BMW 2012 Annual Report Download - page 66

66
18 COMBINED GROUP AND COMPANY
MANAGEMENT REPORT
18 A Review of the Financial Year
21 General Economic Environment
24 Review of Operations
44 BMW Stock and Capital Market
47 Disclosures relevant for takeovers
and explanatory comments
50 Financial Analysis
50 Internal Management System
52 Earnings Performance
54 Financial Position
57 Net Assets Position
59 Subsequent Events Report
59 Value Added Statement
61 Key Performance Figures
62 Comments on BMW AG
65 Internal Control System and
explanatory comments
66 Risk Management
74 Outlook
Risk management within the BMW Group
The growing internationalisation of business activities,
the increasing pressure of competition and the rapid
pace of technological change entail opportunities and
risks for the BMW Group. Making full use of the oppor-
tunities that present themselves is the basis for our
corporate success and reflected in our Strategy Number
ONE (see section “Outlook for the BMW Group in 2013”).
In order to achieve growth, profitability, efficiency and
sustainable levels of business in the future, the BMW
Group consciously exposes itself to a wide variety of risks.
Managing risks is a fundamental prerequisite for being
able to deal successfully with the constant flow of changes
in the relevant political, legal, technical and economic
landscapes.
Risk management is a permanent process for the BMW
Group, covering all aspects of the Group’s business
worldwide. Its key elements are the early identification,
analysis and measurement of opportunities and risks,
the coordinated use of suitable management tools and
monitoring. Although managed from the centre, the
risk management system is based on a decentralised
structure, supported by a network of risk managers. This
approach raises awareness and encourages a balanced
approach to risks at all levels throughout the organi-
sation. The risk management network is formally em-
bedded in the organisational structure of the BMW
Group. Duties, responsibilities and tasks are assigned
to the network. The integration of risk management
functions in the overall management of the enterprise
serves to improve transparency and underlines the im-
portance of risk management within the BMW Group.
The risk management process is geared towards meeting
the criteria effectiveness, usefulness and completeness.
Seamless coordination with the Compliance Commit-
tee, the Internal Control System and the Group Internal
Audit is also ensured.
Risks identified at a decentralised level are initially
reported to a steering committee. Risks deemed by that
committee to be significant or potentially capable of
jeopardising the entity’s going-concern status are
re-
ported to the Board of Management and the Supervisory
Board, classified on the basis of the potential scale of
impact on earnings and cash flows on the one hand and
qualitative criteria on the other. The risk is quantified,
taking account of the probability of occurrence and risk
mitigation measures.
Decisions are reached after consideration of detailed
project analyses that show both potential risks and po-
tential opportunities. In conjunction with the Group’s
monthly and long-term forecasting systems, opportu-
nities
and risks attached to specific business activities
are evaluated and used as the basis for implementing
measures to mitigate risks and achieve targets. Impor-
tant
success factors – such as financial market develop-
ments or the competitive situation – are monitored
continuously to ensure that unfavourable developments
are identified at an early stage and appropriate counter-
measures implemented.
Risk Management
Risk Management within the BMW Group
Analysis and
Measurement
ControllingMonitoring
Reporting
Identification
Risk Management
Internal Control System
Group Audit
Compliance
Committee Risk Management
Effectiveness
Usefulness
Completeness
Supervisory Board
Board of Management