2005-2006 Financial Statements and Management Report

66
THE RISKS TO THE THYSSENKRUPP
GROUP ARE CONTAINED AND
MANAGEABLE.
The risk structure within the Elevator segment reflects not only the different business activities but
also the wide regional presence. While the service and modernization activities are relatively unaffected
by cyclical fluctuations and thus have a stabilizing effect on earnings, the new installation business is
dependent upon the cyclical situation in the construction sectors of the various countries. Activity on
the American construction market is expected to slow. However, stable growth will continue in Asia and
the Eastern European region. Risks also arise from the processing of major projects, and risk management
methods are already in operation here. The service activities counter risks relating to the loss of
maintenance units by developing and implementing customer retention strategies.
Financial hedges are used to limit dependency on exchange-rate effects. In addition, the billing of
sales and costs is largely congruent.
The Services segment focuses on materials trading and services. Services counters the price risks in
procurement and sales through the systematic further development of logistics and logistics control
systems, in particular the expansion of the centralized warehousing concept to optimize inventories and
expand the service business, which does not depend on the price of materials. Risks from the cyclical
development on the markets as a whole and in specific sectors are reduced by a worldwide presence,
a broad customer base and a high degree of diversification. The resultant wide spread of risks also
applies to the risks from potentially uncollectible receivables, which are additionally limited by the use
of hedging instruments.
Risks for the Industrial Services unit result from the considerable competition and price pressure. We
counter this pressure by continuous capacity adjustments on the one hand and new service offerings
and sales initiatives directed at specific sectors and customers on the other. An ongoing project controlling
system is in place to manage risks from the final completion of projects.
SUMMARY: NO THREAT TO EXISTENCE OF COMPANY
The overall evaluation of the risks shows that the Group is affected principally by market risks; these
include economic price and volume developments in particular, as well as the dependency on the
performance of major customers and industries. Business processes are well controlled in general
and, therefore, less subject to risks. Overall, the risks at ThyssenKrupp are contained and manageable
and do not pose a threat to the existence of the Company. Nor are any risks discernible that may
jeopardize the existence of the Company in the future.