Security Level:

Finance Management of
Transaction and Projects
(Intermediate)
November 2019

Building a better connected world www.huawei.com

Business Realized through Transaction, Transaction Determines
Operation Management Result
Business
Regarding business, the first thing to do is to
think from the big picture (a macroscopic
concept). Long-term, short-term, macro, micro,
local, overall, and ecological aspects should all
be considered.
Transaction model
Transaction models are relatively specific. They
reflect the business model details, mainly
including the transaction pricing, acceptance,
and payment methods. They support the
achievement of value creation and benefit
distribution from aspects including transaction
clauses and details.
Start from the end: manage transactions
from the perspective of operation.
Huawei Confidential
Business model
Business model is the carrier of business (a
macroscopic concept). Close attention on how to
distribute and obtain benefits should be given. The
essence of business model is value creation, value
transfer, and value acquisition (BLM model).
Contract
Contract is the physical carrier of transactions to
ensure the execution of transaction models.
Operations management result
It is a specific quantitative reflection of contract
quality (namely, from business to contract) at a
certain time point of time.
3
What should Account Manager be Responsible for?

BUSINESS
Owner
Building a
in Customer Interface church
planning, establishing, maintaining and promoting
the customer relationship & connection

Internal Customer side

• Translate and transfer
customer requirements on
behalf of customer
• Gather resources to fulfill
customer requirements
• Achieve business operation
objectives
Carrying
• Make deal on behalf of stones
Huawei
• Customer relationship
management & Improve
Engraving
customer satisfaction
• Build a mutual trust and
win-win partnership

Huawei Confidential 4
Common Operation Indicators
Period expense
Net sales income Long overdue AR
Expired Billed AR
TUP Expense
Capital cost of AR
Undue Billed AR Standard allocation expense
Contribution profit margin
Invoice amount
What
Invoiced andkind
Contribution profit margin
of operation
revenue ratio

Contribution gross profit margin

Inventory impairment Allowances for doubtful accounts
DSO
indicators do you know? Inventory balance
Capital cost of other assets Collection and revenue ratio
Comprehensive billing rate ITO

Collection and billing ratio

Overhead
AR upon revenue recognition
Huawei Confidential 5
Achieve profitable growth with positive cash flow through managing
the transaction
Period expense
Net sales income Long overdue AR
• gross profit (ratio)
• Order Expired Billed AR • ITO DSO ..
• contribution gross TUP Expense
• working capital
• Income Capital cost of AR profit (ratio) efficiency
Undue Billed AR • contribution profit Standard allocation
• expense
……
• ……
• ……
Contribution profit margin
Scale Profit Efficiency/Cash flow
Invoice amount
Invoiced and revenue ratio
Contribution profit margin
PositiveContribution gross profit margin
Profitable
InventoryGrowth
impairment Allowances for doubtful accounts
Cash Flow Inventory balance
DSO
Capital cost of other assets Collection and revenue ratio
Comprehensive billing rate ITO

Collection and billing ratio

Overhead

Huawei Confidential 6
Managing a transaction from two dimensions: single project and
project group, to promote quality and efficiency simultaneously

Single project operation

Project Group or
Account Operation
Reasonable profit; Focus on systemic factors that
affect the operating results of the
Positive cash flow;
Controllable risks; 01 02 project group or account operation,
Customer satisfaction…… achieving a more efficient operation
improvement.
Systematic efficiency
Quality of basic unit
improvement

Profitable growth with positive cash flow

Huawei Confidential 7
Contents

1 Good Birth: Signing High-quality Contract

2 Good Care: Continuously Improving Fulfillment Quality

3 Challenges to Contract Quality in BCM Scenarios

Huawei Confidential 8
When we discuss quality, what are we really talking
about… …
Do
things Match
right in the
one time standards
Zero
defect Fulfill
require
Lowest
cost ments

Huawei Confidential 9
 What Is a High-Quality Contract?
Contract with reasonable profit, positive cash flow, controllable risks and customer satisfaction is
a high-quality contract.
High-quality Contract

Reasonable Positive Controllable Customer

profit
Contribution profit：
1. price&unit price
2. Cost
3. Clauses that affect profit
（model base price）
4. Risk contingency
（quantitative risks）
cash flow risks satisfaction
ITO+DSO： 1. Non-quantitative risks： 1. PONC cost：project loss
legal compliance cost，penalties due to
1. Cover 80% key clauses
non-delivery of contract,
（acceptance&billing&co 2. Quantitative risks： indemnification
llection unit, milestone, penalties、delivery;
2. Deviations between
due date） existed risk control cost
budget and accounting
2. Huawei's delivery ability is putting into profit
and customer habits analysis

• Contract quality is an end-to-end process of construction and operation，it should meet customer’s expectations;
• Contract quality should seek for balance between benefit-efficiency, risk-customer experience rather than signing a zero-
risk contract；
• Survival is the base line of contract quality, while contract quality should be the ‘fertile soil’ to drive growth and to
keep breeding high-quality contracts。

Huawei Confidential 10
 The contract quality standards are built in the LTC process
LTC

Application Convenes Contract with the Implement ATC

Create Opportunity Evaluation Opportunity Update sales Generate contract
ATI decision-making Project kick-off meeting customer Apply for ATC Decision-making
MCS Manage Customer Solution Process Project Team draft
Bargaining comments
PMP process
Financial Solution Design Process
Develop the project supply solution process
Key Process Activities Hold
Commercial Legal Solution Generation
Process
the
Updat Subm Implement Clari
biddin Analyze Obtai
e the it Design high-level Develo
g ATB ficati
sales Clarifi requirements and p Proposal Apply for n
projec
projec
cation
solutions and analyze Propos review ATB
decision- on
short
t kick- develop bidding making solut
t Issue risks al list
off strategies conclusion ion
team s
meeti
ng.

Transaction
model Transaction planning Transaction model design Contract design Unify the contract quality standards:
Quality Criteria for Sales Contract
Transaction Clauses Negotiation Guide and Risk
Elements X transaction elements XX transaction elements XXX Transaction elements Authorization
are clear

Transaction elements: 6 elements (solution, transaction pricing, delivery, acceptance, collection, legal affairs) or three elements (pricing and commerce, delivery and
acceptance, payment and collection)

Scenario adaptation: Adapt processes based on different scenarios (such as services, software, and IT) and implement processes through scenarios.

Contract Scenario Expert: Support review and decision-making from the dimensions of solution, country, and customer.

