Risk report

In the current fiscal year ThyssenKrupp has been significantly affected by the impact of the financial crisis and its effects on the real economy. However, thanks to our systematic and efficient risk management system, these risks remain contained and manageable. There are no risks threatening the existence of the Company. We are responding to the current economic risks, in particular in the automotive, engineering and construction markets which are of importance to us, with an extensive action program which involves implementing sustained cost-cutting and efficiency enhancement measures in all areas of the Group.

Against the background of the financial crisis, financial risks such as liquidity and credit risks are an increasing focus of attention. ThyssenKrupp takes account of and manages these risks and handles liquidity requirements with foresight. Despite the difficult market environment, financing in fiscal 2008/2009 is on a secure foundation. In the 2nd quarter of the current fiscal year the Group issued a new bond, thereby improving its maturities profile and further strengthening its liquidity situation. However, like other companies ThyssenKrupp could not escape the current market conditions which are characterized by relatively high risk premiums for borrowed capital.

By contrast with the increase in risk premiums for new financings, the reductions in the central bank interest rates are having a positive impact on refinancing costs as they reduce the base rate for our existing variable credit lines via the interbank interest rates, which have also fallen.

Credit risks (default risks) arise from the fact that the Group is exposed to possible default by a contractual party in relation to financial instruments, e.g. financial investments. Against the background of the financial crisis, default risks are taking on greater significance and are being managed very carefully as part of our business policy. Financial instruments used for financing are concluded only with counterparties of extremely good credit standing and within specified risk limits.

Further financial risks such as currency, interest rate and commodity price risks are reduced by the use of derivative financial instruments. Restrictive principles regarding the choice of counterparties also apply to the use of these financial instruments.

In particular in our Steel and Stainless segments but also in the automotive and shipbuilding operations of Technologies, the slowdown of our core markets has given rise to significant volume and price risks which are forcing us to take action in response. Short-time working in the areas affected and additional action programs are under way to safeguard our competitiveness.

ThyssenKrupp's global presence in different areas of activity – steel, capital goods and services – reduces the risk of being dependent on individual sales markets. Our good, longstanding customer relations and our skilled and motivated employees are also helping mitigate the current risks.

We counter other business risks - such as bad debt and changes in political and regulatory conditions - with an intensive controlling and monitoring system. The filing for Chapter 11 bankruptcy protection by Chrysler LLC in the USA has had no major impact on the consolidated interim financial statements for the period ended March 31, 2009. Beyond this, the detailed information contained in the risk report in our 2007/2008 Annual Report is still valid.

We report on pending lawsuits, claims for damages and other risks in Note 07.