Siemens 2009 Annual Report Download - page 187

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defined approval processes to support us to identify and
respond to project risks at an early stage, even before entering
the bidding phase. Furthermore, we maintain appropriate in-
surance levels for potential cases of damage and liability risks
in order to reduce our exposure to such risks and to avoid or
minimize potential losses. Among others, we counteract the
risk of fluctuations in economic activity and customer demand
by closely monitoring the macroeconomic conditions and the
developments in relevant industries, and by timely and conse-
quently adjusting capacity and performing cost reduction
measures, if deemed necessary.
To oversee the ERM process and to further drive the integra-
tion and harmonization of existing control activities in align-
ment with legal and operational requirements, the Managing
Board established a Corporate Risk and Internal Control De-
partment and Corporate Risk and Internal Control (CRIC) Com-
mittee. The CRIC Committee obtains risk and opportunity in-
formation from the Risk Committees established at Sector,
Cross-Sector Business and regional Cluster level as well as from
the Heads of Corporate Units, which then forms the basis for
the evaluation of the company-wide risk and opportunity situ-
ation. The CRIC Committee reports to and supports the Manag-
ing Board on matters relating to the implementation, opera-
tion and oversight of the ERM process and assists the Manag-
ing Board in reporting to the Audit Committee of the
Supervisory Board. The CRIC Committee is comprised of the
Chief Risk & Internal Control Officer, as the chairperson, and
members of senior management like the Sector and Cross-
Sector Business CEOs, the CFO of Siemens, and selective Heads
of Corporate Units.
Moreover, according to U.S. legal requirements, which are in
this regard more comprehensive than those required by Ger-
man law, Siemens is required to establish and maintain ade-
quate internal control over financial reporting. Siemens’ inter-
nal control system is designed to provide reasonable assurance
regarding the reliability of financial reporting and the prepara-
tion of financial statements for external purposes. Manage-
ment concluded that Siemens’ internal control over financial
reporting was effective as of September 30, 2009.
Below we describe the risks that could have a material adverse
effect on our business, our financial condition and results of
operations, the price of our shares and American depository
shares (ADSs), and our reputation. 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. We do not expect to incur any
risks that alone or in combination would appear to jeopardize
the continuity of our business.
STRATEGIC RISKS
Our business is affected by the uncertainties of economic
and political conditions, in particular by the current global
macroeconomic downturn and financial crisis: Our business
environment is influenced by conditions in the domestic and
global economies. In fiscal 2009, the global economic situa-
tion took a significant turn for the worse leading to a decline in
consumer and business confidence, increased unemployment
and reduced levels of capital expenditure, resulting in lower
demand and more challenging market environments across
our Sectors. Our Industry Sector was especially affected by
weaker demand due to the adverse macroeconomic and fi-
nancing conditions. In recent months, certain indices and
economic data began to show first signs of improvement and
stabilization in the macroeconomic environment. However,
there can be no assurance that these improvements will be
broad-based and sustainable, and how they will affect the mar-
kets relevant for us. In general, due to the significant propor-
tion of longer-cycle businesses in our Sectors and the impor-
tance of long-term contracts for Siemens, there is usually a
time lag between the development of macroeconomic condi-
tions and their impact on our financial results. If the improve-
ments will be temporary or the global economic downturn
continues or worsens and we are not successful in adapting
our production and cost structure to the current market envi-
ronment there can be no assurance that we will not experience
further adverse effects that may be material to our revenues,
results of operations, financial condition and ability to access
capital. For example, in addition to a general decline in de-
 Managing Board statements, Independent auditors’ report, Additional information
95 Net assets position 97 Report on post-balance sheet date events
98 Risk report
108 Information required pursuant to
§315 (4) HGB of the German Commercial
Code and explanatory report
114 Compensation report
114 Report on expected developments