Contract Master: Enablement and operation platform

Huawei Confidential 11
Impact of contract quality on operations
As of April 2019, 24 projects with a deviation of more than 1M USD; the total deviation is 267M USD. The related projects are
concentrated in the MS, TK, and software. The deviations are mainly caused by contract clauses, risks, assumption quality,
and performance capabilities.
Rep Amount
No. Project Name Industry Deviation Reason
office (DR2-DR1)
1. The SI workload is structurally changed.
1 Turkey Turkell MS&NRO Project MS&NRO -28.7 2. The exchange rate is devalued.
3. The solution assumption is unreasonable and the execution deviation is large.
1. Exchange rate depreciation
Vodafone MS&NRO
2 Turkey MS&NRO -20.33 2. Subcontracting price increase
Project
3. Delivery resource assumptions are not implemented.
3 Turkey JV U2 Project TK -17.1 Payment collection is severely delayed.
1. Assumption of personnel distribution cannot be achieved
Deutschla VDF Field Level 2. To improve KPI/SLA, work overtime /on call cost
4 Ms -116.75
nd Maintenance Project 3. The risks of DD variance (such as HR expenses) are not identified in a timely
manner and will be discussed during the transition period.
Tigo UNE Cable Rollout The number of cable maintenance work orders increases, resulting in subcontracting
5 Colombia MS&TK -14.99
& MS project costs.
Telefonica MSD FLM
6 Colombia Ms -10.31 Cost reduction assumptions, such as delivery integration, cannot be implemented
Project 2016
The swap strategy and spare parts solution are not implemented, and the
7 Italy Italy Fastweb MS project Ms - Fourteen. cooperation cost is severely overspent. HR release assumptions are not
implemented.
Saudi 1. New project expansion and integrated delivery of new projects are not achieved
8 Saudi STC TX MS project Ms -7.31
Arabia 2. Design defects cause insufficient evaluation of service cost and cost.
Deutschla Vodafone DE Saentis
9 TK -12.1 The business volume assumption changes.
nd project
AT FTTX Modernization
10 Algeria TK -14.51 The project delay leads to the increase of delivery cost and penalty.
Project Huawei Confidential 12
Case analysis(1): C&M Project of Customer T in Country G
60 15.00%
Background: Cable Rollout & MS project of Customer T in Country G is the first 12.40%
40 10.00%
corporate level MS project in Huawei with a large scale and complex network. 5.00%
20
Scope of work: Cable engineering/maintenance (5+1 years); Managed services 0.00%
0
for entire network (10+1 years). Total amount: 384M USD. ESTIMATION DR1 DR2 -5.00%
-20
-10.00%
People transfer: Transferred 605 employees, involving 8 labour unions and more
-40 -15.00%
-10.60%
than 40 welfare groups.
-60 -15.70%
-20.00%
Operations: Project continues to deteriorate, contribution gross profit in estimation is
CP CP RATIO
40M USD, DR1-32MUSD, DR2 -47MUSD

Uncontrolled assumptions and

Key contract terms
• No variation mechanism
• High percentage of
penalties
• Long credit terms
• No termination
mechanism
Insufficient performance ability risks
• Weak subcontracting resource management and difficultly in • Wrong ratio of as built sites and civil
cost control. work
• Difficulty in coordinating between labour unions, transferring • Excessive assumption of people
of people cannot be released. transfer
• Weak management of local customer relationship and • Wrong assumption of people reuse
government relationship, the contradiction between • Risk management of cash flow
personnel and project duration is difficult to coordinate.
cutoff
Huawei Confidential 13
Case Analysis(2): CustomerM MSAN, A Project Suffering Long-term
Losses; Requiring a Price Drop of 25%+ → Give It up or Not?
Data from 2012 to 2016 Profit margin:
40% lower than the normal level
70 61 59
60
60% 50%
50
40 40%
25%
30 10.80%
20%
20
0%
10 10.8% Project GP rate Contribution GP rate
0 -20%
Total项目总订货（MUSD）
project order (MUSD) 项目收入(MUSD)
Project revenue (MUSD) 项目销毛率
GP rate -16.20%
Historical projects Global average

New bid for MSAN in 2016

• Project background: Morocco had 3.2 million of potential HBB users, but Morocco Telecom faced fierce competition from Orange
in FTTH/WTTX. 45% of its PSTN network reconstruction was not completed. It was urgent for Morocco Telecom to speed up the
bandwidth of its legacy network and provide the 100M+ broadband access service.
• Price reduction requirements: The customer re-initiated the bid and had a strong demand for price reduction (25%+ price
reduction, involving US$50 million).
Facing fierce competition and the customer's requirement of
reducing price by 25% or above, how do we win the bid?
Huawei Confidential 14
CustomerM MSAN: Contribution Profit increased by 19% after solution
optimization
Gap Analysis Historical Project Issues Project Optimization Improvement Effect

• Persuaded the customer to replace the 16-port

• Business assumption deviation, GPON board with an equivalent board; created
Production • GPON price: ↑ 33%
price transfer error (GPON) value for Huawei.
Solution • Total equipment cost: ↓ 8.2%
• High cost of purchased equipment • Replaced the purchased product (3M) with
Huawei MDF

• Equipment: 70% POD, 30% PAC,

• Equipment: 80% POD, 20% PAC, credit term
Terms & credit term 90 days • Risk contingency: ↓ 4.79%
60 days
Conditions • 10% PAC retention sum cannot • Cost of capita: ↓ 6.3%
• Replaced pledge with guarantee/bond
be collected

• Associated acceptance with

Delivery cutover (cutover under the
• Separated service acceptance from cutover • Delivery cost: ↓ 15%
process customer's management, with
progress uncontrollable)

Huawei Confidential 15
Discussion

Free sharing

1. Question: Please share a case that meets the definition of high- quality contract

Huawei Confidential 16
Key Elements Affecting Project P&L During Pre-sales
P&L Project Solution Contract T&C Risks&Assumptions
Estimation P&L
1 List Price Product selection Volume discount Penalty
2 Proposed Price Model/Base price Voucher Assumption of BP
5 Other revenue-deducting Revenue
New business Model Price erosion
items ···
6 Net Sales Revenue ··· ···
7 Equipment Cost
8 Service Cost Outsourcing cost decreasing
Product selection Currency
10 Financial Cost Delivery solution
Cost Acceptance terms Co-Site delivery
11 Cost of Capital Responsibility Matrix Payment terms FX Inflation
12 Other Cost
··· ··· ···
13 Project Cost
14 Risk Contingency Risk
Responsibility unclear Tough acceptance
15.1 Gross Profit (After Risk Contingency
Contingency Promise beyond capability High penalty
Profit
18.1 Contribution Profit
(After Contingency)
Huawei Confidential 17
 Example of Estimation P&L
Incentives：various preferential strategies offering to
Estimation P&L customer for specific market objectives, including
1 List Price 417,733,442 One-time Incentive, Volume based List Price
2 Proposed Price 186,179,498 Adjustment and Annual Price Erosion
3.1 Incentives 9,904,991
VAT and other deductible taxes
3.2 Issue Voucher ： Relevant taxes and fees incurred in sales projects
Revenue 3.3 Use Voucher that should be borne by Huawei are in line with the
3.4 VAT and other deductible taxes "sales tax and additional" caliber in the accounting
4 Sales Taxes and Surcharges scheme, including sales tax, service tax, business tax
5 Other revenue-deducting items 14,234,866 and surtax 。
6 Net Sales Revenue 162,039,640

