Mercedes 2015 Annual Report Download - page 144

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 151
Legal risks
Various legal proceedings, claims and government investigations
(legal proceedings) are pending against Daimler AG and its
subsidiaries on a wide range of topics, including vehicle safety,
emissions, fuel economy, financial services, dealer, supplier
and other contractual relationships, intellectual property rights,
warranty claims, environmental matters, legal proceedings
relating to competition law and shareholder litigation. Product-
related litigation involves claims alleging faults in vehicles,
some of which have been made as class actions. If the outcome
of such legal proceedings is detrimental to Daimler, the Group
may be required to pay substantial compensatory and punitive
damages or to undertake service actions, recall campaigns
or other costly actions.
Some of these proceedings may have an impact on the Group’s
reputation. As these proceedings are connected with a large
degree of uncertainty, it is possible that after the final resolution
of litigation, some of the provisions we have recognized for
legal proceedings could prove to be insufficient. As a result, sub-
stantial additional expenditures may arise. This also applies to
legal proceedings for which the Group has seen no requirement
to recognize a provision.
Although the final result of any such litigation may influence
the Group’s earnings and cash flows in any particular period,
Daimler believes that any resulting obligations are unlikely
to have a sustainable effect on the Group’s cash flows, financial
position or profitability. Further information on legal proceed-
ings is provided in E Note 29 of the Notes to the Consolidated
Financial Statements.
Tax risks
Daimler AG and its subsidiaries operate in many countries world-
wide and are therefore subject to numerous differing statutory
provisions and tax audits. Within the Group, the tax assessments
of several years are not yet final. Changes in local tax legisla-
tion and court verdicts, and differing interpretations by the fiscal
authorities in the various jurisdictions – especially in the field
of cross-border transactions – can lead to negative effects on
the Group’s net profit and cash flows.
Any changes or interventions by the fiscal authorities are
continuously monitored by the Tax department and measures
are taken if required.
Overall assessment of the risk and
opportunity situation
The Group’s overall risk situation is the sum of the individual
risks of all risk categories for the divisions, the corporate
functions and the legal entities. In addition to the risk categories
described above, unpredictable events that can disturb pro-
duction and business processes are possible, such as natural
disasters, political instability or terrorist attacks. Therefore,
emergency plans are prepared to allow the resumption of busi-
ness operations, precautionary measures are taken and insur-
ance policies are arranged, if possible. Risks relating to compli-
ance are addressed in the risk management process and are
continually monitored. Regular training courses are carried out
to prevent compliance violations.
In addition to the risks described above, there are risks that
affect the reputation of the Daimler Group as a whole. Public
interest is focused on Daimler’s position with regard to issues
such as ethics and sustainability. Furthermore, customers
and capital markets are interested in how the Group reacts to the
technological challenges of the future and how it succeeds in
offering up-to-date and technologically leading products in the
markets. As one of the fundamental principles of business
activity, Daimler places particular priority on adherence to appli-
cable law and ethical standards. In addition, a secure approach
to sensitive data is a precondition for doing business with custom-
ers and suppliers in a trusting and cooperative environment.
In order to obtain an overall picture, Corporate Risk Manage-
ment collates the information described on risks from the
individual organizational units. The overall situation with regard
to the Group’s risks and opportunities is the aggregate of the
individual risks and opportunities presented. The situation of the
Daimler Group has not changed significantly compared with
the previous year. No risks are currently recognizable that either
alone or in combination with other risks could endanger the
continued existence of the Group. But since considerable eco-
nomic and industry risks still exist, setbacks on the way to
regularly achieving growth and profitability targets cannot be
completely ruled out. The aforementioned opportunities
represent potential as well as challenges for the Daimler Group.
By effectively and flexibly focusing the production program
and sales activities on changing conditions, the divisions
of the Daimler Group strive to secure or surpass their respective
targets and plans. As far as it lays within the control of the
Daimler Group and if measures prove to be financially viable,
the Group takes appropriate action to realize the potential
of its opportunities. Most of the opportunities mentioned last
year were effectively realized. The associated measures
that have been implemented have a sustainable positive effect
on the Group’s earnings.
Daimler is confident that due to the risk and opportunity
management system established at the Group, risks and oppor-
tunities will continue to be recognized at an early stage in the
future, the current risk situation will be successfully managed,
and opportunities will be effectively utilized.