BMW 2015 Annual Report Download - page 71

71 COMBINED MANAGEMENT REPORT
Political and global economic risks and opportunities
As one of the world’s leading providers of premium
products and services, the BMW Group faces a variety
of major challenges. The world is changing at great
speed and the resulting situations can give rise to risks
on the one hand and opportunities on the other.
Political and global economic risks
Efficient individual mobility remains a key issue in many
countries, in terms of the political regulation of both
national environmental and industrial policymaking.
Changing values in society call for innovative mobility
and service solutions. The potential effect of unforesee-
able disturbances in global economic interdependen-
cies, increasingly fierce competition among established
manufacturers and the emergence of new competitors
is extremely difficult to predict.
Shifts between volatile and stable economic phases, com-
bined
with the ready availability of information, also
contribute to the uncertainty experienced by both mar-
kets and consumers. Although the US and UK econo-
mies may currently appear to be robust, the underlying
macroeconomic risks – such as misallocations between
asset price classes – have not become any less real com-
pared to the previous year. The transition of the Chinese
economy from an investment-driven to a consumer-
driven market will entail slower growth rates and greater
instability on financial markets. Apart from precipitat-
ing a decline in automobile sales, this process may also
result in lower demand for commodities, which is most
likely to hurt mainly emerging economies such as
Brazil or Russia. A further drop in commodities prices
could result in political and economic upheavals and
hence lead to lower aggregate demand from the coun-
tries
affected.
The threat of distortions on the Chinese property, stock
and banking markets on the one hand and / or an overly
rapid hike in interest rates by the US Federal Bank pose
considerable risks for global financial market stability.
Unsolved structural problems in the eurozone or a re-
newed deterioration in the economic climate, for instance
in Greece, could potentially dampen growth prospects
for the BMW Group. At a political level, the current
refugee crisis poses a threat to European integration
and hopes of further expanding or at least maintaining
a single economic and monetary area.
Increasing political unrest, military conflicts, terrorist
activities, natural disasters and / or pandemics could
have a lasting negative impact on the global economy
and international capital markets. The risks referred to
above could curtail purchasing power in the countries
and regions involved and, among other things, lead to
reduced demand for the products and services offered
by the BMW Group. The Group counters these risks
primarily by internationalising its sales and production
structures, in order to minimise the extent to which
earnings are dependent on the outcomes of risks in in-
dividual countries and regions. The regular monitoring
of macroeconomic data, which serve as the basis for
sales volume and production planning, ensures that
market changes are identified at an early stage. The ex-
tent of political and global economic risks is determined
by analysing historical data and applying a cash-flow-at-
risk approach.
If risks from this category were to materialise, they
could – due to sales volume fluctuations – have a high
earnings impact over the two-year assessment period.
Overall, the risk amounts attached to political and global
economic risks are classified as high.
Political and global economic opportunities
Economic conditions influence the operations, financial
position and results of operations of the BMW Group.
Should the global economy develop significantly better
than reflected in the outlook, the revenues and earnings
of the BMW Group could be significantly higher than
originally predicted. A better-than-expected perfor-
mance of the global economy with stronger growth in
China, the introduction of economic stimulus pro-
grammes, the implementation of structural reforms
within the eurozone and robust consumer spending in
the USA could – despite higher financing costs – result
in significantly stronger sales volume growth, reduced
competitive pressure and the possibility of achieving
better selling prices. Economic opportunities present
themselves for the BMW Group through the focused
identification of, and engagement in, growth markets.
Any political and / or global economic opportunities
capable of having a positive sustainable impact on
earnings are currently classified by the BMW Group
as insignificant.
Strategic and sector risks and opportunities
New regulations and rising fuel and energy prices can
also influence customer behaviour. Medium- and
long-term targets have already been put in place in
Europe, North America, Japan, China and other coun-
tries
to minimise both fuel consumption and carbon
emissions.