BMW 2010 Annual Report Download - page 70

68
12 GROUP MANAGEMENT REPORT
12 A Review of the Financial Year
14 General Economic Environment
18 Review of Operations
41 BMW Group – Capital Market
Activities
44 Disclosures relevant for takeovers
and explanatory comments
47 Financial Analysis
47 Internal Management System
49 Earnings Performance
51 Financial Position
53 Net Assets Position
55 Subsequent Events Report
55 Value Added Statement
57 Key Performance Figures
58 Comments on BMW AG
62 Internal Control System and
explanatory comments
63 Risk Management
70 Outlook
Apart from the issues discussed above, the BMW Group
is not currently involved in any court or arbitration pro-
ceedings that could have a significant impact on its finan-
cial condition.
Changes in the regulatory environment may impair our
sales volume, revenues and earnings performance in
specific markets or economic regions. Further informa-
tion is provided in the section on sector-specific risks.
Personnel risks
As an attractive employer, for many years we have enjoyed
a favourable position in the intense competition for
qualified technical and management staff. A high level
of employee satisfaction helps to minimise the risk of
know-how drift.
The further development of programmes for new recruits
from specific target groups also plays an important part
in both recruiting and furthering the careers of highly
qualified staff. In 2010, various programmes for manage-
ment trainees and school leavers were revised and started
afresh. Further progress was made in the programme
setup for doctoral postgraduates to encourage highly
motivated recruits to engage in innovative activities for
the BMW Group.
The ageing and shrinking population in Germany will
have a lasting impact on the conditions prevailing in the
labour, product, services and financial markets. Demo-
graphic change will give rise to risks and opportunities
which will affect businesses to an increasing degree in
the coming years. We see demographic change as one of
our main challenges and we are taking a proactive ap-
proach to planning for its effect on operations. The focus
is on the following areas of action, aimed at creating and
retaining a motivated workforce in the long term:
(1) The creation of a working environment for the future,
(2) Promotion and maintenance of the workforce’s ability
to perform with the appropriate set of skills,
(3) Appropriate qualifications,
(4) Increasing employees’ awareness of their responsi-
bility to make personal provisions for their future and
(5) Individual employee working life-time models.
Our diversity strategy is also increasing our ability to per-
form well in the long term. Thanks to the diverse structure
of our workforce, we have access to a body of knowledge
which ensures that existing sales markets are optimally
served, new markets tapped and the inherent strength of
the business maintained.
Risks relating to pension obligations
The BMW Group’s pension obligations to its employees
resulting from defined benefit plans are measured on
thebasis of actuarial reports. In accordance with IAS19,
future pension payments are discounted by reference to
market yields on high-quality corporate bonds. These
yields are subject to market fluctuation and influence the
level of pension obligations. Furthermore, changes in
other factors such as rising inflation or longer life expect-
ancies can also have an impact on pension obligations.
The final tranche of pension obligations in Germany
wastransferred to an external fund in 2010. The corre-
sponding level of assets was transferred to BMW Trust
e. V. In the UK, the USA and a number of other countries,
funds intended to cover the pension benefits
of our
employees are also held in pension funds which are
kept separate from corporate assets. As a consequence,
the level of funds required to finance pension pay-
ments out of operations will be substantially reduced
inthe future. Pension assets of the BMW Group com-
prise in terest-bearing securities with a high level of
creditworthiness, equities, property and other invest-
ment classes.
Risk indicators (e.g. value-at-risk) are regularly computed
in order to identify risks at an early stage and used to
develop measures to mitigate risk. Risks affecting pension
funds are monitored continuously and managed from a
risk-and-yield perspective. Regular asset-liability studies
are performed and used to match the maturities of in-
terest-generating investments with future pension pay-
ments, thereby reducing the interest rate risk relating to
pensions. Investments are broadly spread in order to
reduce risk. In addition, risk limits for asset management
have been defined for each pension fund and are moni-
tored continuously.
Information and IT risks
We attach great importance to the protection of data, busi-
ness secrets and innovative development to safeguard
against unauthorised access, damage and misuse. The
protection of information and data is an integral com-
ponent of our business processes and based on Interna-
tional Security Standard ISO / IEC 27001. Staff, process
design and information technology each play a role in our
comprehensive risk and security concept.