Siemens 2015 Annual Report Download - page 33

Combined Management Report 
Our business naturally evolves and develops in nations and re-
gions around the world, increasing their demand for our offer-
ings. Emerging market operations involve various risks, includ -
ing civil unrest, health concerns, cultural differences such as
employment and business practices, volatility in gross domes-
tic product, economic and governmental instability, the poten-
tial for nationalization of private assets and the imposition of
exchange controls. The Asian markets, in particular, are impor-
tant for our long-term growth strategy, and our sizeable activi-
ties in China operate under a legal system that is still develop-
ing and is subject to change. Our long-term growth strategy
could be limited by governments preferentially supporting local
competitors. With our dedicated regional organizations we
tackle these risks by constantly monitoring the latest trends
and defining our response strategies which include an ongoing
evaluation of our localization approach.
Environmental and other governmental regulations: Some
of the industries in which we operate are highly regulated. Cur-
rent and future environmental and other governmental regula-
tions 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 compliance with applicable gov-
ernmental regulations in the conduct of our business opera-
tions, it cannot be excluded that violations of applicable gov-
ernmental regulations may be caused 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 facili-
ties we design or operate. With regard to certain environmental
risks, we maintain liability insurance at levels that our manage-
ment 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 an adverse effect on our business, financial condition
and results of our operations.
Current and future investigations regarding allegations of
corruption, antitrust violations and other illegal acts: Cor-
ruption, antitrust and related proceedings may lead to criminal
and civil fines as well as penalties, sanctions, injunctions
against future conduct, profit disgorgements, disqualifications
from directly and indirectly engaging in certain types of busi-
ness, the loss of business licenses or permits or other restric-
tions. Accordingly, we may be required to comply with poten-
tial liabilities arising in connection with such investigations
and proceedings, including potential tax penalties. Moreover,
any findings related to public corruption that are not covered
by the  and  corruption charge settlements, which
were concluded with American and German authorities, may
endanger our business with government agencies and inter-
governmental and supranational organizations. Further moni-
tors could be appointed to review future business practices and
we may otherwise be required to further modify our business
practices and our compliance program.
A considerable part of our business activities involve govern-
ments and companies with a public shareholder. We also partic-
ipate in a number of projects funded by government agencies
and intergovernmental and supranational organizations such
as multilateral development banks. Ongoing or potential future
investigations into allegations of corruption, antitrust or other
law violations could also impair relationships with such busi-
ness partners or could result in the exclusion of public con-
tracts. Such investigations may also adversely affect existing
private business relationships and our ability to pursue poten-
tially important strategic projects and transactions, such as
strategic alliances, joint ventures or other business coopera-
tion, or could result in the cancellation of certain of our exist-
ing contracts and third parties, including our competitors,
could initiate significant third-party litigation.
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. Furthermore, we might be exposed to
compliance risks in connection with recently acquired opera-
tions that are in the ongoing process of integration.
Besides other measures, Siemens established a global compli-
ance organization including compliance risk mitigation pro-
cesses such as Compliance Risk Assessments which has been
reviewed recently by external compliance experts.
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, gov-
ernmental and regulatory investigations and proceedings in-
volving, among other things, requests for arbitration, allega-
tions of improper delivery of goods or services, product liability,
product 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 charges. For additional information with
respect to specific proceedings, see NOTE 21 in B.6 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS. There can be no assur-
ance that the results of these or any other proceedings will not