Business and Other Risks - Deficiencies or Flaws in Products and Services

9. Deficiencies or Flaws in Products and Services

In accordance with our corporate philosophy, the Fujitsu Way, we emphasize quality in our business activities. The Fujitsu Group aims to enhance quality to build and support a networked society where people can live comfortably with peace of mind.

We are committed to improving quality at the design and development stages by setting rules on quality control throughout the company. Accordingly, we promote software modularization, standardize development work, and enhance security auditing in order to improve the quality of system development work, but the possibility of defects arising after delivery cannot be excluded.

Moreover, due to such factors as increasingly rigorous demands from customers, system development work is becoming more complex and challenging. At the same time, greater competition is leading to increasingly intense pricing pressures. To deal with this situation and prevent incidences of delayed delivery and loss-generating projects, we have been revising our approach to making contracts with customers, advancing the standardization of sales and system engineering business processes, and working to manage risk from the business negotiation stage through actual project implementation. The Group continues to maintain reserves for losses as necessary. Nevertheless, in spite of these measures, there is a possibility that we may be unable to completely prevent incidences of delayed delivery and occurrence of loss-generating projects.

With respect to products and/or services maintenance businesses, we have continuously made improvements to the quality, contracts, and related rules in order to ensure the stable operation of social infrastructure systems. We cannot, however, entirely eliminate the possibility of deficiencies or flaws.

In addition, during the Group’s designing / developing / manufacturing process, we are also setting rules on quality control throughout the company, compliance with related laws and regulations, compliance with the latest standards, promoting the products’ quality and strict quality control when purchasing components from external suppliers. Notwithstanding these efforts, it is impossible to totally eliminate the possibility of deficiencies or flaws occurring in products, including software.

In the event of deficiencies or flaws, or interruption of services, the Group may have to initiate product recalls or repairs, engage in system recovery work, pay damages to customers or suffer opportunity losses, all of which would negatively impact Group sales and profitability.

Moreover, it would also ruin the Group’s reputation and profitability, in the unlikely event that the Group missed judgement about countermeasures against defects of the Group’s products and/or services, or improper conducts were operated by the Group’s organization.

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