Reebok 2012 Annual Report Download - page 205

adidas Group
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2012 Annual Report
Group Management Report – Financial Review
183
2012
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03.5
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Risk and Opportunity Report
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Financial opportunities
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Management assessment of overall risks and opportunities
Financial opportunities
Favourable financial market changes
Favourable exchange and interest rate developments can potentially
have a positive impact on the Group’s financial results. Our Group
Treasury department closely monitors the financial markets to identify
and exploit opportunities
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SEE TREASURY, P. 141. Translation effects
from the conversion of non-euro-denominated results into our Group’s
functional currency, the euro, might positively impact our Group’s
financial performance. Overall, we believe favourable financial market
changes could have a major potential impact. Given the volatility of
financial markets, and exchange rate movements since the beginning
of 2013, we assess the likelihood of being positively affected to such an
extent as unlikely.
08
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Changes in corporate risk assessment versus prior year
2012 2011
Likelihood Potential impact Likelihood Potential impact
Strategic risks
Consumer demand risks 1) Possible Significant Likely Moderate
Operational risks
Own-retail risks 1) Possible Major Likely Moderate
Supplier risks Unlikely Possible
Inventory risks 1) Possible Significant Probable Moderate
Personnel risks 1) Unlikely Significant Likely Moderate
IT risks Major Significant
Product innovation and development risks Likely Moderate Possible Minor
Risks related to rising input costs Likely Moderate Highly probable Major
Legal & compliance risks
Legal risks 1) Possible Major Likely Significant
Social and environmental risks 1) Possible Major Likely Moderate
Risks related to product counterfeiting and imitation 1) Unlikely Significant Probable Moderate
Product quality risks 1) Possible Significant Likely Moderate
Financial risks
Credit risks 1) Major Moderate
Currency risks Probable Highly probable
Interest rate risks Probable Highly probable
1) Modification of the risk aggregation methodology and further updates of the Risk Universe had an effect on our risk evaluation, contributing to changes in the assessment of likelihood and potential
impact. However, the general risk rating remains virtually unchanged versus the prior year.
Management assessment of overall
risks and opportunities
Management aggregates all risks and opportunities reported by
different business units and functions through the quarterly risk and
opportunity assessment process. Taking into account the occurrence
likelihood and the potential financial impact of the risks explained within
this report, the strong balance sheet as well as the current business
outlook, Management does not foresee any material jeopardy to the
viability of the Group as a going concern. This assessment is also
supported by the historical response to our financing demands
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SEE
TREASURY, P. 141. The adidas Group therefore has not sought an official
rating by any of the leading rating agencies. Management remains
confident that the Group’s earnings strength forms a solid basis for our
future business development and provides the necessary resource to
pursue the opportunities available to the Group. Compared to the prior
year, our assessment of certain risks has changed in terms of likelihood
of occurrence and/or potential financial impact. These changes are
reflected in the table below
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TABLE 08. The changes in individual risks
have no substantial impact on the overall adidas Group risk profile,
which we believe remains unchanged compared to the prior year.