BMW 2013 Annual Report Download - page 73

73 COMBINED MANAGEMENT REPORT
in place to protect highly confidential information,
such as corporate strategies. A high level of protection is
afforded by regular analyses, detailed up-front controls
(such as compliance with mandatory
data protection
requirements) and rigorous security
management.
The volume of enquiries with respect to data protection
has risen sharply in the wake of the NSA scandal and
the public debate regarding a possible new EU directive
on data protection. The BMW Group’s well-established
data protection network ensures the necessary trans-
parency and timely implementation of measures. Re-
sponsibility for data protection in each Group entity
lies with the Board of Management (of BMW AG)
or the
relevant Company management. Each entity has one or
more Local Data Privacy Protection Officers.
In the case of cooperation arrangements and business
partner relationships, the BMW Group protects its in-
tellectual property as well as its customer and employee
data by stipulating clear instructions with regard to
data protection and the use of information technology.
Information pertaining to key areas of expertise is sub-
ject to particularly stringent security measures.
The requirements placed on IT facilities – both
exter-
nally and internally – are changing at a breathtaking
pace in the face of technological developments in this
area. There is a risk that these requirements will neces-
sitate far-reaching changes in IT systems, which could
entail a higher level of expenditure than currently
forecast. Forward-looking planning procedures are in
place to manage and implement new IT requirements
on a project basis. Risks identified during the imple-
mentation of complex IT applications, routine opera-
tions
and / or in conjunction with the development
of the existing IT landscape are highlighted at an early
stage by IT risk management procedures and acted
upon accordingly.
The levels of risk attached to information, data protec-
tion
and IT risks are classified as medium. There has
been no change in this assessment compared to the
previous year.
Financial risks and risks relating to the use of
financial instruments
Currency risks
As an internationally operating enterprise, the BMW
Group conducts business in a variety of currencies,
thus
exposing itself to currency risks. Since a substantial
portion of Group revenues is generated outside the
eurozone (particularly in China and the USA) and the
procurement of production materials and funding is
also organised on a worldwide basis, the currency risk
is an extremely important factor for Group earnings.
Cash-flow-at-risk models and scenario analyses are
used
to measure exchange rate risks. The results of
these analyses are regularly fed into the Group’s fore-
cast of exposures and serve as the basis for decision-
making with respect to operational currency manage-
ment. In 2013 the Chinese renminbi, the US dollar,
the
British pound, the Russian rouble and the Japanese
yen constituted approximately 75 % of the total foreign
currency exposure of the BMW Group, with the Chinese
renminbi and the US dollar accounting for the lion’s
share of foreign currency transactions.
The BMW Group manages currency risks both at a
strategic level
(medium and long term) and at an oper-
ating
level (short and medium term). Medium- and
long-term measures include increasing production vol-
umes in non-euro-region countries (natural hedging)
and increasing purchase volumes denominated in for-
eign
currencies. Constructing new plants in countries
such as the USA, China or Brazil have also helped reduce
foreign currency exposures. Currency risks are managed
in the short to medium term and for operational pur-
poses by means of hedging. Hedging transactions are
entered into only with financial partners of good credit
standing. A description of the methods applied for
risk measurement and hedging is provided in note 42
to the Group Financial Statements. Counterparty risk
management procedures are carried out continuously
in order to monitor the creditworthiness of business
partners.
A high level of risk is attached to short-term currency
risks. The potential impact on earnings is classified as
medium. The level of risk rises in the medium term due
to the lower number of hedge transactions entered into
for this period.
If the relevant recognition criteria are fulfilled, deriva-
tives
used by the BMW Group are accounted for as
hedging relationships. Further information on risks in
conjunction with financial instruments is provided in
note 42 to the Group Financial Statements.
Raw materials price risks
The availability of raw materials and the related price
risks are monitored on the basis of a set of well-defined
management procedures. Price risks relating to precious