Mercedes 2015 Annual Report Download - page 257

264 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Interest rate risk
Daimler uses a variety of interest rate sensitive financial
instruments to manage the liquidity needs of its day-to-day
operations. A substantial volume of interest rate sensitive
assets and liabilities results from the leasing and sales financing
business operated by the Daimler Financial Services segment.
The Daimler Financial Services companies enter into transactions
with customers that primarily result in fixed-rate receivables.
Daimler’s general policy is to match funding in terms of maturities
and interest rates wherever economically feasible. However,
for a limited portion of the receivables portfolio in selected and
developed markets, the Group does not match funding in
terms of maturities in order to take advantage of market oppor-
tunities. As a result, Daimler is exposed to risks due to
changes in interest rates. In this regard, the Group is not
exposed to any liquidity risks.
An asset/liability committee consisting of members of the
Daimler Financial Services segment and the Corporate
Treasury department manages the interest rate risk relating
to Daimler’s leasing and financing activities by setting
targets for the interest rate risk position. The Treasury Risk
Management department and the local Daimler Financial
Services companies are jointly responsible for achieving these
targets. As separate functions, the Daimler Financial Services
Risk Management and the Daimler Financial Services Controlling
& Reporting department monitors target achievement on a
monthly basis. In order to achieve the targeted interest rate
risk positions in terms of maturities and interest rate fixing
periods, Daimler also uses derivative financial instruments such
as interest rate swaps. Daimler assesses its interest rate risk
position by comparing assets and liabilities for corresponding
maturities, including the impact of the relevant derivative
financial instruments.
Derivative financial instruments are also used in conjunction
with the refinancing related to the industrial business.
Daimler coordinates the funding activities of the industrial
and financial services businesses at the Group level.
Table  E.83 shows the period-end, high, low and average value
at risk figures of the interest rate risk for the 2015 and 2014
portfolio of interest rate sensitive financial instruments and
derivative financial instruments of the Group, including the
financial instruments of the leasing and sales financing business.
In this respect, the table shows the interest rate risk regarding
the unhedged position of interest rate sensitive financial
instruments. The average values have been computed on an
end-of-quarter basis.
In the course of 2015, changes of the value at risk for interest
rate sensitive financial instruments were primarily determined
by the development of interest rate volatilities.
Commodity price risk
Daimler is exposed to the risk of changes in commodity prices
in connection with procuring raw materials and manufacturing
supplies used in production. A small portion of the raw material
price risk, primarily relating to forecasted procurement of
certain metals, is mitigated with the use of derivative financial
instruments.
For precious metals, central commodity management shows
an unhedged position of 23% of the forecasted commodity
purchases at year-end 2015 for calendar year 2016. The corre-
sponding figure at year-end 2014 was 32% for calendar
year 2015.
Table  E.83 shows the period-end, high, low and average
value at risk figures of the commodity price risk for the 2015
and 2014 portfolio of derivative financial instruments used
to hedge raw material price risk. Average exposure has been
computed on an end-of-quarter basis. The transactions
underlying the derivative financial instruments are not included
in the value at risk presentation. See also table  E.80
for the nominal values of derivative commodity price hedges
at the balance sheet date.
Compared to the previous year, the value at risk of commodity
derivatives has increased. The main reasons for this develop-
ment were rising volatilities for platinum and an increase in the
nominal hedge volume for palladium and aluminum.
Equity price risk
Daimler predominantly holds investments in shares of compa-
nies which are classified as long-term investments, such as
Nissan or Renault, or which are accounted for using the equity
method, such as BAIC Motor or Kamaz. Therefore, the Group
does not include these investments in a market risk assessment.
Value at risk for exchange rate risk, interest rate risk and commodity price risk
2015 2014
Period-end High Low Average Period-end High Low Average
In millions of euros
Exchange rate risk
(from derivative financial instruments)
1,209 1,680 1,209 1,543
731 731 370 494
Interest rate risk 54 69 46 56 36 39 30 36
Commodity price risk
(from derivative financial instruments)
54 63 37 49
38 38 25 32
E.83