7.1 CHQ Equipment Cost 16,992,117 Other Revenue-deducting Items

7 Equipment Cost ：including Anticipated Penalty、Cash Discount、
7.2 Local Outsourcing
Equipment Cost
Revenue Discount
8 Service Cost 83,981,420
9.1 Patent royalties 13,984
cost Financial Cost：including Financing Cost, Foreign
9.2 Logistics Cost 1,926,950
Exchange Cost, Interest Income of Discounting
10 Financial Cost 1,620,396 Revenue、L/C Charge、Guarantee Expenses and Cash
11 Cost of Capital 2,101,080 Discount
12 Other Cost
13 Project Cost 106,635,947
Contingenc
Risk Contingency： the special funds reserved for
14 Risk Contingency 8,025,612
y contract risk through the method of risk identification
15.1 Gross Profit (After Contingency) 47,378,081 and quantitative analysis
GP
15.2 Gross Margin (After Contingency) 29.24%

Authorized 16.1 Authorized Gross Margin 14.55%

GP Standard Allocation Cost：Indirect costs incurred by
16.2 Target Gross Margin 19.02%
group platforms, BG platforms, P&S platforms and
Allocation 17.1 CHQ Standard Allocation 6,475,704
cost 17.2 Regional Standard Allocation 8,875,480 regional platforms, which are divided into CHQ
Contributio 18.1)Contribution Profit (After Contingency) 32,026,897 Standard Allocation and Regional Standard Allocation.
Huawei Confidential 18
n profit 18.2 Contribution Margin (After Contingency) 19.76%
A mature contract quality standards and risk assessment
tool has been established
• Since the issuance of A/B prohibited clauses in 2007 and the establishment of risk authorization system in 2014, a
complete system has been established, that is, the Sales Contract Clause Quality Criteria, Negotiation Guidance,
and Risk Clause Decision-making Authorization.
• The Sales Contract Clause Quality Criteria, Negotiation Guidance, and Risk Clause Decision-making Authorization
are the accumulation of practical experience and capabilities in projects. With the continuous improvement of the
company's business development, this standard has evolved from scattered risk tips to structured quality standards.
• The annual regular review and update mechanism has been formally developed since 2014. It is officially released
after being approved by the BG SDT every year. The latest version is the Sales Contract Clause Quality Criteria,
Negotiation Guidance, and Risk Clause Decision-making Authorization V6.0 released in January, 2019.

Quality Quality Criteria, Risk Analysis, and Negotiation Guidance for Sales Contract Clauses
standards

Risk Sales Contract Risk Authorization List

authorization

Evaluation tool Risk Assessment Tool (RAT)

Quick Reference Sales Contract Risk Authorization Quick Reference Guide

Guide

Huawei Confidential 19
The Structure of Sales Contract Risk Authorization
Prohibited
Risk
NO Decision-Making by SDT

Business Risk Type Decision-making

Structure of Business Risks
Domain Level
Decision-Making Significant
ICT SDT
Risk

High Risk CNBG SDT

Solution
Medium Risk RSDT/KASDT
Qualitative
Service & Risk
Low Risk COSDT
Delivery
Managed by Authority
Commercial authority Dept. in HQ
&Legal departments
According to the
Managed by
review result of
functional
Finance lines
Fuctional Line

Quantitative Risk in the

Risk Profitability
Contingencies
decision-making

Huawei Confidential 20
RAT6.0 Statistics :Contract Elements56 ，Quantitative Risks 37，
Qualitative Risks 298
Quatitative Risks ：
Commercial &Legal Solutions Service & Delivery Finance
Voucher use Excessive commitment risk Delivery management Financing
Transfer of ownership Customization risks Supply and logistics Foreign Exchange
Risk transfer Assumptions Network integration service Letter of Gurantee
Integration/Network
Contract subcontracting Software integration service Credit
compatibility risks
Contract transfer Solution maturity risk Training Insurance
Transfer of creditor's rights Borderless liability risk Customer support service Payment
Exclusive supply Model and Base Price Managed Service Tax
Audit Voucher issuance CEM Service Inflation
Compliance with laws and
Cyber security risks Porcurement
regulations
Contract termination Qualitative Risks ：
Fines Managed by Managed by
Significant High Medium Low Model/Bas
Liability Risk Level functional authority Total
Risk Risk Risk Risk e Price
lines departments
Compensatory clause Finance 5 36 33 19 18 0 111
Dispute resolution Commercial
0 15 27 19 3 4 68
Force majeure &Legal
Solution 0 2 1 0 8 4 45 60
Confidentiality clause
Service &
Others 4 18 9 5 23 0 59
Delivery
Total 9 71 70 43 52 8 45 298

Huawei Confidential 21
7 Prohibited Risks: Once Found, Stop Immediately; No Decision Makings
• Prohibited clauses are managed separately. SDTs at all levels have no right to make decisions on prohibited clauses. Once a prohibited clause is involved, the
operations must stop immediately.
• Functional element reviewers shall identify prohibited clauses in the respective domains. The Legal Affairs Dept exercises its right to veto prohibited risk clauses.

Risk Type Description Example

1. 1. Violate applicable export control laws and regulations of the United Nations (UN) and countries and regions such
as the USA, EU, and China, as well as Huawei's trade compliance policies and regulations – such as projects or Sell equipment that slightly exceeds specific standards to
Export control
products for military purposes, transaction subjects which are restricted products due to legal or supplier reasons, embargoed Countries.
and sales products for which the de minimis calculation result exceeds specific standards without permission.

2. Commit to developing sensitive functions which violate applicable laws and regulations or providing such functions in Provide surveillance and monitoring functions against local laws
Cyber security/Privacy protection
Huawei products for customers. and regulations.
3. Falsify or change transaction paths and falsify transaction content such as transaction entities, amount, and expenses
to achieve illegal purposes, including but not limited to:

Fictitious financial 3.1 Violate accounting laws, regulations, or standards, and help customers or third parties falsify financial records via Sign fake equipment sales or buy-back contracts to help
Fictitious records fictitious transactions or transaction elements. customers invent their cost or revenue increase.
transaction 3.2 Help customers or third parties illegally obtain financing or other financial benefits via fictitious transactions or Exaggerate the project amount to help customers obtain loans
Financial fraud
transaction elements. from financial institutions.

