Siemens 2005 Annual Report Download - page 123

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Risk management
Siemens’ risk management policy stems from a philosophy of pursuing sustainable growth and
creating economic value while avoiding and managing inappropriate risks. Because risk manage-
ment is an integral part of how we plan and execute our business strategies, our risk manage-
ment policy is set by the Corporate Executive Committee (a committee of the Managing Board
that includes both the CEO and CFO). Siemens’ organizational and accountability structure
requires each of the respective Group managements to execute risk management programs that
are tailored to their specific industries, yet consistent with the overall policy established by the
Corporate Executive Committee.
Moreover, Siemens has implemented a coordinated set of risk management and control sys-
tems to help anticipate, measure, monitor and manage its exposure to risk. The most important
of these systems include our well-established, enterprise-wide processes for strategic planning
and management reporting. The former allows us to consider potential risks well in advance of
major business decisions, while the latter enables us to monitor such risks more closely as our
business progresses. Our internal auditors also regularly review the adequacy and effectiveness
of our risk management and control systems and appropriate modifications are adopted. This
coordination of processes and procedures is intended to help ensure that the Managing Board
and the Supervisory Board are fully and timely informed about significant risks, as described
further in the section “Corporate Governance.”
Below we describe the risks which could have a material adverse effect on our financial condi-
tion or results of operations. The risks we describe here are not necessarily the only ones we face.
Additional risks not known to us or that we currently consider immaterial may also impair our
business operations.
Business risks
Our business environment is influenced by conditions in the domestic and global economies.
Numerous factors, such as global political conflicts, including situations in the Middle East and
other regions, continue to impact macroeconomic parameters and the international capital
markets. The uncertainty of economic and political conditions can impact the demand for our
products and services and can also make our budgeting and forecasting more difficult.
Our Groups in the Information and Communications business area are particularly affected
by market conditions in the telecommunications and information technology industries. In addi-
tion, SV and Osram are suppliers to the automotive industry, and their sales and profitability
could be negatively impacted by the financial condition of their automotive customers. Further-
more, the demand for products of our Groups is linked to consumer demand for automobiles,
which may be adversely impacted by the continuing uncertain economic environment. Competi-
tion in the distribution and logistics industry, including price competition, has remained strong
due to weakened demand and excess capacities.
Management’s discussion and analysis
Consolidated Financial Statements Notes to Consolidated Financial Statements