Siemens 2014 Annual Report Download - page 238

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report
172 C. Business and economic environment
187 C. Financial performance system
193 C. Results of operations
205 C. Financial position
210 C. Net assets position

In addition, future developments in ongoing and potential
future investigations, such as responding to the requests of
governmental authorities and cooperating with them, could
divert management’s attention and resources from other issues
facing our business. The materialization of any of these risks
could have an adverse effect on our business, financial condi -
tion and results of operations and on our reputation.
We are subject to environmental and other governmental
regulations: Some of the industries in which we operate are
highly regulated. Current and future environmental and other
governmental regulations or changes thereto may require us
to change the way we run our operations and could result in
significant increases in our operating or production costs. In
addition, while we have procedures in place to ensure compli-
ance with applicable governmental regulations in the conduct
of our business operations, it cannot be excluded that viola-
tions of applicable governmental regulations may be caused
either by us or by third parties that we contract with, including
suppliers or service providers, whose activities may be at-
tributed to us. Any such violations expose us to the risk of lia-
bility, 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 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 protection
liabilities, which have been accrued based on the estimated
costs of decommissioning facilities for the production of ura-
nium and mixed-oxide fuel elements in Hanau, Germany, as well
as a nuclear research and service center in Karlstein, Germany.
For further information, see NOTE  in D. NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS. Under certain circum-
stances, we establish provisions for environmental risks. With
regard to certain environmental risks, we maintain liability in-
surance at levels that our management believes are appropri-
ate and consistent with industry practice. We may incur envi-
ronmental losses beyond the limits, or outside the coverage, of
such insurance, and such losses may have an adverse effect on
our business, financial condition and results of our operations.
In addition, our provisions for environmental liabilities may
not be sufficient to cover our ultimate losses or expenditures
resulting therefrom.
Our business, financial condition and results of operations
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 be-
come subject to legal, governmental and regulatory investiga-
tions and proceedings involving, among other things, requests
for arbitration, allegations of improper delivery of goods or
services, product liability, product defects, quality problems,
intellectual property infringement, non-compliance with tax reg-
ulations 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 charges. For addi-
tional information with respect to specific proceedings, see
NOTE  in D. 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, financial con-
dition and results of operations. 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. Under certain circumstances
we record a provision for risks arising from legal disputes and
proceedings. In addition, we maintain liability insurance for cer-
tain legal risks at levels our management believes are appropriate
and consistent with industry practice. Our insurance policy, how-
ever, does not protect us against reputational damage. Moreover,
we may incur losses relating to legal proceedings beyond the lim-
its, or outside the coverage, of such insurance or exceeding any
provisions made for legal proceedings related losses. Finally,
there can be no assurance that we will be able to maintain ade-
quate insurance coverage on commercially reasonable terms in
the future. Each of these risks may have an adverse effect on
our business, financial condition and results of operations.
C... ASSESSMENT OF THE OVERALL
RISK SITUATION
The most significant challenges have been mentioned first in
each of the four categories Strategic, Operations, Financial and
Compliance with the risks caused by highly competitive mar-
kets currently being our most significant. Even though the as-
sessments of individual risk exposures have changed during
fiscal  due to developments in the external environment as
well as the effects of our own mitigation measures, the overall
risk situation for Siemens did not change significantly as com-
pared to the prior year. At present, no risks have been identified
that either individually or in combination could endanger our
ability to continue as a going concern. We are confident that we
can continue to successfully counter the challenges arising
from the risks mentioned above.
C.. Opportunities
Within our comprehensive, interactive and management-ori-
ented Enterprise Risk Management (ERM) approach that is inte-
grated 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 opportunities.
Unless otherwise stated, the opportunities described below