Siemens 2005 Annual Report Download - page 126

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Human resource risks
Competition for highly qualified management and technical personnel remains intense in the
industries in which our business Groups operate. In many of our business areas, we further
intend to extend our service businesses significantly, for which we will need highly skilled
employees. Our future success depends in part on our continued ability to hire, assimilate and
retain engineers and other qualified personnel. There can be no assurance that we will continue
to be successful in attracting and retaining highly qualified employees in the future, and any
inability to do so could have a material adverse effect on our business.
Regulatory and legal risks
Changes in regulatory requirements, tariffs and other trade barriers and price or exchange con-
trols could impact our sales and profitability and make the repatriation of profits difficult. In
addition, the uncertainty of the legal environment in some regions could limit our ability to
enforce our rights. We expect that sales to emerging markets will continue to be an increasing
portion of total sales, as our business naturally evolves and as developing nations and regions
around the world increase their demand for our offerings. Emerging market operations present
several risks, including volatility in gross domestic product, civil disturbances, economic and
governmental instability, the potential for nationalization of private assets, and the imposition of
exchange controls. In particular, the Asian markets are important for our long-term growth strat-
egy and our sizeable operations in China are influenced by a legal system that is still developing
and is subject to change. The demand for many of the products of our business Groups, particu-
larly those that derive their revenue from large projects, can be affected by expectations of future
demand, prices and gross domestic product in the markets in which those Groups operate. If any
of these risks or similar risks associated with our international operations were to materialize, it
could have a material adverse effect on our business.
Some of the industries in which we operate in are highly regulated. Med, for example, is sub-
ject to the restrictive regulatory requirements of the U.S. Food and Drug Administration (FDA).
Current and future environmental and other government regulations, or changes thereto, may
result in significant increases in our operating or product costs. We could also face liability for
damage or remediation for environmental contamination at the facilities we design or operate.
We accrue for environmental risks when it is probable that an obligation has been incurred and
the amount can be reasonably estimated. With regard to certain environmental risks, we main-
tain liability insurance at levels that our management believes are appropriate and consistent
with industry practice. We may incur environmental losses beyond the limits, or outside the
coverage, of such insurance and such losses may have a material adverse effect on the results of
our operations or financial condition and our provisions for environmental remediation may not
be sufficient to cover the ultimate losses or expenditures.
Management’s discussion and analysis
Risk management