Siemens 2008 Annual Report Download - page 195

Management’s discussion and analysis 99
Legal proceedings
For information on legal proceedings, see “Notes to Consolidated Financial Statements.”
Risk management
Siemens’ risk management policy stems from a philosophy of pursuing sustainable growth and creating eco-
nomic value while avoiding and managing inappropriate risks. Because risk management is an integral part of
how we plan and execute our business strategies, our risk management policy is set by the Managing Board.
Siemens’ organizational and accountability structure requires each of the respective managements of Corporate
Units, operating units and Regional Companies to execute risk management programs that are tailored to their
specic industries and responsibilities, yet consistent with the overall policy established by the Managing Board.
Siemens has implemented and coordinated a set of risk management and control systems which support us in
the early recognition of developments endangering the going concern of the company. The most important of
these systems include our enterprise-wide processes for strategic planning and management reporting. The for-
mer is intended to support us to consider potential risks well in advance of major business decisions, while the
latter is intended to enable us to monitor such risks more closely as our business progresses. Our internal audi-
tors also regularly review the adequacy and effectiveness of our risk management system. Thereby, decits are
detected and appropriate measures for their elimination become 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 signicant risks, as described further in the section “Corporate Governance.”
In order to enhance the risk management system, Siemens implemented a comprehensive and integrated Enter-
prise Risk Management (ERM) approach into its organization in scal 2008. The ERM process serves for identify-
ing, evaluating and responding to those risks that could materially affect the achievement of Siemens’ strategic,
operational, nancial and compliance objectives. The ERM system covers the whole spectrum of risks and fur-
ther improves strategies to enhance risk response decisions.
To oversee the ERM process and to ensure the alignment with legal and operational requirements the Managing
Board established a Corporate Risk Committee (CRC). The CRC reports to and supports the Managing Board on
matters relating to the implementation, operation and oversight of the ERM process and assist the Managing
Board in reporting to the Audit Committee of the Supervisory Board. The CRC is comprised of the head of Corpo-
rate Finance and Controlling, as the Chairperson, the CEOs of the Sectors and the CEO of the Cross-Sector Busi-
ness SFS and the head of Corporate Legal and Compliance, the head of Corporate Human Resources, the head of
Corporate Technology, the head of Corporate Strategies, the head of Corporate Compliance, the head of Corpo-
rate Legal Corporate and Finance, the head of Corporate Finance Audit, the head of Corporate Finance Taxes and
the head of Corporate Finance Reporting and Controlling.
Moreover, according to U.S. legal requirements, which are in this regard more comprehensive than those
required by German law, Siemens is required to establish and maintain adequate internal control over nancial
reporting. Siemens’ internal control system is designed to provide reasonable assurance regarding the reliabil-
ity of nancial reporting and the preparation of nancial statements for external purposes. In scal 2006 man-
agement concluded that the internal control over nancial reporting proved to be not effective with respect to
preventing misappropriation of funds and abuse of authority. Therefore, during scal 2007 and scal 2008,
management actively designed, initiated and implemented extensive remediation actions focusing on internal