Siemens 2006 Annual Report Download - page 143

Management’s discussion and analysis 139
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 contin-
ue 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
controls 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 pres-
ent several risks, including volatility in gross domestic product, civil disturbances, economic
and governmental instability, the potential for nationalization of private assets, and the impo-
sition of exchange controls. In particular, the Asian markets are important for our long-term
growth strategy 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, particularly 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
subject 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 environ-
mental risks, we maintain 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.
We operate in approximately 190 countries and therefore are subject to different tax regula-
tions. Changes in tax regulation could result in higher tax expenses and payments. Further-
more, changes in tax regulation could impact our tax liabilities as well as deferred tax assets.
Management’s discussion and analysis