relationships with key customers (both customers for end
products and customers that use Philips’ products in their
production process). As a result, product liability claims
could materially impact Philips’ financial condition and
operating results.
Any damage to Philips’ reputation could have an adverse
effect on its businesses.
Philips is exposed to developments which could affect its
reputation. Such developments could be of an
environmental or social nature, or connected to the
behavior of individual employees or suppliers and could
relate to adherence to regulations related to labor, health
and safety, environmental and chemical management.
Reputational damage could materially impact Philips’
financial condition and operating results.
7.5 Compliance risks
Legal proceedings covering a range of matters are pending
in various jurisdictions against Philips and its current and
former group companies. Due to the uncertainty inherent
in legal proceedings, it is difficult to predict the final
outcome.
Philips, including a certain number of its current and
former group companies, is involved in legal proceedings
relating to such matters as competition issues,
commercial transactions, product liability, participations
and environmental pollution. Since the ultimate outcome
of asserted claims and proceedings, or the impact of any
claims that may be asserted in the future, cannot be
predicted with certainty, Philips’ financial position and
results of operations could be affected materially by
adverse outcomes.
Please refer to note 25, Contingent liabilities, for
additional disclosure relating to specific legal proceedings.
Philips is exposed to governmental investigations and legal
proceedings with regard to increased scrutiny of possible
anti-competitive market practices.
Philips is facing increased scrutiny by national and
European authorities of possible anti-competitive market
practices, especially in product segments where Philips
has significant market shares. For example, Philips and
certain of its (former) affiliates are involved in
investigations by competition law authorities in several
jurisdictions into possible anti-competitive activities in the
Cathode-Ray Tubes (CRT) industry and are engaged in
litigation in this respect. Philips’ financial position and
results could be materially affected by an adverse final
outcome of these investigations and litigation, as well as
any potential claims relating to this matter. Furthermore,
increased scrutiny may hamper planned growth
opportunities provided by potential acquisitions (see also
note 25, Contingent liabilities).
Philips’ global presence exposes the company to regional
and local regulatory rules which may interfere with the
realization of business opportunities and investments in
the countries in which Philips operates.
Philips has established subsidiaries in over 80 countries.
These subsidiaries are exposed to changes in
governmental regulations and unfavorable political
developments, which may limit the realization of business
opportunities or impair Philips’ local investments. Philips’
increased focus on the healthcare sector increases its
exposure to highly regulated markets, where obtaining
clearances or approvals for new products is of great