Mercedes 2015 Annual Report Download - page 84

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 91
Principles and objectives of financial
management
Financial management at Daimler consists of capital structure
management, cash and liquidity management, pension asset
management, market-price risk management (foreign exchange
rates, interest rates, commodity prices) and credit and finan-
cial country risk management. Worldwide financial management
is performed within the framework of legal requirements con-
sistently for all Group entities by Treasury. Financial management
operates within a framework of guidelines, limits and bench-
marks, and on the operational level is organizationally separate
from other financial functions such as settlement, financial
controlling, reporting and accounting.
Capital structure management designs the capital structure
for the Group and its subsidiaries. Decisions regarding the
capitalization of financial services companies – as well as
production, sales and financing companies – are based on
the principles of cost-optimized and risk-optimized liquidity and
capital resources. In addition, it is necessary to comply
with restrictions on capital transactions and on the transfer
of capital and currencies.
Liquidity management ensures the Group’s ability to meet
its payment obligations at any time. For this purpose, liquidity
planning provides information about all cash flows from
operating and financial activities in a rolling plan. The resulting
financial requirements are covered by the use of appropriate
instruments for liquidity management (e.g. bank credits, commer-
cial papers, notes); liquidity surpluses are invested in the
money market or the capital market to optimize risk and return.
Our goal is to ensure the level of liquidity regarded as neces-
sary at optimal costs. Besides operational liquidity, Daimler keeps
additional liquidity reserves which are available in the short
term. Those additional financial resources include a pool
of receivables from the financial services business which are
available for securitization in the capital market, as well
as a contractually confirmed syndicated credit facility with
a volume of €9 billion.
Cash management determines the Group’s cash requirements
and surpluses. The number of external bank transactions is
minimized by the Group’s internal netting of cash requirements
and surpluses. Netting is done by means of cash-concentration
or cash-pooling procedures. Daimler has established standard-
ized processes and systems to manage its bank accounts,
internal cash-clearing accounts and the execution of automated
payment transactions.
Management of market price risks aims to minimize the
impact of fluctuations in foreign exchange rates, interest rates
and commodity prices on the results of the divisions and
the Group. The Group’s overall exposure to these market-price
risks is determined to provide a basis for hedging decisions,
which include the definition of hedging volumes and correspond-
ing periods, as well as the selection of hedging instruments.
Decisions regarding the management of risks resulting from
fluctuations in foreign exchange rates and commodity prices,
as well as decisions on asset/liability management (liquidity and
interest rates), are regularly made by the relevant committees.
Management of pension assets includes the investment of
pension assets to cover the corresponding pension obligations.
Pension assets are held in separate pension funds and are
thus not available for general business purposes. The funds are
allocated to different asset classes such as equities, fixed-
interest securities, alternative investments and real estate,
depending on the expected development of pension obliga-
tions and with the help of a process for risk-return optimization.
The performance of asset management is measured by com-
paring with defined reference indices. Local custodians of the
pension funds are responsible for the risk management of
the individual pension funds. The Global Pension Committee
limits these risks by means of group-wide binding guidelines
whereby applicable laws are given due consideration. Additional
information on pension plans and similar obligations is
provided in E Note 22 of the Notes to the Consolidated
Financial Statements.
Liquidity and Capital Resources