Sony 1999 Annual Report Download - page 44

Sony Corporation Annual Report 1999
42
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Risks
The Year 2000 issue could have an adverse effect on Sony’s
operations due to the following factors.
Customer Products;
Customers’ inquiries for Year 2000 issues of products
may increase near the end of calendar year 1999 beyond
Sony’s projections. Sony’s sales and service division may
not be able to manage the inquiries sufficiently during
that period. Sony is not able to assure that its products
do not contain undetected Year 2000 problems.
Information Systems and Manufacturing;
Errors in programs and data in Sony’s internal informa-
tion systems may occur. Software such as operating
systems purchased from third party vendors may also
fail to function properly.
Because Sony obtains information from major sup-
pliers of parts and raw materials, and such information
relies on compliance programs of third parties, and it is
difficult for Sony to estimate potential non-compliance
of such suppliers, Sony is not able to assure that manu-
facturing operations will not be affected by failures of
suppliers to comply with Year 2000 requirements.
Facilities and Infrastructure;
Although cessation or interruption of utilities, such as
water and power supply, due to Year 2000 problems would
adversely affect Sony’s operations, Sony has no control
over such events and is unable to determine the likeli-
hood of a negative impact on its performance at this
time. Communication networks may be affected if third
party vendors such as network service carriers fail to be
Year 2000 compliant. Logistics of Sony’s global opera-
tions may be affected if vendors, customers, freight
forwarders, shipping companies, and other similar
parties fail to remedy their systems. Sony also recog-
nizes the possibility of environmental disruption related
to its facilities, especially those dealing with chemical
materials. Year 2000 problems in banking, transporta-
tion, and customs services could also adversely affect
Sony’s operations.
Contingency Plans
If the anticipated modifications and conversions are not
completed on a timely basis, or if the systems of third parties
on which Sony’s systems and operations rely are not made
compliant on a timely basis, the Year 2000 issue could have
an adverse effect on Sony’s operations.
Sony recognizes the importance of readiness for potential
worst case scenarios. To minimize both internal and exter-
nal risks, Sony is in the process of making contingency plans,
including the establishment of emergency action plans and
escalation procedures for each area of operation, including
customer services, information systems, manufacturing, and
facility management.
Additional Year 2000 Cautionary Statement
Sony has made the aforementioned statements consid-
ering various risk factors. However, many factors may
cause Sony’s actual experience to differ materially from
those stated above. This is because the Year 2000 issue
includes many uncontrollable factors, such as inter-
relation of many third parties. While Sony operates as a
global company in many different countries, the Year
2000 problem may not be addressed consistently in all
locations, including by third parties, and Sony may not
be able to rely on the same approaches in all areas. As a
result, there may be unforeseen problems in different
parts of the world. All of these factors make it impos-
sible for Sony to ensure that it will be able to resolve all
Year 2000 problems in a timely manner to avoid materi-
ally adverse effects on its operations or business or
exposure to third party liability.
COMPLIANCE WITH STATEMENTS OF
FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging
Activities”. This standard, which is effective for fiscal years
beginning after June 15, 1999, requires all derivatives to
be recognized in the balance sheet as either assets or
liabilities and measured at fair value. To implement this
standard, all hedging relationships must be reassessed. Sony
is now in the process of assessing the impact that this
standard will have on Sony’s results of operations and con-
solidated financial position.