Include additional entities into the transaction chain to offer

Commercial 3.3 Violate applicable anti-commercial bribery laws and regulations, and offer illegal benefits to customers or third parties
illegal benefits to customers in order to win projects from
bribery by falsifying transaction paths.
customers.

Issue false VAT invoices or other transaction vouchers to help

4. Help customers with tax evasion, false claims for tax rebates, and tax benefits; or conduct other activities to
Tax law violation customers illegally gain deductible input VATs or deduct
intentionally evade and violate tax laws and regulations.
relevant expenses from pre-tax profits.

5. Violate applicable financial sanctions, anti-money laundering, and anti-terrorist financing laws and regulations of the Receive payments from a customer when knowing or
Financial compliance UN, EU, China, the US and other countries and regions. Violate mandatory laws and regulations stipulated by central suspecting that its money is gained through crimes (smuggling,
banks and foreign exchange management institutions in the involved countries. drug deals, etc)

6. Violate the International Air Transport Association (IATA) regulations, and make commitments to air transport of Promise to transport hazardous chemicals or large-capacity
Public security
unexempted dangerous goods. lithium batteries (> 100 WH) by air.

7. Other sales contract clauses which violate legal requirements and may bring significant legal risks to Huawei.

Document Link：http://w3.huawei.com/info/cn/doc/viewDoc.do?did=7788671&cata=403651
Huawei Confidential 22
9 Significant Risk Items
Functional
No. Domain Risk Point Risk Item
Department
1 Finance Financing Financing purpose Huawei directly provides equity financing, cash financing, or license financing to the customer.
Huawei provides guarantee to the customer's creditor (in (group) projects where the transaction
Provision of
2 Finance Financing counterparty's credit rating is Level D/E/SPM/X or the risk sharing percentage of Huawei is more
financing guarantee
than 20%).
The L/G template contains an amount exposure (including but not limited to rechargeable amount
3 Finance L/G L/G
and compensation claims without an upper limit).
The L/G can be transferred to a third party that does not directly trade with Huawei without
4 Finance L/G L/G
Huawei's permission.
The L/G is issued for a third party that does not directly trade with Huawei or the beneficiary of
5 Finance L/G L/G
the L/G is a third party that does not directly trade with Huawei.
Signing entity of site
Network Huawei is responsible for site acquisition, ROW acquisition, and power connection. Furthermore,
acquisition, ROW
6 Service delivery integration the customer requires Huawei to sign a land/house purchase contract with the proprietor and bear
acquisition, and
service related costs.
power connection
Managed Make commitments in the MS contracts that Huawei will buy network assets back from operator
7 Service delivery Asset Buy-Back
Service and be responsible for the maintenance, operation, and update of the assets.
Managed Huawei directly takes over 100 or more maintenance employees from the customer or the existing
8 Service delivery People transfer risk
Service MSP.
Scenario 1: Bearing fuel fees in non-GCC6 countries and electricity fees in all countries,
including but not limited to:
Managed Bearing fuel and · Bearing fuel/electricity fees, and specifying the total amount;
9 Service delivery
Service electricity fees · Specifying the fuel and electricity expense baseline in the contract regardless of whether a price
adjustment mechanism is available
Huawei Confidential 23
Contents

1 Good Birth: Signing High-quality Contract

2 Good Care: Continuously Improving Fulfillment Quality

3 Challenges to Contract Quality in BCM Scenarios

Huawei Confidential 24
What is fulfillment quality?
Contract fulfillment is the fulfillment of the obligations and rights promised by both parties in the contract;
the achievement of the contract targets and benefits through the implementation of the plan.
How to measure
performance quality?

Reasonable profit Positive cash flow Controllable risks Customer satisfaction

(delivery by contract)
Revenue ITO+DSO Change management
In-house labor investment Inventory Penalty management Quality control
Collection Acceptance management Progress control
Subcontracting resource
Long overdue AR Risk assumption implementation
procurement Penalty (PONC)
... ...
Cost plan ...
...

Cost/efficiency deviation Risk and Assumption deviation Quality & Progress deviation

Fulfillment quality refers to delivery by contract. Management of performance quality is essentially

earned value management, that is, deviation between actual and budget.

Huawei Confidential 25
 Cost deviation: In the past three years, 140 projects suffered losses,
and the accumulated loss amount was 1.1 billion.
• From 2016 to 2019 H1, there are 140 projects of CNBG whose contribution profit loss exceeded 1 million.
• Regions with a large amount of loss projectsare mainly in Latin America, China, Middle East, CEE Nordic Europe, and West Europe.

Projects with a loss of US$

Project Loss Amount (USD)
1 million or more
Region
2016 2017 2018 2019H1 2016 2017 2018 2019H1

West European Region 6 4 4 1 -40,357,541 -13,126,355 -288,395,698 -2,058,765

China Region 2 2 7 2 -33,067,332 -16,611,426 -32,444,479 -22,581,304
Latin America Region 15 10 9 3 -147,099,157 -107,639,864 -24,366,765 -4,591,957
Middle East Region 7 4 5 2 -41,755,461 -18,073,586 -20,168,948 -19,053,237
CEE & Nordic European
11 4 4 -72,655,587 -47,519,894 -12,453,250
Region
Northern Africa Region 3 3 3 -38,391,702 -10,929,430 -10,520,886
Southern Africa Region 2 1 -6,834,260 -5,839,365
Southeast Asia Region 5 4 2 1 -11,569,681 -10,116,917 -4,106,509 -6,780,417
Eurasia Region 1 4 1 -6,516,240 -20,561,880 -2,534,114
South Pacific Region 6 1 1 1 -19,941,374 -1,132,904 -1,057,691 -7,945,428
Total 63 39 30 8 -411,354,076 -252,546,517 -401,887,705 -38,371,039
Note: Data extraction from iPFM

Huawei Confidential 26
Progress and quality deviation: In the past three years, the contract
penalty was 201M, focusing on the wireless, software, and MS
The Carrier BG‘s contract penalty in the last three years is 201MUSD, accounting for 0.17% of the revenue.
The penalty is mainly distributed in wireless, software, and MS projects.

