Siemens 2007 Annual Report Download - page 177

Management’s discussion and analysis 177
Management’s discussion and analysis
Our operating Groups are exposed to fl uctuations in energy and raw material
prices. In the recent past, oil, steel and copper prices in particular have increased
on a worldwide basis. If we are not able to compensate for or pass on our increased
costs to customers, such price increases could have a material adverse impact on
our fi nancial results.
Product Lifecycle Management
Our value chain comprises all steps, from research and development, to produc-
tion, marketing and sales up to services. Operational failures in our value chain
processes could result in quality problems or potential product, labor safety,
regulatory or environmental risks. Such risks are particularly present in relation
to our production facilities, which are located all over the world and have a high
degree of organizational and technological complexity. From time to time, some
of the products we sell have quality issues resulting from the design or manufac-
ture of such products, or from the software integrated into them. Such operational
failures or quality issues could have a material adverse effect on our fi nancial
condition or results of operations.
Human Resources
Competition for highly qualifi ed management and technical personnel remains
intense in the industries and regions in which our business Groups operate. In
many of our business areas, we further intend to extend our service businesses
signifi cantly, 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 qualifi ed personnel. There can be no assurance that we will continue to
be successful in attracting and retaining highly qualifi ed employees and key per-
sonnel in the future and any inability to do so could have a material adverse effect
on our business.
Compliance risks
Code of Conduct
Public prosecutors and other government authorities in jurisdictions around the
world are investigating allegations of corruption at a number of Siemens’ busi-
ness Groups and regional companies. In addition to ongoing investigations, there
could be additional investigations launched in the future by governmental
authorities in these or other jurisdictions and existing investigations may be
expanded. These governmental authorities may take action against us or some of
our employees. These actions could include criminal and civil fi nes, in addition to
those already imposed on the Company, as well as penalties, sanctions, injunc-
tions against future conduct, profi t disgorgement, disqualifi cations from engag-
ing in certain types of business, the loss of business licenses or permits or other
restrictions. In addition to monetary and other penalties, a monitor could be
appointed to review future business practices with the goal of ensuring compli-
ance with applicable laws and we may otherwise be required to further modify
our business practices and compliance programs. Tax authorities may also impose
certain remedies, including potential tax penalties. Depending on the develop-
ment of these investigations, we may be required to accrue additional material