BMW 2009 Annual Report Download - page 66

64
12 Group Management Report
12 A Review of the Financial Year
14 General Economic Environment
18 Review of Operations
42
BMW Group – Capital Market
Activities
45 Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
48 Financial Analysis
48 Internal Management System
50 Earnings Performance
52 Financial Position
54 Net Assets Position
56 Subsequent Events Report
56 Value Added Statement
58 Key Performance Figures
59 Comments on BMW AG
63 Internal Control System
64 Risk Management
70 Outlook
Risk management in the BMW Group
As a globally operating organisation, the BMW Group is
exposed to a variety of risks, arising in part from the in-
creasing
internationalisation of business activities and
ever-greater competition. Price fluctuations on the global
currency, money, capital and commodities markets as
well
as shorter innovation cycles result in increasing com-
plexity, all of which place great demands on enterprises
with international operations.
The international financial and economic crisis and its
knock-on effects have shown quite clearly, particularly
during the financial year 2009, that effective and efficient
risk management is an essential aspect of safeguarding
the going-concern status of the Group in the long term on
the one side and help us to achieve our business objec-
tives on the other. Consciously taking calculated risks and
making full use of the opportunities relating to them has
long been the basis for our corporate success.
As part of the risk reporting system, the Board of Manage-
ment and the Supervisory Board are regularly informed
about
risks which could have a significant impact on busi-
ness
performance. Risk reporting within the BMW Group
is based on an integrated risk management approach.
Business decisions are reached after consideration of in-
depth project analyses which show both potential risks and
potential opportunities. In addition, as part of long-term
planning, annual budget and short-term forecasts, the
risks and opportunities attached to specific business activi-
ties are evaluated and used as the basis for implementing
measures to mitigate risks and achieve targets. The risk
management process is applied throughout the Group and
comprises the early identification of risks and opportuni-
ties, their measurement and the use of suitable instruments
to manage and monitor risks. Our risk management system
comprises a wide range of organisational and methodo-
logical components that are all finely tuned to each other.
The system’s decentralised structure also encourages a
balanced approach to risks at all organisational levels.
The Group reporting system provides decision makers with
comprehensive, up-to-date information on performance
against targets and on new developments with regard to
the market and competitors. Critical success factors are
monitored continuously to ensure that unfavourable devel-
opments are identified at an early stage to enable appro-
priate counter measures to be taken and business oppor-
tunities exploited accordingly.
We see risk management as a continuous process, given
the fact that changes in the legal, economic or regulatory
environment or those within the company itself could lead
to new risks or to known risks being differently assessed.
Standardised rules and procedures consistently applied
throughout the BMW Group form the basis for an organisa-
tion that is permanently learning. By regularly sharing ex-
periences with other companies, we ensure that innovative
ideas and approaches flow into the risk management
system and that risk management is subjected to continual
improvement. Regular basic and further training as well
as
information events are invaluable ways of preparing
employees for new or additional requirements with regard
to
the processes in which they are involved.
Overall risk management within the BMW Group is
managed
centrally and reviewed for appropriateness and
effectiveness by the Group’s internal audit department.
In addition, knowledge gained from external audits also
provides a good basis for further improvements.
At present, no risks have been identified which could
threaten the going concern status of th
e BMW Group or
which could have a materially adverse impact on the net
assets, financial position or results of operations of the
Group. However, risks can never be entirely ruled out.
The main aspects of risk management activities are de-
scribed below. Additional comments on risks in conjunc-
tion with financial instruments are provided in Note 39
of the Group Financial Statements.
Risks relating to the general economic
environment
As a globally operating enterprise, the BMW Group is
affected by economic conditions worldwide. The interna-
tional economic crisis and its impact on financial, goods
and services markets had a significant bearing on Group
revenues and earnings in 2009. The sale of vehicles out-
side the European Currency Union gives rise to currency
exposures, in particular with regard to the US dollar, the
Japanese yen, the British pound and the Chinese renminbi.
These four currencies accounted for approximately two
thirds of our total foreign currency exposure in 2009. Cash-
flow-at-risk models and scenario analyses are used to
measure exchange rate risks. These instruments also serve
as part of the process of currency management for the
purpose of taking business decisions.
Risk Management