BMW 2015 Annual Report Download - page 157

157 GROUP FINANCIAL STATEMENTS
In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus
represents an uncovered risk position. The cash-flow-at-
risk approach involves allocating the impact of potential
At 31 December 2015 irrevocable credit commitments
to dealers which had not been called upon at the end of
the reporting period amounted to € 7,552 million (2014:
€ 7,247 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 un-
secured lines of credit are in place with international
banks, including a syndicated credit line totalling € 6 bil-
lion
(2014: € 6 billion). Intra-group cash flow fluctua-
tions 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-
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, inter-
est 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 risks
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 re-
gion and the procurement of production material and
funding is also organised on a worldwide basis, the
currency risk is an extremely important factor for Group
earnings.
At 31 December 2015 derivative financial instruments,
mostly in the form of forward currency and option
contracts, were in place to hedge the main currencies.
A description of the management of this risk is provided
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. 2015 31. 12. 2014
Euro / Chinese Renminbi 9,973 10,937
Euro / US Dollar 4,770 4,743
Euro / British Pound 5,396 4,818
Euro / Korean Won 1,985 1,584
Euro / Japanese Yen
1,162 1,004