Siemens 2008 Annual Report Download - page 202

106 Management’s discussion and analysis
tle the obligation; and (iii) a reliable estimate can be made of the amount of the obligation. We maintain liability
insurance for certain legal risks at levels our management believes are appropriate and consistent with industry
practice. We may incur losses relating to legal proceedings 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 nancial condi-
tion and our provisions for legal proceedings-related losses may not be sufcient to cover our ultimate loss or
expenditure.
Regulatory
Changes in regulatory requirements, tariffs and other trade barriers and price or exchange controls could
impact our sales and protability and make the repatriation of prots difcult. 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 civil disturbances, health concern, cultural differences such as
employment and business practices, volatility in gross domestic product, economic and governmental instabil-
ity, 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 strategy, and our sizeable operations in China are inu-
enced by a legal system that is still developing and is subject to change. Our growth strategy could be limited by
governments supporting local industries. The demand for many of the products of our Sectors and Cross-Sector
Businesses, 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 Sectors and Cross-Sector Busi-
nesses operate. If any of these risks or similar risks associated with our international operations were to materi-
alize, it could have a material adverse effect on our results of operations and nancial condition.
Some of the industries in which we operate are highly regulated. Current and future environmental and other
government regulations, or changes thereto, may result in signicant 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 (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 settle the
obligation; and (iii) a reliable estimate can be made of the amount of the obligation. With regard to certain envi-
ronmental 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 nan-
cial condition and our provisions for environmental remediation may not be sufcient to cover the ultimate
losses or expenditures.
We operate in approximately 190 countries and therefore are subject to different tax regulations. Changes in
tax regulation could result in higher tax expenses and payments. Furthermore, changes in tax regulation could
impact our tax liabilities as well as deferred tax assets.