Sony 2015 Annual Report Download - page 19

the world. A major earthquake in Japan, especially in Tokyo where Sony headquarters are located, the Tokai area
where certain product manufacturing sites are located, or the Kyushu and Tohoku areas, where Sony’s
semiconductor manufacturing sites are located, could cause substantial damage to Sony’s business operations,
including damage to buildings, machinery, equipment and inventories, and the interruption to production at
manufacturing facilities. For example, the earthquake of April 14, 2016 and subsequent earthquakes in the
Kumamoto region in Japan caused damage to the buildings, machinery, equipment and inventories of a
semiconductor manufacturing site, and production at the site was interrupted. As a result of the delay in the
supply of semiconductor components, sales in the Devices and IP&S segments in the fiscal year ending
March 31, 2017, are expected to be lower than the level anticipated prior to the earthquakes.
In addition, offices and facilities used by Sony, its service providers and business partners, including those
used for network, telecommunications and information systems infrastructure, research and development,
material procurement, manufacturing, motion picture and television production, logistics, sales, and online and
other services are located throughout the world and are subject to possible destruction, temporary stoppage or
disruption as a result of unexpected catastrophic events such as natural disasters, pandemic diseases, terrorist
attacks, cyber-attacks, large-scale power outages and large-scale fires. If any of these facilities or offices were to
experience a significant loss as a result of any of the above events, it may disrupt Sony’s operations, delay
design, development or production, interrupt shipments and postpone the recording of sales, and result in large
expenses to repair or replace these facilities or offices. In addition, if Sony’s suppliers are damaged by such
catastrophic events, Sony may be exposed to supply shortages of raw materials, parts or components, which may
result in a reduction or suspension of production, interruption of shipment and delays in product launches. Sony
may also be exposed to price increases for raw materials, parts and components, and lower demand from
commercial customers. These situations may have an adverse impact on Sony’s operating results and financial
condition.
Moreover, as computer systems, networks and online services have become increasingly important to
Sony’s operating activities, the impact that computer system, network and online service shutdowns may have on
Sony’s operating activities has increased. Shutdowns may be caused by events similar to those described above
or other unforeseen events, such as software or hardware defects. For example, in the fiscal year ended March 31,
2015, Sony’s Pictures segment experienced a serious disruption of its network and IT infrastructure as a result of
a cyber-attack. Similar events may result in the disruption of Sony’s major business operations, delays in
financial reporting, design, development, production, shipments and recognition of sales, and large expenditures
necessary to enhance, repair or replace such facilities and network and information systems. Furthermore, Sony’s
insurance may be insufficient to cover the resulting expenditures and losses. Sony also may be unable to obtain
sufficient insurance in the future, or insurance premiums may increase. These situations may have an adverse
impact on Sony’s operating results and financial condition.
Sony’s brand image, reputation and business may be harmed and Sony may be subject to legal and regulatory
claims if there is loss, destruction, disclosure, misappropriation or alteration of or unauthorized access to data
owned or maintained by Sony, including on Sony networks or those of third-party service providers and
business partners, or if there is any other breach of Sony’s information security, regardless of where or in
what form information is stored.
As a critical element of its operations, Sony, its third-party service providers and other business partners
make extensive use of information technology, including computer systems, networks and online services to
receive, store, process and transmit information, including Sony’s business information, which includes but is not
limited to proprietary information, intellectual property, and employee information, and data related to
customers, suppliers, and other business partners. The security of information received, maintained, processed or
transmitted by Sony’s or a third party’s information technology systems may be compromised by a malicious
third party, or a man-made or natural event, or impacted by intentional or inadvertent actions or inactions by
Sony employees, a third-party service provider or other business partner. As cyber-attacks become increasingly
sophisticated, and as tools and resources become more readily available to malicious third parties, there can be
no guarantee that Sony’s actions, security measures and controls designed to prevent, detect or respond to
intrusion, to limit access to data, to prevent destruction, alteration, or exfiltration of data, or to limit the negative
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