ANNUAL REPORT 2011 - Kuehne + Nagel

Organisation of risk management
A continuous dialogue between the Management Board, risk
management and the Audit Committee is maintained in order to
assure the Group’s effectiveness in this area. The risk management
system is governed by the Risk Assessment Guideline defining
the structure and the process of risk assessments. The risk
catalogue is reviewed regularly and critical analysis ensures a
continuous development of the risk management system.
Summarised assessment of the risk situation
In the 2011 business year there were no substantial risks identified
that would have the potential to impact the Group and its
further development negatively.
Moreover, the Risk and Compliance Committee led by the Chairman
of the Board of Directors and comprising the members of
the Management Board and heads of central administrative
departments, pays special attention to monitoring the risk profile
of the company, the observance and the development of
essential internal requirements and the potential interactions
between individual risks.
The major risk remains in the uncertainties of the global economical
development and the financial markets, therefore being
in constant focus of management and determining its actions.
Financial risk management
The Group is exposed to various financial risks arising from its
underlying operations and finance activities. The Group is primarily
exposed to market risk (i.e. interest rate and currency risk)
and to credit and liquidity risk.
Financial risk management within the Group is governed by
policies and guidelines approved by the senior management.
Consolidated Financial Statements 2011 _ _ _ _ _ _ Other Notes
These policies and guidelines cover interest rate risk, currency
risk, credit risk and liquidity risk. Group policies and guidelines
also cover areas such as cash management, investment of
excess funds and the raising of short and long-term debt. Compliance
with the policies and guidelines is managed by segregated
functions within the Group. The objective of financial risk
management is to contain, where deemed appropriate, exposures
to the various types of financial risks mentioned above in
order to limit any negative impact on the Group’s results and
financial position.
In accordance with its financial risk policies, the Group
manages its market risk exposures through the use of financial
instruments when deemed appropriate. It is the Group’s policy
and practice not to enter into derivative transactions for trading
or speculative purposes, nor for the purposes unrelated to
the underlying business.
Market risk
Market risk is the risk that market prices change due to interest
rates and foreign exchange rates risk affecting the Group’s
income or the value of its holdings of financial instruments.
Interest rate risk
Interest rate risk arises from movements in interest rates which
could have effects on the Group’s net income or financial position.
Changes in interest rates may cause variations in interest
income and expenses resulting from interest-bearing assets and
liabilities. Interest rate risk is the risk that the fair value or the
future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. Loans and investments
at variable interest rates expose the Group to cash flow
interest rate risk. Loans and investments at fixed interest rates
expose the Group to fair value interest rate risk.
105