Siemens 2012 Annual Report Download - page 216

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

ered to entail a higher opportunity exposure. The described
opportunities are necessarily not the only ones we encounter.
In addition, our assessment of opportunities is subject to
change as our Company, our markets and technologies are
constantly developing. As a consequence, new opportunities
may arise, existing opportunities may cease to be relevant, or
the significance of an opportunity may change. Generally, op-
portunities are assessed to the best of our knowledge, consid-
ering certain assumptions, including market development,
market potential of technologies or solutions, and anticipated
developments in customer demand or prices, among other
things. When opportunities materialize, they may have a lower
effect than previously estimated on the basis of the underlying
assumptions. It is also possible that opportunities we see to-
day will never materialize.
Through selective acquisitions, equity investments and
partnerships we constantly strive to strengthen our
leading technology position, open up additional poten-
tial markets or further develop our product portfolio: We
constantly monitor our current and future markets for oppor-
tunities for strategic acquisitions, equity investments or part-
nerships to complement organic growth. Such activities could
help us to strengthen our market position in our existing mar-
kets, provide access to new markets or complement our tech-
nological portfolio in selected areas.
We particularly see further opportunities in the above-
average growth potential of emerging markets: It is ex-
pected that in coming years emerging markets will continue to
grow significantly faster than industrialized nations, led by
strong growth in the BRIC countries Brazil, Russia, India and
China as well as by growth opportunities in the second wave
emerging markets like Chile, Indonesia, Mexico, Poland or Tur-
key. Within One Siemens, we want to take measures aimed at
continuously increasing our share of revenue from emerging
markets. We believe that developing the capability to design,
manufacture and sell so-called SMART (simple, maintenance-
friendly, affordable, reliable, and timely to market) products
will provide us with opportunities to gain market share and en-
hance our local presence in these strategic growth markets.
Adding further SMART products to our portfolio and develop-
ing stronger sales channels would enable us to increase our
revenues by serving large and fast-growing regional markets,
where customers may consider price more strongly than prod-
uct features when making a purchase decision.
Localizing value chain activities in low cost countries
could further improve our cost position: Localizing certain
value chain activities, such as procurement, manufacturing,
maintenance and service in markets such as the BRIC coun-
tries and other emerging markets, as well as the Middle East
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 require us to
change the way we run our operations and could result in sig-
nificant increases in our operating or product costs. In addi-
tion, while we have procedures in place to ensure compliance
with applicable governmental regulations in the conduct of
our business operations, it cannot be excluded that violations
of applicable governmental regulations may occur either by us
or by third parties that we contract with, including suppliers or
service providers, whose activities may be attributed to us. Any
such violations expose us to the risk of liability, reputational
damage or loss of licenses or permits that are important to our
business operations. In particular, we could also face liability
for damage or remediation for environmental contamination
at the facilities we design or operate. For example, we are re-
quired to bear environmental clean-up costs mainly related to
remediation and environmental protection liabilities which
have been accrued based on the estimated costs of decommis-
sioning facilities for the production of uranium and mixed-ox-
ide fuel elements in Hanau, Germany, as well as a nuclear re-
search and service center in Karlstein, Germany. For further in-
formation, see    .    -
 . Under certain circumstances we establish
provisions for environmental risks. 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 our busi-
ness, financial condition and results of our operations. In addi-
tion, our provisions for environmental liabilities may not be
sufficient to cover our ultimate losses or expenditures result-
ing therefrom.
.. Opportunities
Within our comprehensive, interactive and management-ori-
ented Enterprise Risk Management (ERM) approach that is in-
tegrated into the organization and that addresses both risks
and opportunities, we regularly identify, evaluate and respond
to opportunities that present themselves in our various fields
of activity. Below we describe our most significant opportuni-
ties. The order in which the opportunities are presented re-
flects the currently estimated relative exposure for Siemens as-
sociated with these opportunities and thus provides an indica-
tion of the opportunities’ current importance to us. Neverthe-
less, opportunities currently considered to entail a lower
opportunity exposure could potentially result in a higher posi-
tive impact on Siemens than opportunities currently consid-