OPERATING AND FINANCIAL REVIEW 34 countries, attracting over 85,000 exhibitors and more than 4.5 million visitors annually. Its exhibitions and conferences encompass a wide range of sectors, including IT, manufacturing, aerospace, defence, leisure, electronics, food and hospitality, travel and entertainment. Further information on the performance of the individual businesses in 2003 is set out in the Review of Operations below. experience a significant failure, interruption, or security breach. The key risks facing Reed Elsevier arise from the highly competitive and rapidly changing nature of our markets, the increasingly technological nature of our products and services, the international nature of our operations, and legal and regulatory uncertainties. Certain businesses are also affected by the impact on publicly funded customers of changes in funding and by cyclical pressures on advertising and promotional spending. Further details on risk management and internal control procedures are set out in the Structure and Corporate Governance description on pages 22 to 26. Reed Elsevier has an established risk management system that is embedded into the operations of the businesses and is reviewed by the Boards and Audit Committees. Specific risks that have been identified and are continuously addressed include: •Reed Elsevier’s businesses are dependent on the continued acceptance by our customers of our products and services and the prices which we charge for them. We cannot predict whether there will be changes in the future, either in market demand or from the actions of competitors, which will affect the acceptability of products, services and prices to our customers. •We are investing significant amounts to develop and promote electronic products and platforms. The provision of these products and services is very competitive and is to some extent subject to factors outside our control such as competition from new technologies. There is no assurance that this investment will produce satisfactory long term returns.  •Reed Elsevier’s businesses are increasingly dependent on electronic platforms and distribution systems, primarily the internet, for delivery of their products and services. Although plans and procedures are in place to reduce such risks, our businesses could be adversely affected if their electronic delivery platforms •Our products and services are largely comprised of intellectual property content delivered through a variety of media. We rely on trademark, copyright, patent and other intellectual property laws to establish and protect our proprietary rights in these products and services. However, there is a risk that our proprietary rights could be challenged, limited, invalidated or circumvented. •Our businesses operate in over 100 locations worldwide and our earnings are subject to taxation in many differing jurisdictions and at differing rates. We seek to organize our affairs in a tax efficient manner, taking account of the jurisdictions in which we operate. However, tax laws that apply to Reed Elsevier businesses may be amended by the relevant authorities. Such amendments, or their application to Reed Elsevier businesses, could adversely affect our reported results. 6 REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2003 Risks