Philips 2013 Annual Report Download - page 99

6 Risk management 6.4 - 6.5
Annual Report 2013 99
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 eect 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 aect
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 eects. 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
aect 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 eect on its businesses.
Philips is exposed to developments which could aect
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.
6.5 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
aected materially by adverse outcomes.
Please refer to note 26, Contingent assets and
liabilities, for additional disclosure relating to specific
legal proceedings.
Philips is exposed to governmental investigations and
legal proceedings with regard to possible anti-
competitive market practices.
Philips is facing increased scrutiny by national and
European authorities of possible anti-competitive
market practices. For example, Philips is one of the
companies that were inspected by officials of the
European Commission in December 2013. The
European Commission is looking into potential
restrictions on online sales of consumer electronic
products and small domestic appliances. Philips is fully
cooperating with the European Commission. Philips’
financial position and results could be materially
aected by an adverse final outcome of governmental
investigations and litigation, as well as any potential
related claims.
Philips’ global presence exposes the company to
regional and local regulatory rules, changes to which
may aect 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 aect 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 importance, and where there is