Audi 2013 Annual Report Download - page 202

REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES
REPORT ON RISKS AND OPPORTUNITIES
MANAGEMENT REPORT
199
A
// MONITORING OF EFFECTIVENESS, ONGOING
EXAMINATION AND REFINEMENT
With regard to the BilMoG criteria, where corrective action and
management checks substantially reduce the risk, their effec-
tiveness is checked by the departments or by internal and exter-
nal assessors. The departments then attend promptly to the
weak points. Implementation is followed up by Central Risk
Management. The processes of the risk management system
and internal control system are regularly optimized within our
continuous monitoring and improvement processes in order to
ensure lasting effectiveness of the systems. The results are
reported to the Board of Management and Supervisory Board
both on a regular and an ad hoc basis. Internal Auditing and the
external independent auditor act as impartial bodies, which
monitor the regularity and effectiveness of selected elements.
/ RISKS AND OPPORTUNITIES OF THE AUDI GROUP
We list below those risks which we consider to be material,
based on our current assessment of the future development of
the Audi Group. The opportunities presented are determined
analytically and are operationalized when an opportunity
becomes sufficiently specific. The following presentation of
our opportunities and risks reflects the categories typically
used in the automotive industry. Within these categories, we
distinguish according to significance.
// ECONOMIC RISKS
As a manufacturing enterprise, the Audi Group is dependent on
a prompt, demand-driven supply of raw materials, preliminaries
and semi-finished goods. Bottlenecks can occur, for example,
as a result of disproportionately high demand on the markets
for raw materials or due to statutory or political restrictions.
Audi counteracts these risks through ongoing monitoring of
developments in the raw materials markets that are relevant
for the Company. In addition, it continually reconciles its
demand with the market supply and uses its findings when
reaching decisions on stocking, supplier selection and the
production program.
Potential disruptions to the supply chain may occur due in par-
ticular to economic crisis, but also to quality problems and lost
production at suppliers and in turn their own suppliers, as well
as political unrest and environmental disasters. The Audi Group
addresses this risk by practicing preventive, reactive risk man-
agement in the Procurement division as well as continually
analyzing the wider situation.
Commodity price risks may occur as a result of temporary or
longer-term market shortages and undermine the Company’s
competitiveness. In addition to incorporating this risk in cost-
ing, the Audi Group has taken medium-term precautions and
concluded an appropriate level of hedging transactions for
purchases of commodities.
Our Company’s economic success is influenced to a high degree
by the development of the economic conditions worldwide.
European sales markets as well as the U.S. and Chinese auto-
motive markets are of key importance for us. Economic devel-
opments in the individual regions may exhibit marked differ-
ences and considerable fluctuations, with an impact on unit
sales, price enforcement and plant utilization, for example. In
view of the major significance of European sales markets for our
Company, an even sharper decline in demand in Europe would
prove a significant burden for us. An unforeseen slowdown in
economic growth, especially in China, could adversely affect
the global economy and therefore also our business forecasts.
Our ongoing observation of sales markets and analysis of cus-
tomer preferences is flanked by the use of extensive risk early
warning systems. With our attractive product portfolio as well
as consistent market development and management efforts, we
aim to lay the foundations for our long-term business success
even in a challenging environment. Furthermore, we always
strive for demand-oriented production planning so that we can
respond flexibly even to short-term fluctuations in demand.
Helpful solutions for us include, for example, the potential for
transferring production between the locations under the pro-
duction turntable principle and using timebanking effectively.
Unexpected “shocks” such as political intervention in the
economy, social conflicts, terrorist attacks, pandemics and
natural disasters could equally have a detrimental effect on
the Audi Group’s business performance by undermining eco-
nomic activity as well as international financial and capital
markets. The Audi Group counters these risks by taking out
appropriate insurance cover, analyzing such scenarios and
drawing up emergency plans.
// ECONOMIC OPPORTUNITIES
The Audi Group believes there are economic opportunities in
particular as a result of a more positive development in market
demand in Asia, the United States and other selected market
regions. In addition, a wide range of technological innovations
can offer attractive opportunities.