Mercedes 2013 Annual Report Download - page 126

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Quantification of each aggregated risk category in the Manage-
ment Report summarizes the individual risks reported for
each category. To the extent not otherwise presented, even
in the case of simultaneous occurrence of all individual risks
in a risk category, the Group does not expect any effect in this
category of more than €3 billion.
Risk controlling at the Daimler Group takes place at the level
of the divisions based on individual risks. If the impact of
an individual risk exceeds the amount of €2 billion, this risk
is described separately.
The tasks of a person responsible for a risk include, in addi-
tion to identifying and assessing the risks, developing measures
and initiating them if appropriate so that risks are avoided,
reduced or counteracted. All reported risks of the individual
entities and of the related countermeasures that have been
initiated are monitored locally. Corporate risk management
at headquarters regularly reports on the identified risks to
the Board of Management and the Supervisory Board. As well
as the regular reporting, there is also an internal reporting
obligation within the Group for risks arising unexpectedly.
The principle of completeness also applies to risk management.
This means that at the level of the individual entities, all
specific risks must flow into the risk management process.
Such a risk exists if the probability of occurrence of the
risk exceeds a uniform threshold defined for the whole Group.
Latent risks that are below this threshold are monitored
in the internal control system (ICS). Compliance risks are thor-
oughly identified by the Group. Regular courses of training aim
to reduce the number of compliance risks.
The internal control and risk management system with
regard to the accounting process has the goal of ensuring
the correctness and effectiveness of accounting and financial
reporting. It is designed in line with the internationally recog-
nized framework for internal control systems of the Committee
of Sponsoring Organizations of the Treadway Commission
(COSO Internal Control – Integrated Framework), is continually
further developed and is an integral part of the accounting
and financial reporting process in all relevant legal entities and
corporate functions. The system includes principles and
procedures as well as preventive and detective controls.
Among other things, we regularly check that
– the Group’s uniform financial reporting, valuation and
accounting guidelines are continually updated and regularly
trained and adhered to;
– transactions within the Group are fully accounted
for and properly eliminated;
– issues relevant for financial reporting and disclosure from
agreements entered into are recognized and appropriately
presented;
– processes exist to guarantee the completeness
of financial reporting;
– processes exist for the segregation of duties and for
the “four-eyes principle” in the context of preparing financial
statements, and authorization and access rules exist for
relevant IT accounting systems.
We systematically assess the effectiveness of the internal
control system with regard to the corporate accounting process.
The first step consists of risk analysis and definition of control.
Significant risks are identified relating to the process of corporate
accounting and financial reporting in the main legal entities
and corporate functions. The controls required are then defined
and documented in accordance with Group-wide guidelines.
Regular random tests are carried out to assess the effectiveness
of the controls. Those tests constitute the basis for self-
assessment of the appropriate magnitude and effectiveness
of the controls. The results of this self-assessment are docu-
mented and reported in a global IT system. Any weaknesses rec-
ognized are eliminated with consideration of their potential
effects. At the end of the annual cycle, the selected legal entities
and corporate functions confirm the effectiveness of the
internal control and risk management system with regard to the
corporate accounting process. The Board of Management
and the Audit Committee of the Supervisory Board are regularly
informed about the main control weaknesses and about
the effectiveness of the control mechanisms installed. However,
the internal control and risk management system for the
accounting process cannot ensure with absolute certainty
that material false statements are avoided in accounting.
The organizational embedding and monitoring of risk
management takes place through the risk management orga-
nization established at the Group. As previously described
in the “Risk management system” section with regard to material
risks and risks threatening Daimler’s existence, the divisions,
corporate functions and legal entities inquire about the specific
risks at regular intervals. This information is passed on to
Corporate Risk Management, which processes the information
and provides it to the Board of Management and Supervisory
Board as well as to the Group Risk Management Committee
(GRMC). In order to ensure the complete presentation and
assessment not only of material risks and risks threatening the
existence of the Group, but also of the control and risk pro-
cess with regard to the corporate accounting process, Daimler
has established the Group Risk Management Committee.
It is composed of representatives of the areas of Finance &
Controlling, Accounting, Legal Affairs and Group Compliance,
and is chaired by the Board of Management Member for Finance
(CFO). The Internal Auditing department contributes material
statements on the internal control and risk management system.
In addition to fundamental issues, the committee has the
following tasks:
– The GRMC defines and shapes the framework conditions
with regard to the organization, methods, processes and
systems that are needed to ensure a functioning, Group-wide
and thorough control and risk management system.
– The GRMC regularly reviews the effectiveness and functionality
of the installed control and risk management processes.
Minimum requirements can be laid down in terms of the design
of the control processes and of risk management and
cor rective measures can be commissioned as necessary
or appropriate to eliminate any system failings or weak-
nesses exposed.