Management Report and Consolidated Financial ... - Do & Co

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GB Zahlenteil Neu 7 Englisch:Layout 1 16.10.2008 8:58 Uhr Seite 130 130 Internationality brears risk of exchange rate fluctuations Legal Risks With its constant expansion and global scope of business, DO & CO has to abide by a myriad of legal requirements at the national and international level, especially in relation to food law, hygiene, and waste management, as well as special guidelines and regulations of various airlines. Present or future legal regulations or changes in them can cause the company’s costs to increase enormously. At present, there are no signs of any changes of this kind. Every important business transaction is therefore examined and approved by Legal Compliance at the headquarters in Vienna to avoid legal risks. Liability risks and claims are largely reduced to a minimum internationally by taking out specific insurance policies. Foreign Currency Risks DO & CO is heavily exposed to the risk of exchange rate fluctuations due to the international nature of its business segments, especially Airline Catering and International Event Catering. The major foreign currencies involved are USD, YTL and GBP. Closed positions are set up as a hedge by trying to offset proceeds in a given foreign currency against expenses in that same currency with the same maturity. The company also strives to avoid additional risk by including appropriate clauses in its agreements with customers and suppliers. If need be, financial instruments and derivatives are employed to control currency risks. No derivatives were in use at the reporting date. Liquidity Risks Precise financial planning updated daily is the key to controlling liquidity and to avoiding liquidity risk. If expansion and other projects are undertaken, it is essential to conduct a meticulous analysis of their impact on the Group’s liquidity. Deviations from financial plans are detected immediately thanks to regular and prompt financial reporting. This approach ensures that counter-measures can be initiated quickly. All Austrian companies are integrated in a single cash-pooling system so that liquidity can be controlled centrally.
GB Zahlenteil Neu 7 Englisch:Layout 1 16.10.2008 8:58 Uhr Seite 131 Default Risks DO & CO keeps the risk of default to a minimum by closely monitoring outstanding debts as part of receivables management. It is proactive in controlling the risk of default associated with major customers by entering into contractual agreements with them and by having customers furnish collateral. Weekly reporting of all legal entities’ outstanding items was yet another risk mitigation practice implemented in the year under review. DO & CO does not avail itself of credit insurance. Investments are made only at banks with first-class ratings. No material default risks are expected from the other original financial instruments. Interest Risks All financial facilities have the same term as the projects they finance. Financing is done at usual market conditions. No negative effects are expected from interest rate changes. In sum, DO & CO is confident it can manage and offset its risks with the risk management system it has put in place. These risks do not pose a danger to the continued existence of the Group. The Notes contain additional details on currency, liquidity, default and interest risk (Item 4 Accounts receivable and Item 29 Financial instruments). Prompt deptor management minimises risk 131
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Management Report and Consolidated Financial ... - Do & Co

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