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2.7 Management report on the Group Expected developments and and associated opportunities and and risks risks We hedge all foreign currency positions at the time of their inception. We hedge all foreign currency positions at the time of their inception. Pages 116–119 Pages 116–119 Currency risk: To contain the risks of our numerous payment flows in different currencies – in particular in US dollars – we have developed Groupwide policies for foreign currency management. All companies of the Group are required to hedge foreign currency positions at the time of their inception; companies based in the euro zone hedge via our central clearing office. Translation risks arising from the conversion of foreign currency positions are generally not hedged. Interest rate risk: To cover our capital requirements, we procured funds on the international money and capital markets in different currencies and with various maturities. The resulting financial liabilities and our financial investments are partially exposed to risks from changing interest rates. To manage these risks, regular interest rate risk analyses are prepared, the results of which feed into our risk management system. Order risks Cost overruns and/or schedule delays can occur in the handling of major orders. We counter these risks by deploying experienced project managers and continuously improving our management instruments. We select our customers carefully and minimize the risk of default by collecting progress payments. Sales risks As a global industrial group, ThyssenKrupp is dependent on the international economic situation. Especially in the currently weakening global economy, we closely monitor economic trends in our sales regions in order to minimize the market risks. If necessary we have a package of measures at our disposal, for example an immediate adjustment of our capacities. Our international presence in different sectors and our widely differentiated product and customer structure make us largely independent of regional crises on our sales markets. Our effective receivables management system counters the risk of bad debt and continuously monitors the credit rating of our customers. More details on sales risks are provided in the section headed “Specific risks for our operations”. Risks associated with business relationships with customers in countries with trade restrictions Due to our global organization, ThyssenKrupp has business relationships in countries subject to trade restrictions. In 2010 the Federal Republic of Germany, the EU and the USA, acting on the basis of UN Resolution 1929, expanded existing trade restrictions on the Islamic Republic of Iran to include the petroleum sector, and added further individuals and a number of banks to the sanctions lists to prohibit business with them. Violations of the tightened trade restrictions are subject to severe penalties and could damage ThyssenKrupp’s reputation. We have always complied scrupulously with export control regulations and in particular trade restrictions. In addition, the Executive Board of ThyssenKrupp AG ordered a review of the business activities with Iranian customers in existence before the tighter trade restrictions came into effect to establish whether they comply with the new laws. In September 2010 it was decided that ThyssenKrupp will not enter into any new transactions with Iranian customers. This measure significantly reduces the risk of a potential violation of trade restrictions. In addition, an Elevator investment in Iran has been sold. 112
Management report on the Group 2.7 Management report on the Group Expected developments and associated opportunities and risks Pages 177-185 177–185 The effectiveness of of our compliance program was audited by by KPMG in in 2011; more information on compliance and and KPMG's KPMG‘s report can be be found on on the the internet at internet www.thyssenkrupp.com/en/konzern/ at www.thyssenkrupp.com/en/ compliance.html konzern/ compliance.html 112 | 113 Procurement risks Depending on the market situation, prices for raw materials and energy can fluctuate significantly. We safeguard our competitiveness by adjusting purchasing prices and securing alternative procurement sources. The geographical distribution of orders makes us less vulnerable to regional supply bottlenecks. To hedge against raw material price swings, in particular for nickel and copper, we also use derivative financial instruments – mainly commodity forward transactions. The use of these instruments is subject to strict rules. Details of these risk areas are provided in the Notes. The energy transition in Germany will permanently increase the price of electricity with the rise in the share of renewable energies and the associated need to expand the electricity grids. On top of this there are costintensive regulatory requirements for the electricity and gas networks of our major production locations. To counter the risk of rising energy prices we pursue a structured energy procurement policy. Furthermore all business areas are further increasing their efforts to save energy and recycle waste so as to prevent greenhouse emissions and conserve natural resources. Risks associated with acquisitions, disposals and restructurings Active portfolio management is a key element of our corporate development. We constantly monitor and if necessary make provision in the balance sheet for risks associated with the disposal or acquisition of companies, business activities and real estate and with restructurings. Legal risks associated with third-party claims Claims can result in legal risks. In the associated legal proceedings ThyssenKrupp is represented by its own experienced corporate counsel, if necessary with the additional support of external attorneys. We minimize claims for damages under product liability law through the high quality of our products. When contractual partners assert claims against ThyssenKrupp under plant construction, supply and service contracts, we examine the individual claims carefully and make provision where payment obligations are considered likely. Our strict compliance program reduces the risk of antitrust violations and corruption at all levels of the Group. In the Compliance Commitment the Executive Board of ThyssenKrupp AG states that antitrust violations and corruption are not tolerated in the Group. We monitor and regularly update our supplementary policies and publications as well as our internal compliance organization. We have separated the legal counsel service from compliance in terms of organization and staff. Within compliance the advisory function was also segregated from general principles and compliance investigations. In May 2011 we resolved further measures which will be implemented in the framework of a multi-year program. These measures include an increase in the number of employees in the compliance organization, namely by appointing regional compliance officers in selected regions. We appointed KPMG AG to audit our compliance program to auditing standard 980 of the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer e.V.) for the period April to September 2011. The audit covered the structure, implementation and in particular the effectiveness of our compliance program, and was therefore the most extensive audit possible under IDW PS 980. Due to the special rules applying in the USA, the subsidiaries in this country were not part of the audit. KPMG confirmed that the compliance management system at ThyssenKrupp AG is appropriately implemented and was effective in the period reviewed. Insofar as recommendations for compliance work were made on the basis of the audit findings, their implementation is being examined.
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Annual Report 2010/2011 At the cent
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Our mission statement We are Thysse
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Making tomorrow possible Our engine
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Letter to shareholders Dr.-Ing. Hei
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