BMW 2014 Annual Report Download - page 71

71 COMBINED MANAGEMENT REPORT
management within the BMW Group. The duties, re-
sponsibilities, and tasks of the centralised risk manage-
ment unit and network representatives are clearly
described, documented and acted on. Group risk manage-
ment is geared towards meeting the following three
criteria: effectiveness, usefulness and completeness. In
view of the dynamic growth of business in recent years,
in-house thresholds and rules in place for risk reporting
purposes were reviewed in 2014 for effectiveness and
usefulness and modified as seen appropriate. In addition,
the design of the BMW Group’s risk management net-
work was reviewed on the basis of the framework of the
internationally recognised Committee of Sponsoring
Organizations of the Treadway Commission (COSO). This
review was carried out in conjunction with the Com-
pliance Committee, Group Internal Audit, Internal
Control System and overall Group risk management
functions. Appropriate measures are in place to ensure
that these functions are coordinated seamlessly.
Risk management process
The risk management process is applied throughout
the Group and comprises the early identification and
penetration of risks, comprehensive analysis and risk
measurement, the coordinated use of suitable manage-
ment tools and also the monitoring and evaluation of
measures taken.
Risks reported to the centralised risk management team
from within the network are firstly presented for review
to the Risk Management Steering Committee, for which
Group Controlling is responsible. After review, the risks
are reported to the Board of Management and to the
Supervisory Board. Significant and going-concern-
related risks are classified on the basis of the potential
scale of impact on the Group’s results of operations,
finan cial position and net assets. The level of risk is quan-
tified, taking into account the probability of occurrence
and risk mitigation measures.
The risk management system is tested regularly by
Internal
Audit. By sharing experiences with other com-
panies on an ongoing basis, the BMW Group ensures
that new insights are incorporated in the risk manage-
ment system, thus ensuring continual improvement.
Regular basic and further training as well as information
events held throughout the BMW Group, and in par-
ticular within the risk management network, are invalu-
able ways of preparing people for new or additional
challenges with regard to the processes in which they
are involved.
As a supplement to comprehensive risk management,
managing the business on a sustainable basis also repre-
sents one of the Group’s core corporate principles. Any
risks or opportunities related to sustainability issues
are discussed by the Sustainability Committee. Strategic
options and measures open to the BMW Group are put
forward to the Sustainability Board, to which all
mem-
bers of the Board of Management belong. Risk aspects
discussed at this level are integrated in the work of the
group-wide risk network. The composition of the Risk
Management Steering Committee on the one hand and
the Sustainability Committee on the other ensures that
risk and sustainability management are closely coordi-
nated.
Risk measurement
In order to determine which risks can be considered
significant in relation to results of operations, financial
position and net assets and to identify changes in key
performance indicators used by the BMW Group, risks
are classified as high, medium or low.
The overall impact on results of operations based on the
assumption that the risk will materialise is measured
for the two-year assessment period and allocated to the
following categories:
The significance of risks for the BMW Group is deter-
mined on the basis of risk amounts. The measure-
ment of the amount of a risk takes account of both its
impact (net of appropriate countermeasures) and the
likelihood of occurrence in each case. The amount of
a risk is approximated in the case of risks measured on
the basis of valueatrisk / cashflowatrisk models. In
this situation, the following assessment criteria are ap-
plied:
Class Earnings impact
Low > €0 – 500 million
Medium > €500 – 2,000 million
High > €2,000 million
Class Risk amount
Low > €0 – 50 million
Medium > €50 – 400 million
High > €400 million