Proctor and Gamble 2016 Annual Report Download - page 19

The Procter & Gamble Company 5
• collaborating via an online and efficient means of global
business communications;
• complying with regulatory, legal and tax requirements;
• providing data security; and
• handling other processes necessary to manage our
business.
Numerous and evolving information security threats, including
advanced persistent cybersecurity threats, pose a risk to the
security of our IT systems, networks and services, as well as
to the confidentiality, availability and integrity of our data and
the availability and integrity of our critical business operations.
As cybersecurity threats rapidly evolve in sophistication and
become more prevalent across the industry globally, the
Company is continually increasing its sensitivity and attention
to these threats. We continue to assess potential threats and
make investments seeking to address these threats, including
monitoring of networks and systems and upgrading skills,
employee training and security policies for the Company and
its third-party providers. However, because the techniques
used in these attacks change frequently and may be difficult to
detect for periods of time, we may face difficulties in
anticipating and implementing adequate preventative
measures. Our IT databases and systems and our third party
providers' databases and systems have been, and will likely
continue to be, subject to computer viruses or other malicious
codes, unauthorized access attempts, denial of service attacks,
phishing and other cyber-attacks. To date, we have seen no
material impact on our business or operations from these
attacks; however, we cannot guarantee that our security efforts
or the security efforts of our third party providers will prevent
breaches or breakdowns to our or our third-party providers’
databases or systems. If the IT systems, networks or service
providers we rely upon fail to function properly or cause
operational outages or aberrations, or if we or one of our third-
party providers suffer a loss, significant unavailability of or
disclosure of our business or stakeholder information, due to
any number of causes, ranging from catastrophic events or
power outages to improper data handling or security breaches,
and our business continuity plans do not effectively address
these failures on a timely basis, we may be exposed to
reputational, competitive and business harm as well as
litigation and regulatory action. The costs and operational
consequences of responding to breaches and implementing
remediation measures could be significant.
We must successfully manage compliance with legislation,
regulation and enforcement, as well as pending legal
matters in the U.S. and abroad.
Our business is subject to a wide variety of laws and regulations
across all of the countries in which we do business, including
those laws and regulations involving intellectual property,
product liability, marketing, antitrust, privacy, environmental,
employment, anti-bribery or anti-corruption (such as the U.S.
Foreign Corrupt Practices Act), tax or other matters. Rapidly
changing laws, regulations and related interpretations,
including changes in accounting standards, as well as
increased enforcement actions, create challenges for the
Company, including our compliance and ethics programs and
may alter the environment in which we do business, which
could adversely impact our financial results. If we are unable
to continue to meet these challenges and comply with all laws,
regulations and related interpretations, it could negatively
impact our reputation and our business results. Failure to
successfully manage regulatory and legal matters and resolve
such matters without significant liability or damage to our
reputation may materially adversely impact our results of
operations and financial position. Furthermore, if pending
legal matters result in fines or costs in excess of the amounts
accrued to date, that may also materially impact our results of
operations and financial position.
Changes in applicable tax regulations could negatively
affect our financial results.
The Company is subject to taxation in the U.S. and numerous
foreign jurisdictions. Because the U.S. maintains a worldwide
corporate tax system, the foreign and U.S. tax systems are
somewhat interdependent. For example, certain income that
is earned and taxed in countries outside the U.S. is not taxed
in the U.S., provided those earnings are indefinitely reinvested
outside the U.S. If those same foreign earnings are instead
repatriated to the U.S., additional residual U.S. taxation will
likely occur, due to the U.S.’s worldwide tax system and higher
U.S. corporate tax rate. The U.S. is considering corporate tax
reform that may significantly change the corporate tax rate and
the U.S. international tax rules. Additionally, longstanding
international tax norms that determine each country’s
jurisdiction to tax cross-border international trade are evolving
as a result of the Base Erosion and Profit Shifting project
(“BEPS") undertaken by the G8, G20 and Organization for
Economic Cooperation and Development ("OECD"). As these
and other tax laws and related regulations change, our financial
results could be materially impacted. Given the
unpredictability of these possible changes and their potential
interdependency, it is very difficult to assess whether the
overall effect of such potential tax changes would be
cumulatively positive or negative for our earnings and cash
flow, but such changes could adversely impact our financial
results.
If we are unable to successfully execute our portfolio
optimization strategy, as well as successfully manage
ongoing acquisition, joint venture and divestiture
activities, it could adversely impact our business.
InAugust 2014, the Company announced a plan to significantly
streamline our product portfolio by divesting, discontinuing or
consolidating about 100 non-strategic brands, resulting in a
portfolio of about 65 brands. The Company has announced
the Beauty Brands transaction with Coty and completed a series
of other transactions that will substantially complete this plan.
Our ability to successfully execute our portfolio optimization
strategy could impact our results.
In addition, as a company that manages a portfolio of consumer
brands, our ongoing business model includes a certain level of
acquisition, joint venture and divestiture activities. We must
be able to successfully manage the impacts of these activities,
while at the same time delivering against our business