Nitto Denko Group Report 2013

15Nitto Denko Group Report 2013intellectual property rights. However, there exists the possibility that a third party could claim these rights to be invalid and the Group might not enjoy complete protection. The Group’s property could be imitated in some area, with the Group becoming involved in litigation. Therefore, intellectual property rights infringements could negatively affect the performance of the Group.(9)Product DefectsThe Group manufactures products according to ISO 9000 quality standards and carries out quality assurance management, trusted by its customers. The business activities of the Group mainly involve the selling of parts to companies engaged in manufacturing. Although the probability of the Group being forced to directly compensate end users for its products or to conduct a product recall is low, the Group cannot completely eliminate the risk of liability associated with product defects. If compensation were to exceed the coverage of product liability insurance, this could negatively affect the performance of the Group.(10)Environmental IssuesThe Group regards environmental preservation measures as one of its key business policies and acts from a position whereby it accepts its social responsibility, focusing on reducing waste and preventing global warming and air pollution. The Group has not caused any serious environmental problems to date. To protect the global environment, the Group established a voluntary reduction plan, which it duly observes. However, there exists the possibility that unforeseen environmental pollution caused by an accident or natural disaster, or changes in future laws and regulations resulting in signicant expenses due to environmental issues could have adverse effects on the performance of the Group.(11)Compliance and Legal RegulationsThe Group carries out business not only in Japan, but also overseas. Products of the Group are unique, some of which are patented medicines. The Group endeavors to abide by the various laws and regulations of different countries pertaining to such business. However, if these laws and regulations were to be strengthened or changed signicantly, a temporary deciency in internal control of these issues could occur and the activities of the Group might be impaired, or the Group might incur additional costs which could adversely affect its performance.(12)LawsuitsIn the business activities of the Group, there exists the possibility that the Group could become embroiled in legal proceedings with a customer or third party. In addition, the Group conducts business in various countries and could go into unexpected litigation. The risk that the outcome of litigation did not properly reect the opinion of the Group and thus differed from the Group’s forecasts might be ineluctable and this could adversely affect the performance of the Group.(13)Accidents and DisastersThe Group has a Business Continuity Plan to protect itself from accidents and disasters by following a safety rst policy. In particular, Japan has a high occurrence of earthquakes. If a large-scale earthquake were to occur in a particular area within Japan, direct damage could result or injuries could occur within the production process due to re or chemicals. The effects of an earthquake, tsunami or ood would not be limited to the Group, but would be wide-ranging, with damage to infrastructure such as electricity and gas supplies, damage to supply chains such as interruption to the procurement of raw materials and the distribution of products, and losses or inconvenience to our customers, which could cause an interruption to business. Despite the existence of disaster insurance, coverage would be limited and costs incurred could affect the performance of the Group. Moreover, if there were to be a massive outbreak of new infections affecting human life, depending on the nature of the outbreak, it could impact on the global economy. In addition, the Group’s information system assumes a very important role. However, there is no allowance for the possibility of trouble occurring with our information system caused by disaster or cyberterrorism. This might inuence the business results of the Group.(14)Retirement Benet LiabilityEmployee accrued benet costs and liabilities of the Group are calculated on the basis of various experience assumptions used in actual calculations and investment yields of pension assets. In line with the devaluation of pension assets at market price, interest-rate trends and changes in the retirement allowance system and pension system, recognized and calculated liabilities may be affected. This might inuence the business results of the Group.