Values

140
Group Financial Statements
Notes
Exchange Rate Risk
Bertelsmann is exposed to exchange rate risk in various currencies.
Its subsidiaries are advised, but not obliged, to hedge
themselves against exchange rate risks in the local reporting
currency by signing forward agreements with banks that possess
an excellent credit rating. Loans within the Group that are
subject to exchange rate risk are hedged using derivatives.
A number of subsidiaries are based outside the euro zone.
Th e resulting translation risk is managed through the relation-
Interest Rate Risk
Interest rate risk is managed on the basis of the Group’s planned
net fi nancial debt and expected interest rate movements.
Available funds are generally invested at fl oating rates for
periods of less than one year.
Liquidity Risk
Liquidity risks may arise through a lack of roll-over fi nancing
(liquidity risk in a narrower sense), delayed receipt of payment
and unforeseen expenditure (budgeting risk). Budgeting risk
concerns deviations in actual spending versus budget and reserve
amounts. In a narrower sense, liquidity risk depends on
the volume of debt due within a given period.
Liquidity risk is managed and monitored on an ongoing
basis with reference to the budget for current and future years.
Default Risk
The Group is exposed to default risks in the amount of the invested
cash and cash equivalents and the positive fair value
of the derivatives in its portfolio. Money market securities
and other financial instruments are transacted exclusively
with a defined group of banks with an excellent credit rating
(“core banks”). Bertelsmann has expanded internal policy
restrictions concerning the investment of cash and cash
equivalents since the outbreak of the financial crisis. Core
banks are constantly monitored on the basis of quantitative
ship of economic debt to operating EBITDA of key currency
areas. Th e objective is to achieve a reasonable relationship
between economic debt and operating results for each major
currency area in the long term; Bertelsmann uses the upper
limits for leverage defi ned for the Group as a performance indicator.
In the period under review, the proportion of fl oating-rate liabilities
was reduced by way of repayment.
New and unplanned transactions (e. g., acquisitions) are continuously
tracked. Th e maturity profi le of fi nancial assets and
liabilities is also reconciled on a regular basis. Budget risks are
managed through eff ective cash management and constant
monitoring of projected versus actual cash fl ows. Debt maturities
are also diversifi ed to ensure that rising fi nancing costs do
not have a short-term impact. Lines of credit are also maintained
for unplanned expenditures.
and qualitative criteria (rating, CDS spreads, stock price,
etc.) and rated for creditworthiness. Counterparty limits
determined on the basis of credit ratings reflect cash holdings
and positive fair value; adherence to limits is monitored
daily. Funds are invested very short-term in some cases to
preserve flexibility in the event of credit rating changes. Default
risks arising from trade accounts payable are partially
mitigated through credit insurance coverage.
Bertelsmann Annual Report 2009