Penalty analysis by products

60 46.16
40 23.68 22.58
14.5
20 1.46 2.45 1.21 4.09 7.24 3.98 1.57 4.91 5.83
0.11 0.15 0.01
0
CS DC FTTX 软件
software MS
管理服务 Core核心网
Network Network
网络 Wireless
无线

2016 2017 2018

The reasons for the penalty are as follows: Delivery delay (81.74MUSD, accounting for 40% of the revenue),
KPI/SLA (43.27MUSD, accounting for 22%)
Penalty analysis by reason
40 33.71
25.14 22.19
20 7.47 6.65
0.63 4.23 4.34 0.3 0.48 0.13 0.14 0.04 1.19 0.67 0.27
0
EHS KPI/SLA不达标
KPI/SLA 产品质量
Product Quality 工程质量
Delivery Quality 交付延迟
Delivery Delay 网络事故
Network Accident 物料丢失
Loss of materials 物流延迟

2016 2017 2018

Huawei Confidential 27
 Risks and assumptions deviation: TOP10 Project deviation leads to
US$ 240 million budget deterioration
In the Carrier BG's TOP 10 project, the budget was reduced by US$
240 million because assumptions were not implemented and risks
were not effectively controlled. Case: Millicom Colombia Project contains FLM services of mobile and fixed
networks. The period is 5 years (from April 2016 to December 2020), the
Project Key deterioration cause
amount is 30M USD, and the project life cycle loss is 10M+;. The major
- Assumptions are not implemented: The high gross profit and sporadic
engineering workload decrease, and the delivery resources are not reduced assumptions problems are as follows:
Turkey Vodafone MS NRO
Project as expected.
- Risk is not effectively controlled: There is no effective risk control External assumptions are not entered into the contract:
mechanism for the decrease in subcontracting or exchange rate.
• The quotation is based on the information provided by the customer
- Assumptions are not implemented: The transfer of receiving personnel is
Vodafone Germany Field
Level Maintenance Project not implemented. (11,000 km in aerial scenarios and 200,000 m in trenching scenarios).
- Risk is not effectively controlled: KPI penalty 26MEUR
• Actual execution: Aerial 15,000 km, the actual cost is 6838/m (HFC),
- Assumptions are not implemented: Project scale reduction)
Turkey JV Universal Phase 2
TK Project - Risk is not effectively controlled: Payment delay causes capital occupation and the cost increases by 4 million. Civil work: 22,000 meters, the
to erode profits.
actual cost is 134912/m, and the profit is reduced by 10 million.
- Assumptions are not implemented: Project scale reduction
AT FTTX Modernization - Risk is not effectively controlled: The project duration is delayed, resulting
Project in cost increase and penalty accrual. As a result, the cash collection is Internal assumptions are not effectively managed:
delayed and the profit is eroded.
- Assumptions are not implemented: Manpower is not released on schedule. Cable maintenance estimation assumptions deviation, for example: TT
Honduras Millicom E2E
Managed Service Project - Risk is not effectively controlled: There is no effective risk control
forecast 4000 tickets/month, actual 10000 tickets/month; In the estimation,
mechanism for subcontracting gains.
Italy TI OCS project
- Risk is not effectively controlled: The project duration is prolonged, which 294 people are considered for self-delivery. Actually, 625 subcontracting
increases the cost.
personnel are required.
- Assumptions are not implemented: Project scale reduction
Cell C IP & Core Project
2018 - Risk is not effectively controlled: The project duration is prolonged, which OSP personnel reuse assumptions are radical: In the estimation, it is
increases the cost.
- Assumptions are not implemented: Manpower is not released on schedule.
assumed that the transferred personnel undertake 91 OSP design work
Colombia TigoUne Services
Unified Managed - Risk is not effectively controlled: There is no effective risk control without subcontracting cost. This assumption is not realized in practice.
mechanism for subcontracting gains.

Huawei Confidential 28
The key domains to fulfillment quality management is project time
(progress), project cost, and project risk/assumption deviation
management
Project
integration
Project management
Stakeholder Project scope
Management management

Project
Project time
procurement
management
management Ten Knowledge
Domains of
Project
Management
Project risk Project cost
management management

Project Project
communication quality
Project management
management
Human
Resource
Management

Huawei Confidential 29
Progress Management: Continuously Improve Fulfillment Quality through
Promoting Delivery Ability and Manage Customer transaction operation
Contract
signing Shipment Installation PAC Billing Collection

• Customs • Delivery solution • Acceptance unit • Milestone • Credit term

clearance • Subcontracting • Acceptance KPI • Supporting documents • Exchange rate protection
• Transport • Acceptance process • Invoice management • Financing

Contract terms Huawei fulfillment Customer transaction operation

and conditions ability improvement management

Optimize project fulfillment ITO+DSO

 Complete delivery and acceptance as planned, and
accelerate project revenue recognition progress.
 Quick billing and cash collection, accelerating cash inflow.
 Delivery by contract, avoiding delayed cost and penalty.

Huawei Confidential 30
Case：Shorten ITO&DSO through optimizing transaction condition and
improving delivery efficiency
 Customer background：the biggest carrier in S country，stable financial conditions, adequate cash flow, 8 years of good cooperation
experience with Huawei.
 Macro environment：its local currency has been depreciating since the beginning of the year with an average speed of 6%；Standard
Chartered, Citigroup and other banks forecasted it has reached a high exchange rate and the currency appreciation would not be
sustainable.
 Customer analysis： Customer forecast of exchange rate trend is the same with those banks ； the financial departments have to
reduce exchange rate losses and customers have adequate cash flows.
Improve ITO+DSO to be 148 days， Improvement of supply efficiency
Former payment terms Increase contribution margin ratio 4.7% 1、 Reduced connection time and
optimized international logistics
Equipment：50%POD 25%PAC 25%FAC cycle 45 days37 days
Service： 50%PAC 50%FAC 2、Optimized process， optimized
customs clearance cycle 19 days9
Credit term：45 days days
3、optimized plan，increased the
turnover speed of central
warehouse 22 days7 days
Optimization from PO level
Improvement of delivery efficiency
equipment，service 100% prepayment； 4、improve site acceptance cycle
Credit term：30 days from 12 days 5 days
Applied systems to monitor the goods arrival,
installation, and acceptance status. Optimized the
Based on adequate cash flow, Huawei seized the opportunity of understanding subcontracting contract and specified the in-transit and
in-construct periods. Changed the whole acceptance to
customer's financial concerns to improve efficiency by early payment acceptance by DU. Coordinated resources through
systems and made system data visible, to minimize the
waiting time of personnel and goods.

