ANNUAL REPORT 2010/11 - Schumag AG

SCHUMAG AG 29Our department heads and area managers are incharge of the identification of risks, their assessmentand control as well as their communication.Coordination is up to our risk manager.The aim is to point out early the different types ofrisks to the persons in charge at as many hierarchylevels of the company as possible and to use therisk defence and control instruments developedwithin the scope of our risk management in duetime.The business processes are subject to controlswhich are to make risks controllable. The measuresand rules e.g. refer to instructions for the separationof duties, signing regulations, restriction ofsigning authorization for payments to a smallnumber of persons (four-eyes principle), measuresfor IT security.Apart from this, our control and risk managementsystem is assessed within the scope of the audit ofthe annual financial statements in so far as this issignificant for the provision of an accurate pictureof the assets, financial and earnings position ofSchumag.This risk report analyses and describes the essentialrisks of Schumag AG and its subsidiaries to bemonitored which were identifiable until the endof the period under review.Sales market risksSchumag mainly operates in the markets forcommercial vehicles and medical technology. Salesmarket risks occur in different forms here. Whilethe demand in the medical technology marketremains at a relatively constant level the commercialvehicles sector is decisively influenced by theoverall situation in the global economy.As far as our dependency on the automotiveindustry is concerned we see a concentrationof risks here.years a market entry success can be expected onlyafter a period of up to five years, and since theconditions for access to this market have changedwe are no longer able to guarantee the success ofthe funds invested so far in an amount of currentlyEUR 5.8 million.As in previous years the contract award of international,dollar-based projects was impaired by theEUR/USD exchange rate relation.It is a typical feature of sales market risks that theyhave a decisive influence on the assets, financialand earnings position of the company. The salessituation in 2010/11 developed towards the precrisislevel. We respond to the still existing risks arisingfrom the uncertain global economic developmentby the extension of our international market presencein the commercial vehicles supply sector. Inaddition, we develop new sales strategies to achievegrowth in the non-automotive area. Based on ourcontinued diversification we expect to curtail salesmarket risks.Due to the uncertainties with regard to futureeffects of the financial, economic and nationaldebt crisis there are no consistent forecasts forthe development of domestic and foreign demand.Our corporate planning for the core area of precisionengineering is therefore carried out carefully.For fiscal year 2012/13 we expect a decline in salescompared with the previous year by approx. 10 %while for 2013/14 a moderate sales growth ofapprox. 5 % is anticipated again. There is still a riskof sales-market-based losses due to external factorssuch as the economic and financial crisisor the realignment of customer buying behaviour.In addition, discussions with our major customersshowed that in future the question of ownership willhave an essential impact on our sales situation.In the market of plant and component constructionon which our subsidiary Schumag BR EnergyGmbH has put the main emphasis in the last three