Mercedes 2009 Annual Report Download - page 111

Management Report |Risk Report |107
Risks related to the legal and political framework. The legal
and political framework has a considerable impact on Daimler’s
future business success. Regulations concerning vehicles’ exhaust
emissions, fuel consumption and safety play a particularly
important role. Complying with these varied and often diverging
regulations all over the world requires strenuous efforts on the
part of the automotive industry. We expect to have to significantly
increase our spending aimed at fulfilling these requirements
in the future. Many countries have already implemented stricter
regulations to reduce vehicles’ emissions and fuel consumption,
or are about to do so, one example being European regulations on
exhaust emissions and fuel consumption. The key elements of
the European Union’s regulation on carbon dioxide, which was
passed by the EU parliament at the end of 2008, call for a sig-
nificant reduction in new vehicles’ CO
2
emissions already as of
2012, and for phased improvements whereby the average emis-
sions of manufacturers’ entire fleets of new cars have to meet new
limits by 2015. Non-compliance with those limits will lead to
penalty payments for manufacturers. Similar legislative proposals
is also available in the U.S. We assume that we will meet the
targets, but that to do so we will have to significantly increase our
research and development spending. Daimler monitors these
developments and attempts to anticipate foreseeable require-
ments and long-term targets during the phase of product
development.
Procurement market risks. Procurement risks arise for the
Group from fluctuations in prices of raw materials. After the
falls in prices of raw materials at the end of 2008, there was a
degree of stabilization at the beginning of 2009. Since then, the
prices of many raw materials have risen again. Due to the world-
wide effects of the economic crisis, the development of prices in
the raw-material markets remains uncertain. Our scope to
pass
on the increased cost of raw materials and purchased compo-
nents in the form of price increases for our vehicles is very
limited because of intense pressure of competition in the interna-
tional automobile markets. Daimler counteracts procurement
risks by means of targeted commodity and supplier risk manage-
ment. Supplier risk management aims to identify suppliers’
potential financial difficulties at an early stage and to initiate suit-
able countermeasures. We attempt to reduce our dependency
on individual materials in the context of commodity management,
by making appropriate technological progress for example.
Daimler protects itself against the volatility of raw-material prices
by entering into long-term supply agreements, which make
short-term risks for material supplies and the effects of price fluc-
tuations more calculable. Furthermore, in connection with pre-
cious metals, we make use of derivative price hedging instru-
ments. Furthermore, some of our suppliers’ refinancing possibili-
ties have worsened significantly due to the financial market cri-
sis. Some individual or joint support actions by automobile manu-
facturers have been required in order to safeguard production
and sales. 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
as well as cash flows and financial position. Supplier failures
could affect our vehicle production.
Information technology 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 interrupted by supply problems and
intensified security measures at territorial borders. Information
technology plays an increasingly important role in our business
processes. Storing and exchanging data in a timely, complete and
correct manner and being able to utilize fully functioning IT
applications are crucial prerequisites for a global company such
as Daimler. Possible risks, the occurrence of which could result
in the interruption of our business processes due to the failure of
IT systems or the loss or corruption of data, are therefore iden-
tified and evaluated over the entire life cycles of applications and
IT system. Daimler has defined suitable actions for risk avoid-
ance and limitation of damage, continually adapts these actions
to changing circumstances, and monitors their implementation.
These activities are embedded in a multi-stage IT risk management
process. For example, the Group minimizes potential interrup-
tions of operating routines in the data centers by means of mir-
rored data sets, decentralized data storage, outsourced archiv-
ing, high-availability computers and appropriate emergency plans.
In order to fulfill rising requirements in terms of the confiden-
tiality, integrity and availability of data, we have our own risk man-
agement system for information security. Despite all the precau-
tionary measures, we cannot completely rule out the possibility
that IT disturbances will arise and have a negative impact on
our business processes.