BAE-annual-report-2014

Strategic Report
4. COMPETITION IN INTERNATIONAL MARKETS
The 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 REGULATIONS
The 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
pursuant to commitments concerning ongoing
regulatory compliance made in the course of
the 2011 settlement with the US Department
of State, concluded his monitorship in May
2014 and, at the invitation of BAE Systems,
agreed to remain in a limited capacity for a
limited further period of time.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
BAE Systems
Annual Report 2014
51