BMW 2013 Annual Report Download - page 155

155 GROUP FINANCIAL STATEMENTS
In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus
the reporting period amounted to € 6,760 million (2012:
€ 6,044 million).
Solvency is assured at all times by managing and moni-
toring the liquidity situation on the basis of a rolling
cash flow forecast. The resulting funding requirements
are secured by a variety of instruments placed on the
world’s financial markets. The objective is to minimise
risk by matching maturities for the Group’s financing
requirements within the framework of the target debt
structure. The BMW Group has good access to capital
markets as a result of its solid financial position and a
diversified refinancing strategy. This is underpinned
by
the longstanding long- and short-term ratings issued
by Moody’s and Standard & Poor’s.
Short-term liquidity is managed primarily by issuing
money market instruments (commercial paper). In
this
area too, competitive refinancing conditions can
be achieved thanks to Moody’s and Standard & Poor’s
short-term ratings of P-1 and A-1 respectively.
Also reducing liquidity risk, additional secured and
unsecured lines of credit are in place with first-class in-
ternational banks, including a syndicated credit line
totalling € 6 billion (2012: € 6 billion). Intra-group cash
flow fluctuations are evened out by the use of daily
cash pooling arrangements.
Market risks
The principal market risks to which the BMW Group is
exposed are currency risk, interest rate risk and raw
materials price risk.
Protection against such risks is provided in the first
instance through natural hedging which arises when the
values of non-derivative financial instruments have
matching maturities and amounts (netting). Derivative
financial instruments are used to reduce the risk
re-
represents an uncovered risk position. The cash-flow-at-
risk approach involves allocating the impact of potential
maining after netting. Financial instruments are only
used to hedge underlying positions or forecast trans-
actions.
The scope of permitted transactions, responsibilities,
financial reporting procedures and control mechanisms
used for financial instruments are set out in internal
guidelines. This includes, above all, a clear separation
of duties between trading and processing. Currency,
interest rate and raw materials price risks of the BMW
Group are managed at a corporate level.
Further information is provided in the “Report on out-
look, risks and opportunities” section of the Combined
Management Report.
Currency risk
As an enterprise with worldwide operations, business
is conducted in a variety of currencies, from which cur-
rency risks arise. Since a significant portion of Group
revenues is generated outside the euro currency region
and the procurement of production material and fund-
ing is also organised on a worldwide basis, the currency
risk is an extremely important factor for Group earnings.
At 31 December 2013 derivative financial instruments,
mostly in the form of option and forward currency con-
tracts, were in place to hedge the main currencies.
A description of the management of this risk is pro-
vided in the Combined Management Report. The BMW
Group measures currency risk using a cash-flow-at-risk
model.
The starting point for analysing currency risk with this
model is the identification of forecast foreign currency
transactions or “exposures”. At the end of the reporting
period, the principal exposures for the relevant coming
year were as follows:
in € million 31. 12. 2013 31. 12. 2012
Euro / Chinese Renminbi 10,691 8,429
Euro / US Dollar 4,401 5,311
Euro / British Pound 3,852 3,206
Euro / Russian Rouble 1,738 1,638
Euro / Japanese Yen
1,469 1,585