Annual Report 2010 - Knorr-Bremse AG.

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Report on risks and opportunities
The Knorr-Bremse Group operates an established, multistage,
worldwide planning, reporting, and controlling system.
Standard reporting periods and report contents have
been defined across the Group, and these formal reports
are supplemented in greater depth by presentations on
routine and special subjects at monthly review meetings.
In addition, the Knorr-Bremse Group has put in place a
standardized risk management system at top management
level. This is based on a semi-annual risk report that is
discussed at regular Executive Board meetings and used as
a basis for introducing appropriate measures. This ensures
that the operational risk management system is duly complemented
at strategic level. In its entirety, this control system
has proved an effective, reliable network for the early
identification and remediation of potentially undesirable
developments.
Risk assessment and management also forms an important
part of the process of describing, documenting, and
continuously improving business processes across the
Knorr-Bremse Group (Knorr Excellence model).
Business risks
The Knorr-Bremse Group is active in business segments
that for years have been characterized by a dynamic process
of consolidation on the customer side. This has resulted
in powerful demand-side leverage, with corresponding
pressure on prices. Knorr-Bremse responds to these factors
with innovative products and systems, positioning itself as
a partner for long-term relationships that target cost-effective
solutions for the customer. The earlier Knorr-Bremse is
involved in the customer‘s project as a whole, the better
the chance of attaining that target.
Regional commercial vehicle and rail vehicle markets are
subject to irregular cycles. Market volatility and fluctuating
growth can affect individual suppliers, market segments or
entire regions. As a globally active corporate group, Knorr-
Bremse is particularly exposed to the risks implicit in the
changing state of the global economy. The development
of the economies of individual countries and of the worldwide
flow of trade is carefully monitored in order to minimize
risks affecting the company‘s sales. At the same time,
the international presence of Knorr-Bremse renders the
Group largely immune to risks that are restricted to an individual
region.
In the course of its dynamic growth in recent years, Knorr-
Bremse has integrated a number of companies or shareholdings
into the Group. In the past, the financial and cultural
risks typically associated with such integration
processes were minimized by means of systematic analysis
and assessment of the target companies. When it comes to
overcoming cultural barriers, Knorr-Bremse can look back
on 20 years of experience with integration processes related
to the acquisition of numerous companies as well as
to joint ventures in which the company holds a majority
stake and is responsible for operational management. This
experience will pay dividends in any future mergers and
acquisitions and has been mapped in the form of structured
processes.
Knorr-Bremse and its systems are regularly at the leading
edge of technological development. This also engenders
risks which, because of the safety-critical nature of the application
concerned, require particularly careful monitoring.
To this end, Knorr-Bremse routinely employs comprehensive
quality planning, quality assurance, and testing
procedures. To ensure continuous improvement of its
quality procedures, Knorr-Bremse takes its lead from international
standards. The individual plants regularly undergo
internal and external audits in this context. Above and beyond
this, despite having already attained a very high level
of quality, both divisions work intensively to continuously
improve the quality and reliability of their products with
the aid of the Knorr Excellence quality program “Quality
First”.