Audi 2014 Annual Report Download - page 198

REPORT ON EXPECTED DEVELOPMENTS, RISKS AND OPPORTUNITIES
REPORT ON RISKS AND OPPORTUNITIES
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effectiveness is checked by the departments or by external
assessors. If their effectiveness is deemed inadequate, the
department must ensure that improvements are made.
Corporate Risk Management monitors implementation. The
Risk Management System and Internal Control System is
regularly optimized and refined within our continuous moni-
toring and improvement processes. Results and evolutionary
developments are reported to the Board of Management and
the Audit Committee of the Supervisory Board both on a
regular and an ad hoc basis. The regularity and effectiveness
of selected elements are also monitored by Internal Audit
and by external auditors in their capacity as impartial bodies.
/ RISKS AND OPPORTUNITIES OF THE AUDI GROUP
We list below those risks which, based on our current assess-
ment, we consider to be material to the future development of
the Audi Group. The opportunities presented are determined
analytically and are operationalized when an opportunity be-
comes sufficiently specific. The following presentation of our
risks and opportunities reflects the categories typically used in
the automotive industry. The risks within each category are
presented in descending order of significance.
// ECONOMIC RISKS
A stable supply chain along with a demand-led supply of raw
materials, preliminaries and semi-finished goods are the pre-
requisites for optimum utilization of production capacity.
Disruptions to the supplier network and its environment may
lead to temporary supply bottlenecks. Their causes may include
natural disasters, political unrest and strikes (such as a strike
by train drivers), but also economic crises, as well as quality
problems and disruptions to production processes at suppliers
and their own suppliers. Audi manages this risk by practicing
preventive and reactive risk management within Procurement
as well as continually analyzing the wider situation. Contracts
are awarded to suppliers on the basis of a risk assessment and
such decisions are put through rigidly defined processes.
The economic environment of the Europe, United States and
China sales markets are of major significance for the economic
success of the Company. The business cycle in the individual
regions may exhibit marked differences and high fluctuations
that impact unit sales, price enforcement and plant utilization,
for example. Thanks to our worldwide distribution network, we
are in a position to make up elsewhere for market weakness in
individual countries. Nevertheless, adverse developments in
individual sales regions may affect our volume programs and
profit planning. We intend to continue building on our market
strength in Europe. Risks arise from the continuing challenges
of the economic and political environment. China is expected
to remain the major driving force behind global market growth.
As a result, we are increasing our capacities in that region in
order to meet local demand. The competitive situation could
nevertheless further intensify in this growth market. To man-
age the risk, we use comprehensive risk early warning systems
with which we continually observe the sales markets and ana-
lyze customer preferences. We intend to safeguard our compet-
itiveness and long-term business success through our strong
brand, attractive product portfolio and steady focus on premi-
um quality. We respond to short-term developments with
market-specific measures and instruments of control. Further-
more, we always strive for demand-oriented production plan-
ning so that we can also respond flexibly to fluctuations in
demand. Helpful solutions for us include, for example, the
potential for transferring production between the locations
under the production turntable principle and the effective use
of timebanking by our employees.
Political intervention in the economy, social conflicts, terrorist
attacks, pandemics and natural disasters could cause unex-
pected events that could equally affect economic activity as
well as international financial and capital markets. We coun-
ter the risk of a negative business development from such
factors by conducting comprehensive scenario and future
analyses, drawing up emergency plans and taking out appro-
priate insurance cover. The Audi Group has developed a crisis
organization to reinforce Group-wide crisis management.
// ECONOMIC OPPORTUNITIES
The Audi Group perceives market opportunities particularly in
the Asia-Pacific region and in the markets of the Americas.
Furthermore, the broadening of our product portfolio predom-
inantly in the full-size segment could unlock extra market
potential in established and high-growth markets. To realize
these opportunities, we are steadily increasing our worldwide
market presence especially in the growth markets. In addition,
the further internationalization of our production network
increases our flexibility to meet specific customer requirements
and strengthens brand awareness of our brand worldwide.
Economic developments and customer requirements are con-
tinually monitored worldwide in order to capitalize early on
opportunities afforded by innovative solutions and new tech-
nologies.