Siemens 2012 Annual Report Download - page 217

135 D. Consolidated Financial Statements
239 E. Additional Information
130 C. Siemens AG (Discussion on basis of
German Commercial Code)
134 C. Notes and forward-looking statements
129 C. Compensation Report, Corporate Governance
statement pursuant to Section a of the
German Commercial Code, Takeover-relevant
information and explanatory report

could enable us to reduce costs and to strengthen our global
competitive position, in particular compared to competitors
based in countries with a more favorable cost structure.
We constantly strive to develop new technologies, new
products and solutions as well as to improve existing
ones: We invest in new technologies that we expect to meet
future demands in accordance with the four strategic mega-
trends demographic change, urbanization, climate change and
globalization (for further information see ... 
). For instance, starting with fiscal  we extend-
ed our solution portfolio in exploiting the future infrastructure
spending of the customer group “Cities” by bundling our com-
petencies and providing innovative and customized city con-
cepts for the relevant city stakeholders in our Sector Infrastruc-
ture & Cities. In this area, we believe to haven taken a competi-
tive lead in servicing this client base. Our approach is based on
a global network of city account managers allowing us to lever-
age the ability to replicate successful city solutions and the ca-
pability of delivering both unbundled and packaged city solu-
tions by integrating one or all of the competencies of our dif-
ferent business areas.
We are in the process of continuously developing and
implementing initiatives to reduce costs, adjust capaci-
ties, improve our processes and streamline our portfolio:
In an intensified competitive market environment, a competi-
tive cost structure complements the competitive advantage of
being innovative. We believe that further improvements in our
cost position strengthen our global competitive position and
secure our market presence against emerging and incumbent
competitors. For example, we expect to create sustainable val-
ue from productivity measures in the Sectors in connection
with “Siemens ,” as mentioned earlier a company-wide
program supporting our One Siemens framework.
We have an opportunity to further grow in the area of
environment and climate protection: Many of the key ar-
eas of our research and development activities focus on prod-
ucts and solutions capable of strengthening and advancing
our Environmental Portfolio. Our Environmental Portfolio com-
prises products and solutions with outstanding energy effi-
ciency, systems and components for renewable forms of ener-
gy, and other environmental technologies. These products and
solutions are intended to help our customers to reduce their
carbon dioxide footprint, cut their energy costs and improve
their profitability through increased productivity. We believe
that public policy initiatives in many countries will lead to
greater demand for such products and solutions in the years
ahead, including from government stimulus programs. For fur-
ther information, see ..  .
We see potentials in utilizing cross-collaboration among
our broad portfolio and global presence to offer more in-
novative and holistic solutions: Our technological and mar-
ket experience across our Sectors and Cluster enables us to le-
verage cross-divisional innovation or cross-regional solutions
to address the specific needs of our customers. Complemented
by our Financial Services organization and its portfolio we be-
lieve on further growth opportunities in our existing markets
and possibilities to explore new market opportunities.
.. Significant characteristics of
the accounting-related internal control
and risk management system
The following discussion describes information required pursu-
ant to Section  () and Section  () no.  of the German
Commercial Code (Handelsgesetzbuch) and explanatory report.
The overarching objective of our accounting-related internal
control and risk management system is to ensure that finan-
cial reporting is conducted in a proper manner such that the
Consolidated Financial Statements and the Combined Manage-
ment Report are prepared in accordance with all relevant regu-
lations.
As described in the section ..  , our ERM
approach is based on the worldwide accepted “Enterprise Risk
Management – Integrated Framework” developed by the
COSO. As one of the objectives of this framework is reliability
of a company ’s financial reporting, it also includes an account-
ing-related perspective. The accounting-related internal con-
trol system (control system) implemented by us is based on In-
ternal Control – Integrated Framework, an internationally rec-
ognized framework also developed by the COSO. The two sys-
tems are complementary as identified risks, and, for example,
may reveal gaps in the control system that could be closed by
implementing new controls and closely monitoring them. Con-
versely, monitoring the control system could show that certain
risks are not being controlled as effectively as was originally
assumed.
We have standardized our procedures for monitoring the effec-
tiveness of the control system on a group level, complying
with the requirements of the U.S. Sarbanes-Oxley Act. Under
these procedures, necessary controls are defined, documented
in accordance with uniform standards, and tested regularly.
Our management is responsible for establishing and maintain-
ing adequate internal control over financial reporting. At the
end of each fiscal year, our management performs an evalua-