Siemens 2008 Annual Report Download - page 290

194 Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
Management of nancial market risk is a key priority for Siemens’ Managing Board. As a member of this Board,
the Chief Financial Ofcer covers the specic responsibility for this part of the overall risk management system.
At the highest level, the Managing Board retains ultimate accountability. For practical business purposes, the
Managing Board delegates responsibilities to central functions and to the Siemens segments and entities. SFS
holds a minor trading portfolio which is subject to tight limits. As of September 30, 2008, it has a value-at-risk
close to zero.
Within the various methodologies to analyze and manage risk, Siemens implemented a system based on “sensi-
tivity analysis”. This tool enables the risk managers to identify the risk position of the entities. Sensitivity analy-
sis provides an approximate quantication of the exposure in the event that certain specied parameters were
to be met under a specic set of assumptions. The risk estimates provided here assume:
 a 20% decrease in equity prices of all investments traded in an active market, which are classied as current
available-for-sale nancial assets;
 a simultaneous, parallel foreign exchange rates shift in which the Euro depreciates against all currencies
by 10%;
 a parallel upwards shift of 100-basis points of the interest rate yield curves in all currencies.
The potential economic impact, due to these assumptions, is based on the occurrence of adverse market condi-
tions and reects estimated changes resulting from the sensitivity analysis. Actual results that are included in
the Consolidated Statements of Income may differ substantially from these estimates due to actual develop-
ments in the global nancial market.
Any market sensitive instruments, including equity and interest bearing investments that our Company’s pen-
sion plans hold are not included in the following quantitative and qualitative disclosure. For additional informa-
tion see Note 24.
Equity price risk
Siemens’ investment portfolio consists of direct and indirect investments in publicly traded companies held for
purposes other than trading. These participations result from strategic partnerships, spin-offs, IPOs of strategic
venture capital investments or compensation from M&A transactions.
The equity investments are monitored based on their current market value, affected by the uctuations in the
volatile stock markets worldwide. The market value of Siemens’ portfolio as of September 30, 2008 was €104,
a reduction of €93 compared to September 30, 2007.
An adverse move in equity prices of 20% as of September 30, 2008 would reduce the value of Siemens’ equity
investments by €21 compared to €39 the year before, meaning that the equity price risk has signicantly
decreased over the last year.
Foreign currency exchange rate risk
Transaction risk and currency management
Siemens’ international operations expose the Company to foreign-currency exchange risks in the ordinary
course of business. The Company employs various strategies discussed below involving the use of derivative
nancial instruments to mitigate or eliminate certain of those exposures.