Sumitomo Dainippon Pharma Annual Report 2017
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Group may be ordered to suspend part of or all of its operations for a fixed period of time or be subject to other measures in the event that the Group violates these laws and regulations. The Group currently has no knowledge of any facts that would warrant the revocation of its licenses or other certifications. However, an order to revoke the Group’s licenses or other certifications could have a significant and negative impact on the Group’s operating results and financial position.Risk relating to litigationThere is a possibility that a suit may be brought to court in terms of an adverse effect of a pharmaceutical product, product liability, labor issues, fair trade, etc., relating to the business activities of the Group. Depending on the development thereof, such cases could have a significant and negative impact on the Group’s operating results and financial position.Close or shutdown of a plantThe Group can envision scenarios in which the Group’s plant is closed or shut down due to technical problems, stoppage of supply of raw materials, fire, earthquake, or any other disaster where the supply of products is delayed or halted. Such cases could have a significant and negative impact on the Group’s operating results and financial position.Impact of the financial market situation and foreign exchange fluctuationsA sluggish equity market will give rise to a loss on valuation or sale of shares held, and the interest rate trend may increase interest expenses on borrowings, etc., and the deterioration of the financial market situation will cause retirement benefit obligations to increase. All these factors could have a significant and negative impact on the Group’s operating results and financial position. Furthermore, foreign exchange fluctuations may have a material impact on importing and exporting transactions and the conversion of operating results of consolidated subsidiaries into yen.Impact of impairment of fixed assetsThe Group owns various types of tangible and intangible fixed assets, such as business assets and goodwill. In the future, in the event of substantial deterioration of operating results or reduction in values, the need to incur impairment will arise, which could have a significant and negative impact on the Group’s operating results and financial position.Transactions with the parent companyThe Company and its parent company, Sumitomo Chemical Co., Ltd., have concluded agreements for the leasing of land for the Osaka Research Laboratories, Ehime Plant, and Oita Plant, as well as for the purchase of raw materials used in the production of active pharmaceutical ingredients at these sites and other locations. These agreements involve prices that are determined based on discussions between the two parties with reference to general market prices. These agreements are customarily renewed every year. The Company also accepts employees on loan from the parent company. Furthermore, during the year, we also made short-term loans to our parent company to raise capital efficiency. The Company’s policy is to continue these transactions and other ties with the parent company. However, changes in these agreements, including changes in the transaction terms specified therein, could have a significant and negative impact on the Group’s operating results and financial position.Risk relating to overseas operationThe Group conducts overseas business activity mainly in the regions of North America and China. The risks such as change of local restrictions, worsening of diplomatic relations, and political uncertainties are inherent in these activities. In the event that the Group faces such risks, it could have a significant and negative impact on the Group’s operating results and financial position.Risk relating to information managementSince the Group uses a variety of information systems, there is the possibility of business being interrupted by a system malfunction, computer virus, or the like. Additionally, since the Group holds a large amount of confidential information that includes personal information, an external leak of the data could have a significant and negative impact on the Group’s operating results and financial position resulting from compensation for damages, administrative sanctions, loss of social credibility, or the like.Risk relating to complianceThe Group makes every effort to promote the observance of laws and regulations and business ethics, being aware that compliance is the very basis of all its business activities. With all the measures, however, there is a possibility of the situation running counter to the spirit of compliance, which could result in social disgrace of the Group and could significantly affect its operating results and financial position.There are risks other than those described above, and the risks listed here do not include all of the risks faced by the Group.66Sumitomo Dainippon Pharma Co., Ltd. Annual Report 2017

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