Mercedes 2015 Annual Report Download - page 140

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 147
Innovation and technology opportunities for the progressive
and future-oriented design of the product range flow into the
strategic product planning of the automotive divisions.
In the context of a continuous process, checks are regularly
carried out as to whether the level of production can be
increased by means of shift work, the worldwide production
network, investment projects or more flexible production
facilities. In order to safeguard the long-term future orientation
of the Daimler Group’s production facilities with regard to
the diversity of the product portfolio and in order to develop
additional production capacities to allow Daimler to grasp
the opportunities that are presented, continuous modernization,
expansion, construction and restructuring are carried out
at the locations of the Daimler Group and its joint ventures and
joint operations. The execution of modernization actions
and the launch of new products are generally connected with
high investments. Guidelines or delays in the ramp-up phase
of a new model or in connection with a product’s lifecycle can
lead to a short-term reduction in production volumes. In order
to achieve a very high level of quality, which is one of the key
factors for a customer’s decision to buy a product of the
Daimler Group, it is necessary to make investments in new prod-
ucts and technologies that sometimes exceed the originally
planned scope. This cost overrun would then reduce the antici-
pated earnings from the launch of a new model series or
product generation. Those automotive segments are affected
which are currently launching new products or planning to do
so, or carrying out related production expansions and modifi-
cations, in some cases in conformance with specific regional
conditions. In particular, the creation and expansion of production
capacities in the Chinese market is connected with risks due
to the uncertain market development. The establishment of effi-
cient production processes serves to manage quality risks
there. Furthermore, dependencies between contractual partners
and possible changes in the conditions in China must be
included in the local decision-making process.
In principle, there is also a danger that due to infrastructure
problems, the failure of production equipment or a production
plant or in the external supply of energy, it might not be
possible to maintain the planned level of production, and that
would consequently generate costs. Such risks mainly exist
for the Mercedes-Benz Cars segment. The production equipment
is regularly maintained and as a precaution, spare parts are
held available for the production plants that might be at risk.
Insufficient availability of vehicle components at the right
time and difficulties or interruptions in the supply chain, possibly
caused by regional restrictions, can lead to bottlenecks. In
order to avoid such bottleneck situations, priority is given to
foresighted capacity planning. In addition, supply chains and
the availability and quality of products are continuously monitored
within the context of managing the entire value chain. The
ongoing modernization of the production plants, supplier man-
agement and other monitoring activities help to prevent
risks in this area.
Warranty and goodwill claims can arise when the quality
of the products of the automotive divisions does not meet
customers’ expectations, when a regulation is not fully complied
with, or when support is not provided in the required form in
connection with product problems and product care. The Daimler
Group works continually and intensively to maintain product
quality at a very high level, even given the growing product com-
plexity, in order to avoid the danger of making corrections to
end products and in order to supply customers with the best pos-
sible products. Furthermore, processes are implemented at
the Daimler Group to regularly obtain customers’ opinions on the
support provided so that our service and customer satisfaction
can be continuously improved.
Production and technology risks continue to have a low
probability of occurrence due to preventive measures. However,
because of the continually high number of new product
launches, the potential impact of such risks remains at the
same level.
Information and technology risks and opportunities
The digitization strategy that is systematically pursued at
Daimler offers new possibilities for enhancing customer benefits
and enterprise value. However, it includes risks from the
increasing dependency of products and business processes
on IT. In addition, specific risks exist due to the use and avail-
ability of new technologies in connection with digitization, which
for example can affect the products, their use or the opera-
tional business. It is still essential for a global company like
Daimler that information is maintained and exchanged in
real time, comprehensively and correctly. Appropriately secure
IT systems and a reliable IT infrastructure must be used in
order to protect information. Risks that could result in the inter-
ruption of business processes due to the failure of IT systems
or which could cause the loss or corruption of data are therefore
identified and evaluated over the entire lifecycles of applica-
tions and IT systems. Daimler has defined suitable measures for
risk avoidance and limitation of damage. These measures are
continually adapted to changing circumstances. For example,
the Group minimizes potential interruptions of operating
routines in the data centers by means of mirrored data sets,
decentralized data storage, outsourced archiving, high-
availability computers and appropriate emergency plans. An IT-
security operations center coordinates potential danger from
cyber crime and hacker attacks. Daimler utilizes various preven-
tive and corrective measures in order to meet the growing
demands placed on the confidentiality, integrity and availability
of data. Necessary precautions are taken also for the protec-
tion of the products and services of the Daimler Group. Despite
all the precautionary measures taken, Daimler cannot com-
pletely rule out the possibility that IT disturbances will arise and
have a negative impact on the Group’s business processes.
The impact and probability of occurrence of IT risks remain
unchanged compared to the prior year.