REG - BAE SYSTEMS PLC - Doc re. Annual Financial Report <Origin Href="QuoteRef">BAES.L</Origin> - Part 2

BAE SystemsAnnouncement

18/03/2015 12:51

- Part 2: For the preceding part double click  ID:nRSR7932Ha 

                                                                                                                                                                                                                                                
 Description- BAE Systems is an international company conducting business in a number of regions, including the US and Middle East.- The risks of operating in some countries include: political changes impacting the business environment; economic downturns, political instability and civil disturbances; changes in government regulations and administrative policies; the imposition of restraints on the movement of capital; and the introduction of burdensome taxes or tariffs.- The Group is exposed to volatility in currency exchange rates, particularly in respect of the US dollar, Euro and Saudi Riyal.                                                                                                                                                                   Impact- The occurrence of any such events could have a material adverse effect on the Group's future results and financial condition.                                                                                                                                                                                                                                                                                                                                                                       Mitigation- The Group has a balanced portfolio of businesses across a number of markets               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          internationally.- The Group's policy is to hedge all material firm transactional exposures.           
 4. COMPETITION IN INTERNATIONAL MARKETSThe Group's business is subject to significant competition in international markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
 Description- The Group's business plan depends upon its ability to win and contract for high-quality new programmes, an increasing number of which are expected to be in non-UK/US markets.- The Group is dependent upon UK and US government support in relation to a number of its business opportunities in export markets. In the UK, export contracts are often structured on a government-to-government basis and government support can also involve military training, ministerial support for promotional activities and financial support through UK Export Finance. In the US, most of the Group's defence export sales are delivered through the Foreign Military Sales process, under which the importing government contracts with the US government.                          Impact- The Group's business and future results may be adversely impacted if it is unable to compete adequately and obtain new business in the markets in which it operates.                                                                                                                                                                                                                                                                                                                                Mitigation- The Group has an international, multi-market presence, a balanced portfolio of businesses, 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          leading capabilities and a track record of delivery on its commitments to its customers.- The Group   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          continues to invest in research and development, and to reduce its cost base and improve efficiencies, 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          to remain competitive.                                                                                
 5. LAWS AND REGULATIONSThe Group is subject to risk from a failure to comply with laws and regulations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 Description- The Group operates in a highly-regulated environment across many jurisdictions and is subject, without limitation, to regulations relating to import-export controls, money laundering, false accounting, anti-bribery and anti-boycott provisions. It is important that the Group maintains a culture in which it focuses on embedding responsible business behaviours.- Export restrictions could become more stringent and political factors or changing international circumstances could result in the Group being unable to obtain necessary export licences.                                                                                                                                                                                                             Impact- Failure by the Group, or its sales representatives, marketing advisers or others acting on its behalf, to comply with these regulations could result in fines and penalties and/or the suspension or debarment of the Group from government contracts or the suspension of the Group's export privileges, which could have a material adverse effect on the Group.- Reduced access to export markets could have a material adverse effect on the Group's future results and financial condition.    Mitigation- BAE Systems has a well-established legal and regulatory compliance structure aimed at     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          ensuring adherence to regulatory requirements and identifying any restrictions that could adversely   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          impact the Group's activities. A programme is underway to enhance resources dedicated to regulatory   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          compliance.- Internal and external market risk assessments form an important element of ongoing       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          corporate development and training processes.- A uniform global policy and process for the appointment 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          of advisers engaged in business development is in effect.- The special compliance officer, appointed