Siemens 2012 Annual Report Download - page 214

1 A. To our Shareholders
21 B. Corporate Governance 49 C. Combined Management Report
50 C. Business and economic environment
64 C. Financial performance measures
69 C. Results of operations
82 C. Financial position
93 C. Net assets position
95 C. Overall assessment of the economic position
96 C. Subsequent events
97 C. Sustainability
111 C. Report on expected developments and
associated material opportunities and risks

changes in pension plan assumptions could affect net periodic
pension cost. For example, a change in discount rates may re-
sult in changes in the net periodic benefit cost in the following
financial year. In order to comply with local pension regula-
tions in selected foreign countries, we may face a risk of in-
creasing cash outflows to reduce an underfunding of our pen-
sion plans in these countries, if any. Furthermore, changes in
the accounting pronouncements concerning pensions could
require adaptations in the way pension obligations are record-
ed in our Consolidated Financial Statements and thus could
have adverse effects on our business, financial conditions and
results of operations.
For further information on financial risks and financial risk
management see    .    -
 .
...  
We are subject to regulatory risks associated with our
international operations: Protectionist trade policies and
changes in the political and regulatory environment in the
markets in which we operate, such as foreign exchange import
and export controls, tariffs and other trade barriers and price
or exchange controls, could affect our business in several na-
tional markets, impact our sales and profitability and make the
repatriation of profits difficult, and may expose us to penalties,
sanctions and reputational damage. In addition, the uncertain-
ty of the legal environment in some regions could limit our
ability to enforce our rights. For example, as a globally operat-
ing organization, we conduct business with customers in
countries that are subject to export control regulations, embar-
goes, sanctions or other forms of trade restrictions imposed by
the U.S., the European Union or other countries or organiza-
tions. The sanction regime against Iran was recently tightened
further following the approval of the Council Regulation (EU)
No.  /  on March ,  concerning restrictive mea-
sures against Iran and repealing Regulation (EU) No  / 
and the Implementing Regulation (EU) No.  /  dated Oc-
tober ,  that built thereupon, which lists  additional
companies and institutions (primarily from the Oil and Gas in-
dustry sector). In addition, the signing into law of the Ameri-
can “Iran Threat Reduction and Syria Human Rights Act of ”
on August ,  tightens the restrictions on the ability of
non-U.S. companies to do business or trade with Iran and Syria
and imposes additional disclosure obligations. As described in
more detail under ...    , we have
issued, and regularly update, restrictive internal guidelines
governing business with customers in Iran. We may, however,
still conduct certain business activities and provide products
and services to customers in Iran under limited circumstances.
Although we believe that our business activities have not had
a material negative impact on our reputation or share value,
we cannot exclude any such impact in the future. New or tight-
ened export control regulations, sanctions, embargos or other
forms of trade restrictions imposed on Iran, Syria or on other
sanctioned countries in which we do business may result in a
curtailment of our existing business in such countries and in
an adaptation of our policies. In addition, the termination of
our activities in Iran, Syria or other sanctioned countries may
expose us to customer claims and other actions.
We expect that sales to emerging markets will continue to ac-
count for an increasing portion of our total revenue, as our busi-
ness naturally evolves and as developing nations and regions
around the world increase their demand for our offering.
Emerging market operations involve various risks, including
civil unrest, health concerns, cultural differences such as em-
ployment and business practices, volatility in gross domestic
product, economic and governmental instability, the potential
for nationalization of private assets and the imposition of ex-
change controls. The Asian markets, in particular, 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. Our growth strategy could be limited
by governments supporting local industries. Our Sectors, par-
ticularly those that derive their revenue from large projects,
could be adversely affected if future demand, prices and gross
domestic product in the markets in which those Sectors operate
do not develop as favorably as expected. If any of these risks or
similar risks associated with our international operations were
to materialize, our business, financial condition and results of
operations could be materially adversely affected.
Current and future investigations regarding allegations
of public corruption and other illegal acts could have a
material adverse effect on our business, financial condi-
tion and results of operations, the price of our shares
and American depository shares (ADS) and our reputa-
tion: We engage in a substantial amount of business with gov-
ernments and government-owned enterprises around the
world. We also participate in a number of projects funded by
government agencies and intergovernmental and suprana-
tional organizations such as multilateral development banks.
If we are found to have been engaged in public corruption and
other illegal acts, such activities may impair our ability to do
business w
ith these or other organizations. Corruption and re-
lated proceedings may lead to criminal and civil fines as well as
penalties, sanctions, injunctions against future conduct, profit
disgorgements, disqualifications from directly and indirectly en-
gaging in certain types of business, the loss of business licenses
or permits or other restrictions. Accordingly, we may be required
to record material provisions to cover potential liabilities arising