Mercedes 2008 Annual Report Download - page 83

Management Report |Risk Report|79
Procurement market risks. Procurement risks arise for the Group
on the one hand from further increases in prices of various
raw materials that raise our factor costs either directly or indi-
rectly through purchased components. Although the prices of
many raw materials have fallen since the peak levels during the
middle of 2008, due to the financial market crisis the outlook
for the raw-material market remains uncertain. On the other hand,
due to the increasing concentration on globally active suppliers,
dependencies arise for our own production process. Our scope
to pass on the increased cost of raw materials and purchased
components in the form of price increases for our vehicles is very
limited due to the intense pressure of competition in the inter-
national automobile markets. Furthermore, some of our suppliers’
refinancing possiblities have worsened significantly due to the
financial market crisis. The rising pressure on procurement, sales
and financing markets could seriously jeopardize the financial sit-
uations and continued operations of financially challenged sup-
pliers. To an increasing extent, individual or joint support actions
have been required by automobile suppliers in order to safeguard
production and sales. An additional factor is that in such cases,
the Group has only limited ability to achieve further price reduc-
tions for purchased components. Should the financial situation
of important suppliers continue to deteriorate, this could require
further significant support actions with a negative impact on
the Group’s earnings and cash flows. If suppliers deliver compo-
nents late or are unable to deliver, that could have a negative
impact on Daimler’s vehicle production and thus also on our prof-
itability. Daimler counteracts procurement risks by means of
targeted commodity and supplier risk management. Supplier risk
management aims to identify suppliers’ potential financial diffi-
culties at an early stage and to initiate suitable countermeasures.
In addition, the Group attempts to reduce its dependency on
individual materials in the context of its commodity management,
by making appropriate technological progress for example.
IT risks and unforeseeable events. Production and business
processes could also be disturbed by unforeseeable events
such as natural disasters or terrorist attacks. Consumer confidence
would be significantly affected and production could be inter-
rupted by supply problems and intensified security measures at
territorial borders. In addition, our manufacturing processes
could also be disturbed by failures at our data centers. Security
measures and emergency plans have been prepared for such
eventualities. Because the importance of storing and exchanging
information is rising at a global group like Daimler, and in order
to counteract the growing risks for the operation of central IT sys-
tems and the security of confidential data, we have our own
risk management system for IT security. Guidelines from head-
quarters and the decentralized security organization we have
established worldwide help to minimize these IT risks. For this
reason, most IT risks have a very low probability of occurrence,
but if such a case actually arose, it would have a significant nega-
tive impact on earnings.
Specific risks in the area of human resources. Daimler’s
success is highly dependent on the expertise and commitment
of its workforce. The application of our personnel instruments
takes existing personnel risks into consideration, while contri-
buting towards the recruitment and retention of staff with high
potential and expertise and ensuring transparency with regard
to our resources. Another focus of our human resources mana-
gement is on the targeted personnel development and further
training of our workforce. Our executive staff and specialists
profit from the range of courses offered by the Daimler Corporate
Academy and from the transparency created by LEAD, our uni-
form worldwide performance and potential management system.
Demographic developments present the Group with the particular
challenge of managing the changes relating to an aging work-
force and securing a sufficient number of qualified young persons
with the potential to become the next generation of highly skilled
specialists and executives.