Siemens 2013 Annual Report Download - page 234

92 A. To our Shareholders
117 B. Corporate Governance 155 C. Combined Management Report
156 C. Business and economic environment
173 C. Financial performance system
179 C. Results of operations
192 C. Financial position
204 C. Net assets position
207 C. Overall assessment of the economic position
209 C. Subsequent events
210 C. Sustainability
227 C. Report on expected developments and
associated material opportunities and risks

Operational and organizational structure of the Enterprise Risk Management (ERM) process as of September 30, 2013
1 The term “Sector” in this chart comprises Sectors, SFS and SRE.
Implement ERM system and ensure management and monitoring of risks and opportunities in their respective organization.
Oversees the effectiveness of the risk management and
internal control system.
Audit Committee
Oversee the risk and internal control activities for their area of responsibility and provide
the Management with information necessary to report to the CRIC.
Sector Risk & Internal
Control Committees
Cluster Risk & Internal
Control Committees
Heads of Corporate UnitsSector Management Cluster Management
Overall responsibility for the Risk and Internal Control System.
Defines risk policy and ERM strategy.
Managing Board
Chairman of the CRIC. Defines and monitors application of ERM strategy,
policy and methodology. Consolidates Siemens wide risk and opportunity
profile for CRIC.
Reports to and supports the Managing Board in matters relating
to the implementation, operation and oversight of an effective
Risk and Internal Control System.
Corporate Risk & Internal Control Committee (CRIC) Chief Risk & Internal Control Officer
C.. Risks
Below we describe the risks that could have a material adverse
effect on our business, financial condition (including effects
on assets, liabilities and cash flows), results of operations and
reputation. The order in which the risks are presented in each
of the four categories reflects the currently estimated relative
exposure for Siemens associated with these risks and thus
provides an indication of the risks’ current importance to us.
Nevertheless, risks currently considered to entail a lower risk
exposure could potentially result in a higher negative impact
on Siemens than risks currently considered to entail a higher
risk exposure. Additional risks not known to us or that we
currently consider immaterial may also negatively impact
our business operations. Unless otherwise stated, the risks
described below relate to all of our segments.
C... STRATEGIC RISKS
Our business, financial condition and results of operations
may be affected by the uncertainties of economic and
political conditions, particularly in the current macro-
economic environment, which is characterized by a high
degree of uncertainty and modest recovery as well as the
continuing risk of resurgence of crisis in financial markets
and of renewed global economic downturn: Our business
environment is influenced by domestic as well as global
demand, which in turn is influenced by economic conditions.
We still see a high degree of volatility in the global financial
markets, primarily as a result of the ongoing crisis in the
Eurozone. Future economic developments and, in conse-
quence, the speed of economic growth and the sustainability
of our market environment are dependent upon the evolution
of a number of global and local factors such as the crisis in the
credit markets, economic crises arising from sovereign debt
overruns, and government budget consolidation measures re-
lated thereto, reduced levels of capital expenditures, declining
consumer and business confidence, increasing unemployment
in certain countries, fluctuating commodity prices, bankrupt-
cies, natural disasters, political crises, imminent social unrest
and other challenges.
In light of the latest economic developments, the high degree
of unemployment in certain countries, the level of public debt
in the United States, in Japan and in countries affected by the
European sovereign debt crisis, uncertainties with respect to
the stability of certain emerging markets, e.g. India or Indone-
sia, the risk of an escalation of the budgetary quarrels in the
United States and the potential impact of budget consolidation
measures by governments around the world, the bases for our
expectations relating to the overall economic situation and
specific conditions in markets relevant to us are subject to con-
siderable uncertainties. In general, due to the significant pro-
portion of long-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. Important ex-
ceptions include our short-cycle businesses in the Industry
Sector, particularly those in Industry Automation and parts of