Proctor and Gamble 2013 Annual Report Download - page 18

16 The Procter & Gamble Company
We face risks associated with having significant
international operations.
We are a global company, with manufacturing operations in
more than 40 countries and a significant portion of our
revenue is outside the U.S. Our international operations are
subject to a number of risks, including, but not limited to:
• compliance with U.S. laws affecting operations outside
of the United States, such as the Foreign Corrupt
Practices Act;
• compliance with a variety of local regulations and laws;
• changes in tax laws and the interpretation of those laws;
• changes in exchange controls and other limits on our
ability to repatriate earnings from overseas;
• discriminatory or conflicting fiscal policies;
• difficulties enforcing intellectual property and
contractual rights in certain jurisdictions;
• greater risk of uncollectible accounts and longer
collection cycles;
• effective and immediate implementation of control
environment processes across our diverse operations and
employee base; and
• imposition of increased or new tariffs, quotas, trade
barriers or similar restrictions on our sales outside the
United States.
We have sizable businesses and maintain local currency cash
balances in a number of foreign countries with exchange,
import authorization or pricing controls, including, but not
limited to, Venezuela, Argentina, China, India and Egypt.
Our results of operations and/or financial condition could be
adversely impacted if we are unable to successfully manage
these and other risks of international operations in an
increasingly volatile environment.
Fluctuations in exchange rates may have an adverse
impact on our business results or financial condition.
We hold assets and incur liabilities, earn revenues and pay
expenses in a variety of currencies other than the U.S. dollar.
Because our consolidated financial statements are presented
in U.S. dollars, the financial statements of our subsidiaries
outside the United States are translated into U.S. dollars.
Our operations outside of the U.S. generate a significant
portion of our net revenue. Fluctuations in exchange rates
may therefore adversely impact our business results or
financial condition. See also the Results of Operations and
Cash Flow, Financial Condition and Liquidity sections of the
MD&A and Note 5 to our Consolidated Financial
Statements.
We face risks related to changes in the global and
political economic environment, including the global
capital and credit markets.
Our business is impacted by global economic conditions,
which continue to be volatile. Our products are sold in more
than 180 countries and territories around the world. If the
global economy experiences significant disruptions, our
business could be negatively impacted by reduced demand
for our products related to: a slow-down in the general
economy; supplier, vendor or customer disruptions resulting
from tighter credit markets; and/or temporary interruptions
in our ability to conduct day-to-day transactions through our
financial intermediaries involving the payment to or
collection of funds from our customers, vendors and
suppliers.
Our objective is to maintain credit ratings that provide us
with ready access to global capital and credit markets. Any
downgrade of our current credit ratings by a credit rating
agency could increase our future borrowing costs and impair
our ability to access capital and credit markets on terms
commercially acceptable to us.
We could also be negatively impacted by political issues or
crises in individual countries or regions, including sovereign
risk related to a default by or deterioration in the credit
worthiness of local governments. For example, we could be
adversely impacted by continued instability in the banking
and governmental sectors of certain countries in the
European Union or the dynamics associated with the federal
and state debt and budget challenges in the United States.
Consequently, our success will depend, in part, on our ability
to manage continued global and/or economic uncertainty,
especially in our significant geographies, as well as any
political or economic disruption. These risks could
negatively impact our overall liquidity and financing costs,
as well as our ability to collect receipts due from
governments, including refunds of value added taxes, and/or
create significant credit risks relative to our local customers
and depository institutions.
If the reputation of the Company or one or more of our
brands erodes significantly, it could have a material
impact on our financial results.
The Company's reputation is the foundation of our
relationships with key stakeholders and other constituencies,
such as customers and suppliers. In addition, many of our
brands have worldwide recognition. This recognition is the
result of the large investments we have made in our products
over many years. The quality and safety of our products is
critical to our business. Our Company also devotes
significant time and resources to programs designed to
protect and preserve our reputation, such as social
responsibility and environmental sustainability. If we are
unable to effectively manage real or perceived issues,
including concerns about safety, quality, efficacy or similar
matters, these issues could negatively impact sentiments
toward the Company or our products, our ability to operate
freely could be impaired and our financial results could
suffer. Our financial success is directly dependent on the
success of our brands and the success of these brands can
suffer if our marketing plans or product initiatives do not
have the desired impact on a brand's image or its ability to
attract consumers. Our results could also be negatively
impacted if one of our brands suffers a substantial
impediment to its reputation due to a significant product
recall, product-related litigation, allegations of product
tampering or the distribution and sale of counterfeit