Siemens 2008 Annual Report Download - page 201

Management’s discussion and analysis 105
Additionally, we engage in a substantial amount of business with governments and government-owned enter-
prises around the world. We also participate in a number of projects funded by government agencies and non-
governmental organizations such as the World Bank and other multilateral development banks. If we or our sub-
sidiaries are found, including pursuant to the resolution of the investigations of the Munich public prosecutor,
the SEC and DOJ, to have engaged in illegal acts or are found not to have taken effective steps to address the alle-
gations or ndings of corruption in our business, this may impair our ability to participate in business with gov-
ernments or non-governmental organizations and may result in formal exclusions from such business, which
may have a material adverse effect on our business. For example, legislation of member states of the European
Union could in certain cases result in mandatory or discretionary exclusion from public contracts in case of
a conviction for bribery and certain other offences. As described more fully in “Notes to Consolidated Financial
Statements”, we or our subsidiaries have in the past been excluded from government contracting as a result of
ndings of corruption or other misconduct. Conviction for illegal behavior, or debarment from participating in
contracting with governments or non-governmental organizations, in one jurisdiction may lead to debarment in
other jurisdictions or by other non-governmental organizations. Even if we are not formally excluded from par-
ticipating in government business, government agencies or non-governmental organizations may informally
exclude us from tendering for or participating in certain contracts. From time to time, we have received requests
for information from government customers and non-governmental organizations regarding the investigations
described above and our response to those investigations. We expect such requests to continue.
In addition, our involvement in existing and potential corruption proceedings could also damage our reputation
generally and have an adverse impact on our ability to compete for business from both public and private sector
customers. The investigations could also impair our relationship with business partners on whom we depend
and our ability to obtain new business partners and could also adversely affect our ability to pursue strategic
projects and transactions which could be important to our business, such as alliances, joint ventures or other
combinations. Current or future investigations could result in the cancellation of certain of our existing con-
tracts, and the commencement of signicant third-party litigation, including by our competitors.
The governmental investigations are at this time incomplete and we cannot predict when they will be completed
or what their outcome will be, including the potential effect that their results or the reactions of third parties
thereto, may have on our business. Future developments in these investigations, responding to the requests of
governmental authorities and cooperating with these investigations, especially if we are not able to resolve the
investigations in a timely manner, could divert management’s attention and resources from other issues facing
our business. Management has implemented a remediation plan to address corruption and compliance risk in
our business. If this remediation plan is unsuccessful, there could be an increased risk that one or more of the
risks described above could materialize.
Legal
We are subject to numerous risks relating to legal proceedings to which we are currently a party or that could
develop in the future. In the ordinary course of our business, we become party to lawsuits, and/or similar pro-
ceedings, and become subject to governmental investigations and proceedings involving allegations of
improper delivery of goods or services, product liability, product defects, quality problems and intellectual prop-
erty infringement and/or alleged or suspected violations of applicable laws. In addition, we may face third party
claims as a result of the circumstances that led to the corruption proceedings described above. For additional
information with respect to legal proceedings, see “Notes to Consolidated Financial Statements.” There can be
no assurance that the results of these or other legal proceedings will not materially harm our business, reputa-
tion or brand. We record a provision for legal proceedings risks when (i) a present obligation as a result of a past
event exists; (ii) it is probable that an outow of resources embodying economic benets will be required to set-