Siemens 2015 Annual Report Download - page 27

Combined Management Report 
year level despite higher interest expense related primarily to
issuance of bonds in fiscal .
We do not expect significant effects from discontinued opera-
tions in fiscal . For comparison, income from discontinued
operations of € . billion in fiscal  included the € . billion
gain from the sale of our hearing aid business. We anticipate
our tax rate for fiscal  to be in the range of  % to  %.
Capital efficiency
Within our One Siemens financial framework, we in general
aim to achieve a ROCE in the range of  % to  %. For fiscal
, we expect ROCE to show a double-digit result but to come
in substantially below the amount reached in fiscal , which
benefited from the sale of businesses described earlier.
Capital structure
Following the financing measures executed during fiscal ,
we expect our capital structure ratio in fiscal  to be below
but near .. In November , we announced a new share
buyback of up to €  billion ending at the latest on Novem-
ber , . The buybacks will be made under the current
authorization granted at the Annual Shareholders’ Meeting on
January , . Shares repurchased may be used for cancel-
ling and reducing capital stock; for issuing shares to employ-
ees, to members of the Managing Board and board members of
affiliated companies; and for meeting obligations from or in
connection with convertible bonds or warrant bonds.
A.8.1.4 OVERALL ASSESSMENT
We anticipate further softening in the macroeconomic environ-
ment and continuing complexity in the geopolitical environ-
ment in fiscal . Nevertheless, we expect moderate revenue
growth, net of effects from currency translation. We anticipate
that orders will materially exceed revenue for a book-to-bill ratio
clearly above . For our Industrial Business, we expect a profit
margin of  % to  %. Furthermore, we expect basic EPS from
net income in the range of € . to € . as compared to € .,
which we achieved in fiscal  excluding € . per share in
portfolio gains from the divestments of the hearing aid business
and our stake in BSH. This outlook assumes that momentum in
the market environment for our high-margin short-cycle busi-
nesses will pick up in the second half of fiscal . Additionally,
it excludes charges related to legal and regulatory matters.
Overall, the actual development for Siemens and its Segments
may vary, positively or negatively, from our outlook due to the
risks and opportunities described below or if our expectations
and assumptions do not materialize.
A.8.2 Risk management
A.8.2.1 BASIC PRINCIPLES OF RISK MANAGEMENT
Our risk management policy stems from a philosophy of pursu-
ing sustainable growth and creating economic value while
managing appropriate risks or opportunities and avoiding inap -
propriate risks. As risk management is an integral part of how
we plan and execute our business strategies, our risk manage-
ment policy is set by the Managing Board. Our organizational
and accountability structure as of September ,  requires
each of the respective managements of our Industrial Business,
SFS, regions and Corporate Units to implement risk manage-
ment programs that are tailored to their specific industries and
responsibilities, while being consistent with the overall policy.
A.8.2.2 ENTERPRISE RISK MANAGEMENT PROCESS
We have implemented and coordinated a set of risk manage-
ment and control systems which support us in the early recog-
nition of developments that could jeopardize the continuity of
our business. The most important of these systems include our
enterprise-wide processes for strategic planning and manage-
ment reporting. Strategic planning is intended to support us in
considering potential risks well in advance of major business
decisions, while management reporting is intended to enable
us to monitor such risks more closely as our business pro-
gresses. Our internal auditors regularly review the adequacy
and effectiveness of our risk management system. Accordingly,
if deficits are detected, it is possible to adopt appropriate mea-
sures for their elimination. This coordination of processes and
procedures is intended to help ensure that the Managing Board
and the Supervisory Board are fully informed about significant
risks in a timely manner.
Risk management at Siemens builds on a comprehensive, inter -
active and management-oriented Enterprise Risk Management
(ERM) approach that is integrated into the organization and
that addresses both risks and opportunities. Our ERM approach
is based on the worldwide accepted Enterprise Risk Manage-
ment – Integrated Framework () developed by the Commit-
tee of Sponsoring Organizations of the Treadway Commission
(COSO). The framework connects the ERM process with our
financial reporting process and our internal control system. It
considers a company’s strategy, the efficiency and effective-
ness of its business operations, the reliability of its financial
reporting as well as compliance with relevant laws and regula-
tions to be equally important.
The ERM process aims for early identification and evaluation
of, and response regarding, risks and opportunities that could
materially affect the achievement of our strategic, operational,
financial and compliance objectives. The time horizon covered
by ERM is typically three years. Our ERM is based on a net risk