Risk Report
Increasing the value of the company, securing its existence and countering individual risks appropriately - these are the tasks of our risk management system. In the reporting year, all
risks were contained and manageable. The future existence of the company is secured.
Risk policy
As part of corporate strategy our risk policy is directed at systematically and continuously increasing the value of the company. The existence of the company has to be secured. In addition, the name and reputation of the Group and the "ThyssenKrupp" brand are of key importance for the Group.
The particular risk strategy applied always begins with an evaluation of the risks and the opportunities associated with them. In the Group's core competency areas we consciously take on reasonable, manageable and controllable risks if they are expected to deliver an appropriate increase in value. Risks in processes which support our core activities are transferred - where economically appropriate - to other risk carriers. Risks not connected with core and/or support processes are not accepted. Overall the aggregate risk volume must not exceed the risk coverage potential available at ThyssenKrupp AG.
ThyssenKrupp has set out rules for dealing with risks in Group policies and guidance notes. Numerous training and monitoring programs ensure these rules are observed. Speculative transactions or other measures of a speculative nature are inadmissible. Conduct towards suppliers, customers and society must be fair and responsible at all times.
Risk management system has proven itself
The risk management system installed by the Executive Board of ThyssenKrupp AG has proven itself to be efficient. All employees of the Group must consider the possible risks of their actions. Direct responsibility for early identification and management of risks and for communicating them to the next reporting level lies with the operating managers. The next organization level up in each case is responsible for risk control.
Within the framework of risk inventories the occurrence, status and significant changes of major risks are reported by the Group companies using tiered threshold values. The segments inform the Executive Board of ThyssenKrupp AG about the current risk situation on a bi-weekly basis. In addition, risks occurring at short notice and urgent risks with an impact on the entire Group are communicated directly to ThyssenKrupp AG outside the normal reporting channels.
Once again in 2006/2007 Corporate Internal Auditing examined whether the Group companies in Germany and abroad are observing the rules of the risk management system. The findings made helped further improve the early identification and management of risks. In addition we have continuously enhanced the tools for identifying and managing risks in the Group.
General economic risks
We expect the world economy to continue to grow in the next two years. We forecast growth of 5.2% in 2007 and just under 5% in 2008. The growth trend should also continue after 2008, but at a slower pace. These forecasts are based on a series of assumptions. In particular it is assumed that the geopolitical and economic situation will remain largely stable. This includes stable capital, currency and raw material markets.
Risks to global growth may result from the liquidity bottlenecks triggered by the US real estate crisis. Weaker spending by US consumers would impact the growth prospects of the US economy and dampen international trade. A weakening of the US economy would have negative effects on economic growth in the rest of the world.
In the medium term we expect the US dollar/euro exchange rate to stabilize. This forecast assumes among other things that the policy of the central banks will not lead to a further reduction in the interest rate differences between the USA and the euro zone. Interest rate and exchange rate risks would also ensue if the capital markets were to significantly change their positive attitude towards the financeability of the US trade deficit. A depreciation of the US dollar versus the euro would have negative consequences for the competitiveness of businesses producing in the euro zone.
We believe that raw material and oil prices will stay at a high level. We expect supplies of energy and other raw materials to remain secure. However, a significant rise in oil prices in particular could increase the economic risks and slow global economic growth. Protectionist measures could impair the availability of raw materials on the international markets.
Source: Annual Report 2006/2007, p. 113+116
For more details, please turn to the Corporate Governance Report Page.