Huawei Confidential 31
 End-to-end risk and assumption management to mitigate uncertainty
• Assumptions are the prerequisite for solution. Risks are generated with Assumption management:
solution. Both are part of the solution.  What is irrelevant to the contract scope, such as the future

• There is Conversion between assumptions and risks: Assumptions and outlook and commitment, cannot be used as a project

risks appear in pairs. If the assumption is not achieved, it becomes a assumption and not included in the project estimation. It
can only be used as a reference for decision-making.
risk, which affects the project financial results.
 The customer interface assumptions should be
implemented in the bid submission/contract (such as the

Very uncertain Risk project scope, responsibility matrix, and solution dependency).
1. …
2. … Qualitative  Internal assumptions should be generated based on
… &

Operation
baselines/experience and managed in a closed-loop manner.
3.

Results
Quantification

Mutually
convert Risk management:
Assumption

Uncertain factors  Risks are classified into qualitative and quantitative risks.

1 2 Qualitative risks need to be decided by SDT. Quantitative risks

3 4 are included in the estimation sheet as risk contingency,
affecting project profitability.
 Risks should be continuously managed in the fulfillment phase.
Risks are the erosion of profits.

Huawei Confidential 32
Case (Pakistan V8 Project): Irrational Assumptions in the Bidding Phase Failed
to Be Realized in the Delivery Phase
Project background
• In May 2016, the contract for the Safe City V8 project (as a benchmark) in Pakistan was signed. The chief minister of Punjab (a state in NW
India) took charge of this project.
• The project valued US$120 million, covering 8 outsourced sub-systems, 25 software application systems, interconnection of 20+ internal and
external systems, and 20 control rooms. The solution was complex and difficult to deliver.
• After the delivery was initiated in July, major deviations occurred between the actual project financial performance and the project
estimation/budget, and the project operation result severely deteriorated.

Assumptions became more radical during bidding and negotiation:

Risk exposure

Cost: ↓ US$17.53 million

Cost: ↓ US$6.3 million  Share 96 eLTE sites with the

Cost: ↓ US$4 million
Invite carriers such as M/W/P
to participate in OSP
construction and introduce
multiple subcontractors to
compete with each other: ↓ 4
million through negotiation
Assumptions (1st round)
 Obtain and sub-lease the
five-year advertising right of
site poles: ↓ 5 million
 Reduce the solution
configuration and OSP
delivery: ↓ 1.3 million
Assumptions (2nd round)
carrier free of charge: ↓ 7.53
million
 DC diesel generator, power
distribution, and security
protection: ↓ 5 million
 Furniture, computers, and
vehicles: ↓ 2 million
 Hire a new DC subcontractor: ↓
3 million
Assumptions (3rd round)

Project progress

Huawei Confidential 33
Discussion

Free sharing

1. Question: share a case that has improved operation management

through enhancing performance quality in your account, or a case on
deterioration of project operation caused by poor performance quality.

Huawei Confidential 34
Key Elements Affecting Project P&L During Delivery
P&L
Budget&
1. Project Revenue
1.1 Equipment Revenue
1.2 Service Revenue
2. Project Cost
2.1 Equipment Cost
2.2 Service Cost
2.3 Logistics Cost
10.1 Bad Debt Provision
11. Capital Cost
11.1 AR Management Cost
11.2 Inventory Management
Cost
15. Risk Contingency
16. Contribution Gross Profit
Cost deviation Progress deviation Risk & Assumption deviation
Non fulfillment of customer
Delivery out of scope Penalty of Delay
Customer-oriented Assumptions
···
Revenue Non fulfillment of BP assumption
Multiple site visits Non fulfillment of Internal
HR cost
Cost HR structure Assumptions, ex., cost
Subcontracting cost
Subcontracting decreasing, HR assumption
Long-term AR Assumption transfer to risk
Long ITO+DSO
Risk Long-term Inventory Risk happening
Profit
Huawei Confidential 35
WHAT CAN YOU DO
for improving
operation quality
during transaction
with customer?

Huawei Confidential 36
Contents

1 Good Birth: Signing High-quality Contract

2 Good Care: Continuously Improving Fulfillment Quality

3 Challenges to Contract Quality in BCM Scenarios

Huawei Confidential 37
How Much do You Know about BCM?

• BIS Bureau of Industry and Security

• EAR Export Administration Regulation

• EL Entity List
• TGL Temporary General License
• ECCN Export Control Classification Number
• De Minimis Level

Huawei Confidential 38
BCM Contract T&Cs Requirements increased sharply since EL event
on May 16th
Customer’s requests related to BCM contract T&Cs had increased sharply after May 16th, and has stabilized since middle
of July（W9), currently the main focus is on handling penalty disputes and contract amendments in this stage.

BCM requirements trend during last 15 weeks since May 16th BCM requirements in each region since May 16th

May Aug 19th 57

16th 59
35
49
45 35 68
41 94 24
38 37 40 34
16
9 4 5 3
1 30
29 29 60 6 4 21 18
27 26 26 5 39 34 6
24 24 8 29 29 2 3
4 2 7
21 22 21 11 13 9 12 4
2 9 2
19
15 16
13 11 Commitment 13
10
Supply
9 Continuity 8 8 8
5 6
5 5 6 7 6 5 7
5 7
6
5 6 6
3 3 4 4 4 4 4 2 2 4 4 3
1 Trade Compliance Commitment
W1 W2 W3 W4 W5Penalty/indemnity
W6 W7 W8 W9 W10 W11 W12 W13 W14 W15 Supply Continuity Commitment Trade Compliance Commitment
Contract Amendment Penalty/indemnity Contract Amendment

Huawei Confidential 39
 Scenario 1:
Supply Continuity/Trade Compliance
Commitments

Huawei Confidential 40
Typical Customer Requests
A B C D

 …customer to  …certifies and  Huawei shall not do or  Provide the ECCN or US-origin
suspend or represents US- omit to do anything content percentage and the
terminate the origin content might cause C to breach calculation method
contract if Huawei contained subject any US Trade Controls  Confirm if EL Huawei participated in
materially breaches to EAR. Laws. the supply chain
its delivery  B is entitled to verify  provide confirmation  Specify whether any products
obligations to the or audit the on compliance with ordered may experience delayed
fact that Huawei compliance of such US Trade Controls deliveries or reduced availability
becoming listed certifications and Laws on delivery  Confirm none of employees working
on any restricted representations. documentation for every in customer space are employed by
parties list. Order. EL Huawei

Risk for Huawei

Risks of over-commitment and undertaking liabilities Risks of disclosing HW’s

High Risks of breaching
beyond HW’s control, which shall not be attributable to commercial confidential
the contract by HW, …
HW and not in connection with the Contract fulfillment & information, …
performance, … Huawei Confidential 41
Mitigation Strategy (1/2)

What can we promise

• Comply with applicable Trade Control Laws.
• Ensure that Huawei itself does not break the law, and will not cause our clients to break the law.
• Compliance entity is limited to Huawei contractual party.
• The list of products and alternative solutions affected by BCM can be provided (but need to be reviewed by
the BCM team).

