Risk report

In the current fiscal year the business activities of ThyssenKrupp have been significantly affected by the impact of the financial and economic crisis. 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. ThyssenKrupp is responding to the current economic risks in the markets of importance to us with an extensive action program comprising 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 these risks and manages liquidity requirements with foresight. Despite the difficult market environment, financing in this fiscal year and the next is on a secure foundation. In particular with the issue of bonds with a total volume of €3 billion in the 2nd and 3rd quarters of the current fiscal year, we improved our maturities profile and further strengthened our 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 effect 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. In times of crisis, default risks take on greater significance; we are therefore managing them 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 our Steel and Stainless segments and also in the automotive and shipbuilding operations of Technologies, we are exposed to significant market-related capacity utilization and price risks to which we are responding with an extensive action program including short-time working. We are doing this in order to adjust to the new market conditions and safeguard our competitiveness.

In view of the current order situation in shipbuilding, the possibility cannot be ruled out that further surplus capacities may have to be removed and that the very difficult negotiations with the Greek customer may not be brought to a successful conclusion. Both these events could have a significantly negative effect on the Group's financial and earnings situation.

ThyssenKrupp's global presence and good, longstanding customer relations help us in the current market situation, ensuring that we are less dependent on individual sales markets. We do not expect the filing for bankruptcy protection by General Motors and Chrysler in the USA to have a major impact on our business.

Our skilled and motivated employees are helping mitigate the current risks for the Group. Furthermore, an intensive controlling and monitoring system ensures that risks from the handling of our major projects as well as other business risks – such as bad debt and changes in political and regulatory conditions – are efficiently managed. 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 7.