BMW 2008 Annual Report Download - page 65

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14 Group Management Report
14 A Review of the Financial Year
16 General Economic Environment
20 Review of Operations
42 BMW Stock and Bonds
45 Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
47 Financial Analysis
47 Internal Management System
49 Earnings Performance
51 Financial Position
52 Net Assets Position
55 Subsequent Events Report
55 Value Added Statement
57 Key Performance Figures
58 Comments on BMW AG
62 Risk Management
68 Outlook
Like all enterprises, the BMW Group is exposed to the risk
of warranty claims. Adequate provisions have been recog-
nised in the balance sheet to cover such claims. Part of the
risk, especially where the American market is concerned,
has been insured externally up to economically acceptable
levels. The high quality of BMW Group products, addition-
ally ensured by regular quality audits and ongoing improve-
ment measures, helps to reduce this risk. In comparison
with competitors, this can give rise to benefits and oppor-
tunities for the BMW Group.
Changes in the regulatory environment may impair the
sales volume, revenues and earnings performance of the
BMW Group in individual markets or economic regions.
Further information is given in the section on sector-spe-
cific risks.
Personnel risks
As an attractive employer, the BMW Group has been in a
favourable position for many years in the intense compe-
tition for qualified technical and management staff. A high
level of employee satisfaction helps to minimise the risk
of know-how drift. The BMW Group’s attractiveness as an
employer also helps to ensure that appropriately qualified
staff can be recruited, particularly at a time when new
strategies are being implemented.
An ageing and shrinking population in Germany will have
a lasting impact on the conditions prevailing in the labour,
product, services and financial markets. Demographic
change will give rise to risks and opportunities which will
affect businesses more and more in the coming years.
The BMW Group sees demographic change as one of its
main challenges and is actively involved in planning for
its effect on operations. The focus is on the following areas
of action, aimed at creating and retaining a motivated
workforce in the long term:
() the creation of a working environment for the future,
() promotion and maintenance of the workforce’s ability
to perform with the appropriate set of skills,
() appropriate qualifications,
() increasing employees’ awareness of their responsibility
to make personal provisions for their future and
() individual employee working life-time models.
Risks relating to pension obligations
The BMW Group’s pension obligations to its employees
resulting from defined benefit plans are measured on the
basis of actuarial reports. In accordance with IAS , future
pension payments are discounted by reference to market
yields on high-quality corporate bonds. These yields are
subject to market fluctuation and influence the level of
pension obligations. Furthermore, changes in other factors,
such as longer life expectancies, can also have an impact
on pension obligations. In the United Kingdom, the USA
and a number of other countries, funds intended to cover
the pension entitlements of BMW Group employees are
held in pension funds which are kept separate from corpo-
rate assets and mainly invested in fixed-income securities
(with a high level
of creditworthiness), equities, property
and other investment
classes. In , a part of the pension
obligations arising in Germany was also transferred to an
external fund, namely to BMW Trust e. V. It
is planned that
further pension obligations will be externalised in the
coming years.
Risks affecting pension funds are monitored continuously
and managed from a risk and yield perspective. Regular
asset-liability studies are performed and used to match the
maturities of interest-generating investments with future
pension payments, thereby reducing the interest rate risk
relating to pensions. Investments are broadly spread in
order to reduce risk. In addition, risk limits for investment
activities have been defined for each pension fund and are
monitored continuously.
Risk indicators (e. g. value-at-risk) are regularly computed
in order to identify risks at an early stage and used to de-
velop measures to mitigate risk.
Information and IT risks
In the BMW Group, great importance is attached to the
protection of data, business secrets and innovative devel-
opment to safeguard against unauthorised access, damage
and misuse. The protection of information and data is an
integral component of business processes and systems
are based on international security standards. Staff, process
design and information technology each play a role in the
overall security concept. Groupwide standards, which are
incorporated in the BMW Group’s set of core principles
and documented in detailed working instructions, require
employees to handle all information appropriately and to
ensure that information systems are properly used. Pur-
poseful communication and training measures create a
high degree of security awareness on the part of the em-
ployees involved. Employees receive training from the
Group’s Compliance Organisation to ensure compliance
with legal and regulatory requirements.
The technical data protection procedures used by the
BMW Group include process-specific security measures