ANNUAL REPORT 2011 - Kuehne + Nagel

104
Consolidated Financial Statements 2011 _ _ _ _ _ _ Other Notes
both financial and operational risks. A risk is defined as the
possibility of an adverse event which has a negative impact on
the achievement of the Group’s objectives.
Risk management as an integral part
of the Internal Control System
Risk management is part of the Internal Control System (ICS).
Preventive and risk-reducing measures to control risks are proactively
taken on different levels and are an integral part of
management responsibility. Operational risks are treated where
they occur in accordance with established competencies.
Conduct of a risk assessment in 2011
The analysis and assessment of financial risks was carried out by
the finance and accounting department. A specific risk assessment
procedure was adopted for operational risks. Applying an
interview methodology, risks were identified in collaboration
with regional management and included into a risk overview
which was discussed with the senior management. Strategic risks
and the adoption of countermeasures were dealt with at Management
Board level. Within the framework of the corporate governance
process, the Audit Committee of the Board of Directors
was informed on the progress of the risk assessment.
Identified risks:
— Financial risks such as development of interest rate, credit
and financial markets and currency risks, which are all constantly
monitored and controlled by the finance and accounting
department.
— The growing challenges of the economic development as well
as the uncertainties of the financial markets are of essential
importance from the risk-policy point of view, whereby this is
counteracted by appropriate risk diversification and avoidance
of regional and industry clustering. In this connection,
risks relating to purchase of transportation services are
specifically monitored.
— Ensuring readiness of the operational network is paramount
for a global logistics company. Potential risks are mainly
caused by Force Majeure such as natural disasters and pandemics,
but also in the socio-political environment. Various
activities in the area of Business Continuity, targeted training
and information to staff, safety measures and emergency
plans are set up to maintain operational availability.
— Further to the operational readiness, the IT network availability
is in the focus. Permanent monitoring of systems, redundant
infrastructure, interlinked data centres with back-up
structures and business continuity plans are risk mitigating
measures of this area.
— Organised crime, terrorism, accompanied by increased density
of regulations, growing complexity and customer expectations
have led to rising security requirements which are taken into
consideration by using a holistic supply chain approach.
— In this connection, management intensified focus on IT
security, particularly data security and integrity.
— Special focus is given by senior management to risks combined
with the integration of new staff members in particular
following the acquisition of companies. Kuehne + Nagel has
further developed its precautionary measures in the area of
integration management.
— Increasing regulatory demands as well as growing complexity
and international interrelation of business relations increase
the trend towards contract and liability risks. These risks are
monitored primarily by the development of an integral ITsupported
contract management.
— Legal and compliance risks such as fraud and intentional and
unintentional violations of the law as well as adherence to
export regulations are counteracted by various activities.
The measures include inter alia comprehensive staff training
and a worldwide network of compliance officers to ensure
anchoring on regional and national management levels.
— Communication risks with respect to capital markets as well
as image and reputation risk, e.g. in connection with compliance-related
issues, are taken into consideration by a centralised
approach towards corporate communications.