What can’t we promise

• Compliance entities include Huawei entity, individuals or third parties other than the contractual parties.
• Provide our supplier list and procurement related content.
• Provide U.S. ECCN code, EAR De Minimis Rule compliance details and measurement methods.
• Accept Client/Channel/Third party to audit against compliance, or provide third party audit report.

Huawei Confidential 42
Mitigation Strategy (2/2)
Reply Strategies To Customers: positive answer, reply in time, avoid increasing clients’ doubts.
Pay special attention to two scenario:

1. Customer with US background: give positive answers, reply ASAP, to avoid turning the problem into passive situation. e.g.: After
receiving a letter from the lawyer of CUSTOMER for two weeks, frontline finally escalates to HQ to review the reply, which caused the
client to send three letters afterwards expressing doubt about Huawei's supply continuity and compliance ability.

2. Overreacting Clients: customer exaggerated the current risk and talks about EL as Denied Persons List (DPL) or Specially Designated
Nationals (SDN). The legal department should directly intervene at the beginning to pull the customer back.

Currently, 4 clients groups have requested to add relevant terms to mitigate DPL/SDN scenario risk. e.g.: CUSTOMER A
requires that if supplier was unable to collect payment due to financial sanctions, supplier should continue to fulfill the
contract for the next 60 months.

Huawei Confidential 43
 Scenario 2:
Additional Penalty /
More Restrictions on Compensation Clauses

Huawei Confidential 44
Typical Customer Requests
E F G

 …in E’s sole discretion to  In case there will be any regulatory  HW is to provide Performance
terminate the Agreement if HW is ban to use HW equipment by EU Guarantee equal to 100% of
likely to violate laws or within one year from the signing date Contract amount.
regulations or it becomes illegal of the Agreement, HW shall be  No prepayment paid by
or unlawful for HW to perform responsible to return the money F Customer.
Agreement. has paid for the equipment that has
 HW shall remain liable to E for any been delivered before the regulatory
direct or indirect damages ban, and dismantle the equipment
without cap of limitation of liability. installed and send them back at HW’s
own cost .

Risk for Huawei

• Termination depend on customer’s Regulatory ban not controlled by Huawei,
Unfair position for payment and
discretion but not facts. so it is not fair to make commitment for
performance guarantee.
• Indirect loss and no LOL cap. such consequence.
Huawei Confidential 45
Mitigation Strategy
Typical Requirements from Customer
1. Termination of contract and claim for
compensation in violation of trade control laws or
as a result of sanctions.(E)
2. Customer can terminate the contract and claim for
compensation/refund/return/bearing the
government penalty if government or regulatory
authority prohibits the transaction.(F)
3. Increase the proportion of performance bond and
the upper limit of penalty/liability. (G)
Huawei Confidential
Mitigation Principles and Suggestions
1. Do not accept compensation requirements, whereby Huawei
violates trade control rules but such violation does not cause a
violation or loss to the customer.
2. Do not accept return & refund. Guide customers to accept an
indemnity with limitation and the amount should be negotiable.
3. Do not commit to a penalty or liability without limitation, and do not
bear indirect losses. Set upper limits for all liabilities and third-
party replacement costs with price delta caps.
4. New contracts should be separate from existing contracts. Existing
clauses cannot deteriorate. New contract T&C’s commitment should
be dependent on corresponding supply capability.
5. Reduce the compensation target , only affected part of the project
shall apply. Reduce penalty/compensation calculation base (contract -
>PO-> affected part).
46
 Scenario 3:
Penalty dispute in existing projects

Huawei Confidential 47
Typical Customer Requests

H J

 The customer sent a Lawyer's letter to Huawei,
indicating that the delay supply of the STB and CPE
have caused a loss of XX M Euros to the customer,
and asked Huawei should respond.
 The customer sent a Lawyer's letter again to reply
HW’s letter, stating that "unforeseeable" was not
established, and Huawei's delivery delay was due to
quality issues rather than the Google Android
certificate issue of the STB. Customer’s letters
suggest that XX M Euros have been lost.
 If there is no substitute solution for supply of XX product (cable)
by HW due to HW’s incapability of continual supply, then HW
is to accept a high risk of penalty in accordance with contract.
 The customer requires HW to provide a formal written reply in
term of the cable supply.
 HW must find a third party to continue to perform the contract if
HW cannot continue its performance. In addition, the third-party
performance shall not increase the customer's cost, and HW
bears joint and several liability to the third party and HW cannot
be exempted from the contract.

Risk for Huawei

Risks of penalty imposed by Customer on HW for the fact not attributable to HW.

Huawei Confidential 48
Mitigation Strategy
Typical Actions from Customer Mitigation Principles and Suggestions

1. Predict risks in advance and create a Communications

Plan. Do not wait for communication until customer starts to
1. Huawei is required to confirm the breach of ask or claim for indemnity.
contract because of supply inability or delay 2. Comprehensively Review Huawei liability and
under EL status. responsibilities based on contracts, facts, and local laws
• For example, when Huawei fails to supply, to protect Huawei's interests.
customer sends a lawyer’s letter to claim for 3. Promptly Involve Legal Dept to collect defensive evidence
compensation (H). favourable to Huawei.
2. Preparation of evidence for penalty. 4. Determine whether to select Force Majeure as a defence
• For example, when there is no substitute solution based on long-term cooperation and business with customer.
for a certain product, customer requires a written (For details, please see the next page.)
confirmation to accept a high risk of penalty (J). 5. If the penalty cannot be avoided, first option is to offset bad
debt/long-term overdue AR and second option is to issue
voucher.

Huawei Confidential 49
 Scenario 4:
Force Majeure

Huawei Confidential 50
Definition of Force Majeure
Definition from FIDIC:
"Force Majeure" means an exceptional event or circumstance:
(a) which is beyond a Party’s control,
(b) which such Party could not reasonably have provided against before entering into the Contract,
(c) which, having arisen, such Party could not reasonably have avoided or overcome, and
(d) which is not substantially attributable to the other Party.
Common Scenario: war, strike, riot, crime, or an event described by the legal term act of God (hurricane, flood, earthquake,

volcanic eruption, etc.)

