Mercedes 2008 Annual Report Download - page 203

Consolidated Financial Statements |Notes to Consolidated Financial Statements |199
30. Risk management
General information on financial risk
Daimler is exposed to market risks from changes in foreign cur-
rency exchange rates, interest rates and equity prices, while
commodity price risks arise from procurement. In addition,
the Group is exposed to credit risks mainly from its lease and
financing activities and from trade receivables. Furthermore,
the Group is exposed to liquidity risks relating to its credit and
market risks or a deterioration of its operating business or
financial market disturbances. With respect to the Daimler Finan-
cial Services segment, the Group is exposed to credit risks aris-
ing from operating lease contracts, finance lease contracts and
financing contracts. These financial risks may adversely affect
Daimler’s financial position, cash flows and profitability.
Daimler has established guidelines for risk controlling procedures
and for the use of financial instruments, including a clear segre-
gation of duties with regard to operating financial activities, settle-
ment, accounting and the respective controlling. The guidelines
upon which the Group’s risk management processes are based are
designed to identify and analyze these risks throughout the
Group, to set appropriate risk limits and controls and to monitor
the risks by means of reliable and up-to-date administrative
and information systems. The guidelines and systems are regularly
reviewed and adjusted to changes in markets and products.
The Group manages and monitors these risks primarily through
its operating and financing activities and, if required, through
the use of derivative financial instruments. Daimler does not use
derivative financial instruments for purposes other than risk
management. Without these derivative financial instruments, the
Group would be exposed to higher financial risks (additional
information on financial instruments and especially derivatives is
included in Note 29). Daimler regularly evaluates its financial risks
with due consideration of changes in key economic indicators
and up-to-date market information.
Any market sensitive instruments, including equity and debt secu-
rities, that the pension and other post-employment benefit plans
hold are not included in this quantitative and qualitative analysis.
Please refer to Note 21 for additional information regarding
Daimler’s pension plans.
Credit risk
Credit risk is the risk of economic loss arising from counterparty’s
failure to repay or service debt according to the contractual
terms. Credit risk encompasses both the direct risk of default and
the risk of a deterioration of creditworthiness as well as con-
centration risks.
The maximum risk positions of financial assets, which generally
can be subject to credit risk, are equal to their carrying amounts
and are shown in the following table:
Liquid assets. Liquid assets mainly consist of cash and cash
equivalents and debt instruments from available-for-sale financial
assets. With the investment of liquid assets, the banks and
issuers of securities are selected very carefully and diversified in
accordance with a limit system. The limits are reassessed
continuously. Hence, there were various limit adjustments relating
to the current financial market crisis. In line with the Group’s
risk policy, the predominant part of liquid assets is held in invest-
ments with an external rating of “A” or better.
Receivables from financial services. The financing and leasing
activities of Daimler are primarily focused on supporting the
sale of the automotive products of the Group. As a consequence
of these activities, the Group is exposed to credit risk, which
is monitored with the use of defined standards, guidelines and
procedures. Daimler Financial Services manages its credit
risk irrespective of whether it is related to an operating lease
or a finance lease contract. For this reason, statements
concerning the credit risk of Daimler Financial Services refer
to the entire leasing business, unless specified otherwise.
13
17
14
28
14
8,003
42,387
6,999
4,072
1,536
2,089
17,055
39,213
6,361
3,389
1,908
3,581
Liquid assets
Receivables from financial services
Trade receivables
Derivatives (only assets)
Loan commitments
Other receivables and financial assets
Maximum risk
position
2007
Maximum risk
position
2008
in millions of €
See Note