Audi 2014 Annual Report Download - page 195

REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES
REPORT ON RISKS AND OPPORTUNITIES
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The Three Lines of Defense model
The risk owners of the divisions of AUDI AG and subsidiaries are
responsible for the operational management of their risks and
controls, as well as for reporting on them. They represent the
first line of defense. Controlling maintains a constant dialogue
with the departments and continually incorporates the financial
information for planning and managing purposes.
In the second line of defense, the central GRC organization takes
charge of the fundamental functionality of the Risk Manage-
ment System and Internal Control System as well as the compli-
ance management system. The core activities of Corporate Risk
Management involve monitoring system performance and sub-
mitting an aggregated report on the risk situation to the Board
of Management and the Audit Committee of the Supervisory
Board (GRC Annual Report). This ensures that the statutory
requirements for the early identification of risks and the effec-
tiveness of the Risk Management System and Internal Control
System are met. In addition, Corporate Risk Management han-
dles the Group-wide ongoing development of risk governance
and risk management tools. These include directives and stand-
ards, as well as methods and processes that are adapted to the
scale of the individual company. Consultancy on operational risk
management is available for the divisions and subsidiaries.
Furthermore, training courses and fact-finding events are in
place to reinforce risk awareness and the risk culture.
As an impartial body, Internal Audit acts as the third line of
defense in examining the security, regularity and economic
effectiveness of the systemic and operational activities of the
Risk Management System and Internal Control System. In
addition, the risk early warning system and Internal Control
System for accounting are subject to review by the independ-
ent auditor of the Consolidated Financial Statements.
// OPERATING PRINCIPLE OF
OPPORTUNITIES MANAGEMENT
The Audi Group is pursuing its Strategy 2020 with determination.
As well as managing risks effectively, it also seeks to identify and
exploit business opportunities to the best possible effect.
Opportunities management is integrated into the operational
and organizational structure of the Audi Group and is closely
aligned with our strategic objectives. Both risks and opportuni-
ties are therefore taken into account in all business decisions
that have a long-term impact. With that in mind, we analyze the
international context continually and promptly to identify gen-
eral trends and industry-specific key factors that might influence
our business model (Audi environment radar). Potential devel-
opments are studied in greater depth with the help of scenario
analyses. The possible consequences for Audi are identified with
reference to the strategic corporate planning, the divisions
affected and the Controlling area, with the goal of strategic
early diagnosis and opportunities creation. Medium and short-
term potential opportunities are identified and operationalized
by the divisions. Synchronizing the process with corporate man-
agement and internal reporting ensures we can realize the
opportunities identified to maximum effect. We safeguard our
long-term growth pathway through effective efficiency initia-
tives such as the continuous improvement process (CIP). We
remain resolutely on this course with our current Group-wide
fitness program. The program incorporates both opportunities
on the income side and further improvements to our cost struc-
tures, in order to generate a high return in the long term.
Meanwhile, we aim to further improve the efficient use of
resources.
// INTEGRATED INTERNAL CONTROL AND
RISK MANAGEMENT SYSTEM FOR THE
FINANCIAL REPORTING PROCESS
The financial reporting section of the Internal Control and Risk
Management System that is relevant for the financial state-
ments of AUDI AG and the Audi Group contains all measures
that are designed to ensure the complete, accurate and prompt
Supervisory Board
Board of Management
First
line of defense
Third
line of defense
Operational risk
management
Reports on risk
management
Second
line of defense
Coordination
of GRC control
process, risk and
compliance program
Reporting through
GRC Annual Report
Divisions Central GRC
organization Internal Audit
Audit of
RMS/ICS
Audit reports
on RMS/ICS