27 Risks and their management Business relations Market environment Dialog’s risk management process follows a sequence of risk identification, assessment of probability and impact, and assigns an owner to manage mitigation activities, liaising with internal and external auditors. Dialog operates in the fast-moving, highly competitive consumer electronics market where manufacturers demand the best quality at lowest prices  from their suppliers. Typical to our market are breakthrough innovations, fast rising leaders, hypes, mass production and global visibility. As a fabless  semiconductor manufacturer, Dialog’s position in its segments of operation is maintained by a high degree of innovation and fast time-to-market.  Dialog seeks to mitigate the cyclical volatility of its market by diversifying into new sectors and broadening its customer base to reduce exposure to the  potential loss of any major customer. We need to seek partnerships that are flexible to the fluctuations in demand but able to ensure the continuity  of production. By distributing our supply over multiple partners, we seek to prevent shortages in the event one of our suppliers faces capacity constraints,  financial problems or natural disasters. Risk Actions Consumers  Dialog is a market-leading provider of  high-quality IC solutions to innovative  consumer electronics companies. To maintain  this position and grow our business,  we need to convert trends into business  opportunities through effective marketing.  Dialog invests in research and development to anticipate and respond to new market trends, rapidly  implement new designs to meet customers’ needs and keep abreast of technological changes. Dialog invested US$127.9 million, or 16.5% of revenues, in R&D in 2012 across a range of highly  targeted areas. We also opened our Asian headquarters in Taiwan, complementing our existing manufacturing  engineering support presence in the country, to be closer to our customer base in the region. Economy Our ambition is to sustain growth, but the  slowdown in the semiconductor industry  also affects the segments of our business. Dialog is broadening its product portfolio and investing in new solution areas that target  high-growth sectors.  In 2012, Dialog raised US$201 million of funds to allow us to respond quickly to acquisition  opportunities and expand our business. Competition Other parties in our industry may seek to  yield benefits from our technical innovations  by duplication of our products or parts. We seek to protect our current business and our IP from being copied or used by others by  appropriate use of patents, copyrights and trademarks on a global basis. Dialog holds 305 patent families, including 47 additional patents filed in 2012. Risk Actions Suppliers Dialog outsources the capital intensive  production of silicon wafers, packaging  and testing of integrated circuits to leading  suppliers, mainly in Asia. Capacity constraints  and business interruption could lead to  shortage of supply with various negative  consequential effects, such as loss of  revenue and adverse impact on Dialog’s  relationship with its customers.  Dialog has forged close partnerships with its foundries and they have responded by investing in capacity to meet demand from our expanding customers.  Dialog maintains intense interaction to plan and manage capacity with its suppliers. Dialog strives to have multiple backend and test sources to mitigate the risk of disruption to supply. For each supplier, manufacturing quality, continuity of supply and financial health are regularly monitored. Dialog continued to work with a range of foundries in Taiwan, Singapore and China and test and assembly houses in Taiwan and Singapore to mitigate the risk of supply chain disruption  and constraints. Customers Since Dialog relies on a relatively small  number of customers for a substantial  proportion of its revenue, the loss of one  or more of these customers would be likely  to have a material effect. We are reducing the risk of our revenues, profitability and growth being affected by a slowdown in the wireless communications market by winning customers in other sectors. Dialog continued to expand its customer base. This includes ongoing success in providing multiple  Tier 1 customers with technologies for a growing number of portable device platforms and models  and the broadening of our range of Application Specific Standardised Products. 