Siemens 2010 Annual Report Download - page 192

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis
50 Business and operating environment
78 Fiscal  – Financial summary
81 Results of operations
98 Financial position
110 Net assets position
113 Overall assessment of the economic position
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tegic projects and transactions which could be important to
our business, such as strategic alliances, joint ventures or
other business combinations. Current or possible future inves-
tigations could result in the cancellation of certain of our exist-
ing contracts, and the commencement of significant third-
party litigation, including by our competitors.
Many of the governmental investigations are at this time still
ongoing 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 investiga-
tions, responding to the requests of governmental authorities
and cooperating with them, especially if we are not able to
resolve the investigations in a timely manner, could divert
management’s attention and resources from other issues fac-
ing our business. We have implemented a worldwide Compli-
ance Program to prevent and address compliance risks and are
continuously working to improve the effectiveness and effi-
ciency of this program, supported by our global compliance
organization.
Examinations by tax authorities and changes in tax regula-
tions could adversely affect our financial condition and re-
sults of operations: We operate in approximately  countries
and therefore are subject to different tax regulations. Changes
in tax law could result in higher tax expense and payments.
Furthermore, this could materially impact our tax receivables
and liabilities as well as deferred tax assets and deferred tax
liabilities. In addition, the uncertainty of tax environment in
some regions could limit our ability to enforce our rights. As a
globally operating organization, we conduct business in coun-
tries subject to complex tax rules, which may be interpreted in
different ways. Future interpretations or developments of tax
regimes may affect our tax liability, return on investments and
business operations. We are regularly examined by tax au-
thorities in various jurisdictions.
Our business could suffer as a result of current or future
litigation: We are subject to numerous risks relating to legal,
governmental and regulatory proceedings to which we are
currently a party or to which we may become a party in the
future. We routinely become subject to legal, governmental
and regulatory investigations and proceedings involving,
among other things, requests for arbitration, allegations of
improper delivery of goods or services, product liability, prod-
uct defects, quality problems, intellectual property infringe-
ment, non-compliance with tax regulations and / or alleged or
suspected violations of applicable laws. In addition, we may
face further claims in connection with the circumstances that
led to the corruption proceedings described above. For addi-
tional information with respect to specific proceedings, see
“Notes to Consolidated Financial Statements.” There can be no
assurance that the results of these or any other proceedings
will not materially harm our business, reputation or brand.
Moreover, even if we ultimately prevail on the merits in any
such proceedings, we may have to incur substantial legal fees
and other costs defending ourselves against the underlying
allegations. We record a provision for legal risks when () we
have a present obligation as a result of a past event; () it is
probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and () a reli-
able estimate can be made of the amount of the obligation. In
addition, we maintain liability insurance for certain legal risks
at levels our management believes are appropriate and consis-
tent with industry practice. Our insurance policy, however,
does not protect us against reputational damage. Moreover, we
may incur losses relating to legal proceedings beyond the
limits, or outside the coverage, of such insurance. Finally,
there can be no assurance that we will be able to maintain
adequate insurance coverage on commercially reasonable
terms in the future. Each of these risks may have a material
adverse effect on our financial condition and results of opera-
tions, and our provisions for legal proceedings-related losses
may not be sufficient to cover our ultimate losses or expendi-
tures.
We are subject to environmental and other government
regulations: 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
significant increases in our operating or product costs. We
could also face liability for damage or remediation for environ-
mental contamination at the facilities we design or operate.
For example, we are required to bear environmental clean-up
costs mainly related to remediation and environmental protec-
tion liabilities which have been accrued based on the esti-
mated costs of decommissioning facilities for the production
of uranium and mixed-oxide fuel elements in Hanau, Germany,
as well as a nuclear research and service center in Karlstein,
Germany. For further information, see “Notes to Consolidated
Financial Statements.” We establish provisions for environmen-
tal risks when () we have a present obligation as a result of a
past event; () it is probable that an outflow of resources em-
bodying economic benefits will be required to settle the obliga-
tion; and () a reliable estimate can be made of the amount of
the obligation. With regard to certain environmental risks, we
maintain liability insurance at levels that our management