Actions/Consequence after force majeure:
• Inform the other party within notification period, e.g. 14 days after Force Majeure event has occurred, and provide
necessary documents and evidence.
• Normally a Force Majeure event could excuse a party's non-performance, however any event that is the result of the
negligence or malfeasance of a party shall not be exempted.
• Any party may terminate contract in the event that non-performance due to Force Majeure continues for a prolonged
period of time, e.g. 90 days.

Huawei Confidential 51
Typical Customer Requests

K L

 The Parties agree that none of the following shall be
considered a Force Majeure Event:
a. A breach by Huawei of the provision of the Sanctions
and Export Controls Clause 4.5 above; and/or
b. the consequences of such breach; and/or
c. if the Supplier (or any person(s) who controls such
Supplier) becomes listed on any applicable restricted
parties list (including, without limitation, the US/OFAC
and the UK/HMT Consolidated SDN lists).
 In the event that a governmental body and/or supervisory
authority communicates or issues a law, ban,
recommendation, objection, advice, instruction, (export)
restriction, decision or (indirect) conditions (including but
not limited to auction rules) or any other communication
demonstrated by CUSTOMER, which might affect the
subject matter of this Contract and/or might reflect
negatively on CUSTOMER or its customers; this at
CUSTOMER’s sole discretion, Termination for
convenience according to this sub-article does not
constitute a force majeure event..

Risk for Huawei

Huawei have no chance to argue with customer about claims, and will undertake all liability of
contract breach due to sanction, in despite that sanction is beyond Huawei’s control.
Huawei Confidential 52
Mitigation Strategy
Amongst more than 10K existing contracts:
• 96% of the contracts do not explicitly mention sanctions, so it is not clear whether sanctions belong to force majeure.
• 3.8% of the contracts specify that sanctions belong to force majeure.
• Only 10+ contracts specify that sanctions not belong to force majeure.
Typical Requirements from Customer Mitigation Principles and Suggestions

1. Do not exclude ‘sanction(s)’ from force majeure (especially do

not exclude EL status). Leaving “blank” is acceptable (ie keep it
1. Explicitly exclude ‘sanctions’ from force majeure.
unclear in the written agreement).
For example, frame agreement between customer V
2. Avoid weakening or excluding the defensive power of force
and Huawei specifies that ‘sanction’ do not belong to
majeure through any written forms such as
force majeure.
letters/supplementary agreements. During communication, you
2. Customer does not reject to exclude force majeure,
can use words such as ‘unforeseen’ or ‘uncontrollable’
but requires Huawei to promise (guarantee) to fulfill
event(s). In the meantime, put forward an ‘alternative supply
the contract according to original contract terms
solution’ to guide the contract amendment so we can better
and conditions.
defend ourselves against potential claims of indemnity in the
future.

Huawei Confidential 53
Case: HW use Force Majeure to exempt its Liability
Huawei Side Customer Side

Background:
AR129,HG659 could not be supplied after 05/16. Huawei • Huawei send force majeure notification to
(Australia) made decision to proactively communicate with customer to execute the notice obligation under
Customer in respect of that matter to avoid subsequent risks after
the contract and specify that Huawei shall be
evaluation.
exempted from the responsibility and liability
Analysis:
according to the contract in connection with US
• Force majeure clauses in the contract support the point
Sanction as a matter of force majeure.
that sanction belongs to matters beyond both parties’
• Provide necessary support to find alternative
control.
solution for customer.
• No deep cooperation with customer and Huawei’s small
• Cancel undelivered PO via Contract Change
market share won’t affect customer business.
Risks to HW
Agreement.
• Easy to procure alternative products from other vendors.

• Local owned operator.

Huawei Confidential 54
 Scenario 5:
Contract Change

Huawei Confidential 55
Contract Change Strategy
Contract Change is required as a result of solution change that is necessary due to supply chain restrictions under EL status,
which involves written communication regarding delays, replacement, and/or termination.
• Strategy: After customer accepts our new solution, we should initiate the contract amendment or obtain written confirmation ASAP, so
that we can start shipment ASAP to avoid penalty risks.

Need to do：
• Archive the meeting minutes, email, and other communications with the Customer as evidence.
• Promptly obtain formal agreement to support the contract amendment so that we are exempt of liability for breach of contract.
• If formal agreement cannot be obtained in time, only after obtaining internal decision, shipment can be started. But risk management must be performed and
form a closed loop.

Do not do：
• If the solution during bidding cannot be supplied and HW continue and sign the contract first without informing the customer and then make contract
amendment (which means signing directly leads to a breach). e.g : CUSTOMER XX NGN frame contract needs to be renewed. In the decision-making
stage the SDT identified E9000 supply risk and decided to stop the signing process. The account department communicated with customer again, customer
accepted the alternative solution and finally signed the contract.
• Implement shipment which bypasses Huawei entity (contained within the EL) via changing the transaction path (compliance risk).

Huawei Confidential 56
Contract risk changes under BCM situation, historical
clauses shall not be inherited directly
Under current BCM situation, same clause would become different meaning. Some risks are enlarged, other risks become advantageous.
Therefore, no matter new contract, renewed contract, or contract amendment shall be reviewed completely but not directly inheriting historical
clauses.

T&C Before EL After EL

Exclusive Vendor High risk
Recommended
Market Share Commitment Contract breach risk increased under BCM situation
High risk
Automatically Extension No risk No chance to optimize existing contract terms, or terminate contract, e.g.
managed service contract termination
Existing contract: maintenance risk decrease as this T&C support TGL
15 years Product Lifecycle High risk application
New contract: High risk
Sanction excluded from Force High risk
Low risk
Majeure Huawei give up defense excuse of force majeure
No Cap of Compensation High risk
Low risk
under Step-in Huawei
Step-inConfidential
will be common situation due57to BCM issue
Copyright©2014 Huawei Technologies Co., Ltd. All Rights Reserved.
The information in this document may contain predictive statements including, without limitation, statements regarding the future financial and operating
results, future product portfolio, new technology, etc. There are a number of factors that could cause actual results and developments to differ materially
from those expressed or implied in the predictive statements. Therefore, such information is provided for reference purpose only and constitutes neither
an offer nor an acceptance. Huawei may change the information at any time without notice.
Operations Mgmt. Result are based on optimization of contract-signing quality,
improvement of fulfillment ability, impact of customary rules, mitigation of risk
and implementation of assumption

Operations Management Target

Reasonable Positive Post-born

Inborn Gene- profit cash flow Improvement-
Signing high-quality Continuously
contract, managing improving
transaction model, performance quality,
enhancing contract managing self-
quality
Controllable Customer
performance ability
risk satisfaction
and Customer Habits

E2E uncertainty management

Mitigation of project risk & implementation of assumptions
Huawei Confidential 59