BMW 2010 Annual Report Download - page 65

63 GROUP MANAGEMENT REPORT
Risk management in the BMW Group
The BMW Group’s risk management system comprises
awide range of finely tuned organisational and meth-
odological
components. It is based on a decentralised
structure and supported by a network of risk managers.
The risk management system is aimed at encouraging
abalanced approach to risks at all organisational levels.
The risk management process is applied throughout
theGroup and comprises the early identification and
analysis of opportunities and risks, their measurement
and the use of suitable instruments to manage and
monitor risks. As part of the risk reporting system, deci-
sion makers are regularly informed about risks that could
have a significant impact on business performance.
Business decisions are reached after consideration of in-
depth project analyses which show both potential risks
and potential opportunities. In conjunction with the
Group’s monthly and medium- and long-term forecasting
systems, opportunities and risks attached to specific
business activities are evaluated and used as the basis for
implementing measures to mitigate risks and achieve
targets. Important success factors are monitored con-
tinuously to ensure that unfavourable developments are
identified at an early stage and appropriate counter-
measures implemented.
Changes in the legal, economic or regulatory environ-
ment or within the Company itself can only be assessed
in good time by means of ongoing processes. Standard-
ised rules and procedures consistently applied through-
out the BMW Group form the basis for an organisation
that is permanently learning. By regularly sharing expe-
riences with other companies, we ensure that innovative
ideas and approaches are incorporated in the risk manage-
ment
system and that risk management is subjected to
continual improvement. Regular basic and further train-
ing as well as information events are invaluable ways
ofpreparing staff for new or additional requirements with
regard to the processes in which they are involved.
Risk management is performed centrally and reviewed
regularly for appropriateness and effectiveness by inter-
nal auditors. Knowledge gained from these audits serves
as the basis for further improvements.
Consciously tak-
ing calculated risks and making full use of
theopportu-
nities relating to them has long been the basis
for our cor-
porate success.
As a globally operating organisation, the BMW Group is
exposed to a variety of risks, arising in part from the in-
creasing internationalisation of business activities and
ever-greater competition. Price fluctuations on the global
currency, money, capital and commodities markets as
well as shorter innovation cycles result in increasing com-
plexity, all of which place great demands on enterprises
with international operations.
In risk management terms, the financial year 2010 can be
sub-divided into two principal phases. During the first
half of the year, the knock-on effect of the international
economic and financial crisis was still highly evident and
the main focus was to manage related risks. The euro /US
dollar exchange rate stood at approximately 1.45 at the
beginning of the year, in retrospect its highest level for
the year. Some sales markets, particularly the USA, did
not recover quickly from the consequences of the cri
sis.
More to the point, the worry of renewed recession
emerged. It was only over the course of the year that op-
portunities gained the upper hand as some of the world’s
economies picked up perceptibly. In this situation, pro-
active
management helped us make the most of the op-
portunities that arose.
At present, no risks have been identified which could
threaten the going-concern status of the BMW Group or
which could have a materially adverse impact on the
netassets, financial position or results of operations of
the Group. However, risks can never be entirely ruled
out.
The main aspects of risk management activities are de-
scribed below. Additional comments on risks in conjunc-
tion with financial instruments are provided in the notes
to the Group Financial Statements.
Risks relating to the general economic environment
Global conditions were subject to a great deal of change
during the past year. Regional economic growth
differ-
ences and various measures designed to revive the
economy in the wake of the worldwide economic and
financial crisis were significant for Group revenues and
earnings.
The sale of vehicles outside the European Currency
Union gives rise to exchange risks, in particular in rela-
tion to the Chinese renminbi, the US dollar, the British
pound and the Japanese yen. These four currencies
accounted for over two-thirds of our total foreign cur-
rency exposure in 2010. Cash-flow-at-risk models and
scenario analyses are used to measure exchange rate
Risk Management