144 Huawei Investment & Holding Co., Ltd.
Operational Risks
Business continuity: With today’s highly globalized
division of labor, Huawei must rely on a variety
of third parties (including outside companies and
agencies) for procurement, manufacturing, logistics,
and global technical services. Therefore, a discontinuity
in third-party business could directly or indirectly
compromise Huawei’s operations and business
performance.Through years of ongoing investment, Huawei has
established a business continuity management
(BCM) system for domains such as procurement,
manufacturing, logistics, and global technical
services. This system covers end-to-end processes,
from suppliers to Huawei, and on to our customers.
As part of this system, we have developed and
established effective measures to manage risks that
arise during our daily work. Specifically, we have
built up management organizations, processes, and
IT platforms, prepared business continuity plans and
incident management plans, and organized BCM
training and drills for employees.The Bureau of Industry and Security of the US
Department of Commerce successively added Huawei
Technologies Co., Ltd., and some of its non-US
affiliates, to the Entity List on May 16 and August 19,
2019, pursuant to § 744.11 of the Export Administration
Regulations (EAR). This means the export, re-export,
or in-country transfer of any item subject to the EAR
(including hardware, software, and technologies) to
Huawei or its listed affiliates requires a license from
the Department of Commerce.This has interrupted our business development, but
that impact has been limited. As a staunch advocate
of globalization, we source products from the global
supply chain without depending on any one country
or region, and then build our competitiveness upon
this. Being added to the Entity List does not restrict or
prohibit Huawei from providing products and services
to our customers in accordance with compliance
requirements. We have the confidence and capabilities
to provide premium products, solutions, and services
to customers worldwide.(For further information on the BCM system, see pages
67 to 68 of this Annual Report.)Information security and IPR: Although Huawei has
adopted stringent information security measures to
protect its IPR, it is impossible to completely prevent
other companies from improperly using our proprietary
information or patented technologies. Even when we
are able to protect our IPR through the judicial means,
we may still suffer losses due to improper usage.Financial Risks
For further information on financial risks, see pages 86
to 88 of this Annual Report.