FY2021 10-K Document - FINAL 11 15 21 - Flipbook - Page 13
Table of Contents
OPERATIONAL RISKS
Our business operations may be adversely affected by information systems interruptions, intrusions, or new
software implementations. We rely extensively on various information technologies throughout our company in
support of nearly every business activity. In doing so, we work with sensitive data types including proprietary business
information, intellectual property, and confidential employee data. Handling and storage of this data, either onsite or
managed by authorized third parties, may be subject to privacy, security, or other regulatory requirements. Business
disruptions are possible due to information system errors, equipment failures, or ever-evolving cyber-attacks.
Unauthorized access or tampering via cybersecurity incident may result in potential data corruption, exposure of
proprietary or confidential information, work stoppage, increased operational costs, fines, penalties, or diminished
competitive advantage through loss of intellectual property or reputational damage. Our vulnerability to cybersecurity
risks may have also increased after adopting a hybrid working policy in response to the COVID-19 pandemic,
empowering employees to work productively from home when appropriate to do so. Additionally, we have and expect
to incur additional costs to comply with our customers' increased cybersecurity protections and standards, including
those of the U.S. Government. We have embarked on multi-year business information system transformation and
standardization projects. These endeavors are complex and company-wide, involving new technologies and may
introduce risk to our cybersecurity infrastructure. While we are investing significant resources throughout the planning,
project managing and deployment processes, unanticipated delays could occur and could adversely affect our
financial results. Any of these cybersecurity issues may cause operational stoppages, increased operational costs,
fines, penalties and diminished competitive advantages through reputational damages.
We may not be able to prevent, or timely detect, issues with our products and our manufacturing processes
which may adversely affect our operations and our earnings. We must continuously improve product
development and manufacturing processes and systems to ensure we deliver high-quality, technically advanced
products. Due to growth in operations, there is a risk our current manufacturing processes and systems are unable to
maintain our high-quality and on-time delivery standards for our customers. If we are unable to maintain these
standards, we could experience late deliveries and penalties, recalls, increased warranty costs, order cancellations
and litigation.
If our subcontractors or suppliers fail to perform their contractual obligations, our prime contract
performance and our ability to obtain future business could be materially and adversely impacted. With
respect to many of our contracts, we rely on other companies to perform portions of the manufacturing process of our
products. While we actively manage our supply chain establishing alternate sources, some business conditions cause
us to obtain certain components and sub-assemblies from a single supplier or a limited group of suppliers. There is a
risk that we may have disputes with our subcontractors regarding the quality and timeliness of work performed by the
subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task
orders under a subcontract or our hiring of personnel of a subcontractor. Failure by our sole-sourced or group of
subcontractors to satisfactorily provide on a timely basis the agreed-upon, defect-free supplies, or perform the agreedupon services, may materially and adversely impact our ability to perform our obligations as the prime contractor.
Subcontractor performance deficiencies could result in a customer terminating our contract for default, which could
expose us to liability and substantially impair our ability to compete for future orders. In addition, a delay or failure in
our ability to obtain components and equipment parts from our suppliers may adversely affect our ability to perform
our obligations to our customers.
The failure or misuse of our products may damage our reputation, necessitate a product recall or result in
claims against us that exceed our insurance coverage, thereby requiring us to pay significant damages.
Defects in the design and manufacture of our products or our subcontractors' products may necessitate a product
recall. We include complex system designs and components in our products that could contain errors or defects,
particularly when we incorporate new technologies into our products. If any of our products are defective, we could be
required to redesign or recall those products, pay substantial damages or warranty claims and face actions by
regulatory bodies and government authorities. Such an event could result in significant expenses, delay sales, inflate
inventory, cause reputational damage or cause us to withdraw from certain markets. We are also exposed to product
liability claims. Many of our products are used in applications where their failure or misuse could result in significant
property loss and serious personal injury or death. We carry product liability insurance consistent with industry norms.
However, these insurance coverages may not be sufficient to fully cover the payment of any potential claim. A product
recall or a product liability claim not covered by insurance could have a material adverse effect on our business,
financial condition and results of operations.
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