Mercedes 2015 Annual Report Download - page 251

258 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. Management of financial risks
General information on financial risks
As a result of its businesses and the global nature of its opera-
tions, Daimler is exposed in particular to market risks from
changes in foreign currency exchange rates and interest rates,
while commodity price risks arise from procurement. An equity
price risk results from investments in listed companies (including
Nissan, Renault, BAIC Motor and Kamaz). In addition, the
Group is exposed to credit risks from its leasing and financing
activities and from its operating business (trade receivables).
With regard to the leasing and financing activities, credit risks
arise from operating lease contracts, finance lease contracts
and financing contracts. Furthermore, the Group is exposed to
liquidity and country risks relating to its credit and market
risks or a deterioration of its operating business or financial
market disturbances. If these financial risks materialize,
they could adversely affect Daimler’s profitability, liquidity
and capital resources and financial position.
Daimler has established internal guidelines for risk controlling
procedures and for the use of financial instruments, including
a clear segregation of duties with regard to financial activities,
settlement, accounting and the related controlling. The guide-
lines upon which the Group’s risk management processes for
financial risks are based are designed to identify and analyze
these risks throughout the Group, to set appropriate risk limits
and controls and to monitor the risks by means of reliable and
up-to-date administrative and information systems. The guide-
lines and systems are regularly reviewed and adjusted to
changes in markets and products.
The Group manages and monitors these risks primarily through
its operating and financing activities and, if required, through
the use of derivative financial instruments. Daimler uses deriv-
ative financial instruments exclusively for hedging financial
risks that arise from its commercial business or refinancing
activities. Without these derivative financial instruments,
the Group would be exposed to higher financial risks (additional
information on financial instruments and especially on the
nominal values of the derivative financial instruments used
is included in Note 31). Daimler regularly evaluates its financial
risks with due consideration of changes in key economic
indicators and up-to-date market information.
Any market sensitive instruments including equity and
debt securities that the plan assets hold to finance pension
and other post-employment healthcare benefits are not
included in the following quantitative and qualitative analysis.
See Note 22 for additional information on Daimler’s pension
and other post-employment benefits.
Credit risk
Credit risk is the risk of economic loss arising from a counter-
party’s failure to repay or service debt in accordance with
the contractual terms. Credit risk encompasses both the direct
risk of default and the risk of a deterioration of creditworthi-
ness as well as concentration risks.
The maximum risk positions of financial assets which
are generally subject to credit risk are equal to their carrying
amounts (without consideration of collateral, if available).
Table  E.81 shows the maximum risk positions.
Liquid assets
Liquid assets consist of cash and cash equivalents and market-
able debt securities classified as available-for-sale. With the
investment of liquid assets, banks and issuers of securities
are selected very carefully and diversified in accordance with
a limit system. In the past years, the limit methodology was
continuously enhanced to counteract the decline of the credit-
worthiness of the banking sector in the course of the financial
crisis. Additionally, liquid assets are increasingly also held at
financial institutions outside Europe with high creditworthiness
and as bonds issued by German federal states. Furthermore
and due to the current business development, the Group also
temporarily holds high levels of liquidity in emerging markets.
At the same time, the Group has increased the number
of financial institutions with which investments are made.
In connection with investment decisions, priority is placed
Maximum risk positions of financial assets and loan commitments
see also
Note
Maximum
risk position
2015
Maximum
risk position
2014
In millions of euros
Liquid assets 18,209 16,301
Receivables from financial
services 14
73,514
61,679
Trade receivables 19 9,054 8,634
Derivative financial instruments
used in hedge accounting
(assets only) 16
1,363
1,296
Derivative financial instruments
not used in hedge accounting
(assets only)
16
203
97
Loan commitments 30 1,931 1,320
Other receivables and
financial assets 16
2,839
2,325
E.81