Porsche 2009 Annual Report Download - page 97

Risks arising from operations
Risks can never be completely eliminated. In-
cidents such as fires or explosions can severely dis-
rupt operating processes. Regular safety checks and
protective measures integrated into buildings and
processes offer preventive protection. Moreover,
business interruptions and damage to property are
covered by insurance. Natural disasters, terrorist ac-
tivities, pandemics and changes in the law are risks
that can be difficult to predict in some cases but have
a sizeable economic impact if they come to pass.
The statistics show that natural perils such as
storm, hail, or earthquakes are becoming more fre-
quent. In order to reduce such risks and the resulting
interruption to production, the group has set up an
emergency team that can take quick action in a coor-
dinated manner to minimize the loss. Each case of
loss leads to new findings. If these findings reveal a
need to optimize the existing processes, the findings
are evaluated in detail and, if need be, implemented in
the risk mitigation organization.
Risks related to demand
Levels of demand and sales are also influ-
enced by the changing economic landscape. Intensive
monitoring of local markets and early warning signs
enable the group to quickly spot a potential fall in
sales. The general decline in demand for premium
vehicles in the wake of the financial crisis has hit Por-
sche and its competitors alike. The fall in sales has
been confronted by reallocating the geographical dis-
tribution of sales and introducing country-specific
sales promotion packages. Despite these measures,
Porsche had to introduce short-time work in produc-
tion in Zuffenhausen in the reporting period.
The retail organization is granted terms of
payment that involve the individual recipients being
rated positively in terms of their economic perform-
ance, a rating that is reviewed regularly by a credit
committee. Risk diversification and active risk man-
agement, such as obtaining the collateral customarily
expected by banks as well as obtaining information
and monitoring it daily also contribute to reducing the
risk of default for the group.
Procurement risk
The prices of raw materials and oil remain
volatile. At the same time, they have an impact on
production costs. Raw materials markets are perma-
nently monitored and analyzed in order to enable Por-
sche AG to effectively plan for future materials costs
and secure the materials it needs. Long-term con-
tracts with suppliers also hedge against bottlenecks
and the risk of price fluctuations.
Risks arising from financial instruments
In its business activities the group is exposed
to risks arising from the primary or derivative financial
instruments used. The primary aim of using financial
instruments is to limit the financial risk position for
the group’s ability to continue as a going concern and
its earnings power. In order to manage these risks,
the group has set out guidelines to ensure that trans-
actions are concluded only in financial instruments
97