Philips 2013 Annual Report Download - page 100

6 Risk management 6.5 - 6.5
100 Annual Report 2013
a dependency on the available funding for healthcare
systems. In addition, changes in reimbursement
policies may aect spending on healthcare.
Philips is exposed to non-compliance with General
Business Principles.
Philips’ attempts to realize its growth ambitions could
expose it to the risk of non-compliance with the Philips
General Business Principles, such as anti-bribery
provisions. This risk is heightened in growth
geographies as the legal and regulatory environment is
less developed in growth geographies compared to
mature geographies. Examples include commission
payments to third parties, remuneration payments to
agents, distributors, consultants and the like, and the
acceptance of gifts, which may be considered in some
markets to be normal local business practice. (See also
note 26, Contingent assets and liabilities.)
Defective internal controls would adversely aect our
financial reporting and management process.
The reliability of reporting is important in ensuring that
management decisions for steering the businesses and
managing both top-line and bottom-line growth are
based on top-quality data. Flaws in internal control
systems could adversely aect the financial position
and results and hamper expected growth.
The correctness of disclosures provides investors and
other market professionals with significant information
for a better understanding of Philips’ businesses.
Imperfections or lack of clarity in the disclosures could
create market uncertainty regarding the reliability of the
data presented and could have a negative impact on
the Philips share price.
The reliability of revenue and expenditure data is key
for steering the business and for managing top-line and
bottom-line growth. The long lifecycle of healthcare
sales, from order acceptance to accepted installation,
together with the complexity of the accounting rules for
when revenue can be recognized in the accounts,
presents a challenge in terms of ensuring there is
consistency of application of the accounting rules
throughout Philips Healthcare’s global business.
Philips is exposed to non-compliance with data privacy
and product safety laws.
Philips’ brand image and reputation would be
adversely impacted by non-compliance with various
data protection and product security laws. In light of
Philips digital strategy, data privacy laws are
increasingly important. Also, Philips Healthcare is
subject to various (patient) data protection and safety
laws. In Philips Healthcare, privacy and product safety
and security issues may arise, especially with respect to
remote access or monitoring of patient data or loss of
data on our customers’ systems.
Philips operates in a highly regulated product safety
and quality environment. Philips’ products are subject
to regulation by various government agencies,
including the FDA (US) and comparable foreign
agencies. Obtaining their approval is costly and time
consuming, but a prerequisite for market introduction. A
delay or inability to obtain the necessary regulatory
approvals for new products could have a material
adverse eect on business. The risk exists that product
safety incidents or user concerns could trigger FDA
business reviews which, if failed, could lead to business
interruption which in turn could adversely aect Philips’
financial condition and operating results. E.g. the
voluntary, temporary suspension of new production at
our Healthcare facility in Cleveland, Ohio targets to
further strengthen manufacturing process controls after
certain issues in this area were identified during an
ongoing FDA inspection.