Sennheiser 2011 Annual Report Download - page 33

CONSOLIDATED MANAGEMENT REPORT 2011
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CONSOLIDATED MANAGEMENT REPORT 2011
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RISK MANAGEMENT
Sennheiser has a controlling system that monitors and manages all business processes within the Group. It
quickly and effectively counteracts deviations. The transparency of structures and processes was increased in
2011 as a result of a Group-wide divisional reorganization. This went hand in hand with the development of
strategic and operational planning and reporting tools – which will continue to be developed in the future – for
analyzing and assessing medium- and long-term opportunities and risks.
In financial year 2011, Sennheiser made better use than most of positive worldwide economic developments
and continued its growth trend from the previous year. But the future growth of the Sennheiser Group will still
depend on the economic changes around the world. In order to disperse risks, the Sennheiser Group will continue
to focus on different business areas. Increased investments in brand development, particularly in North America
and Asia, will help to reduce the company’s dependence on the general economic situation.
Liquid resources, inasmuch as they are not required by subsidiaries for daily business, are concentrated in the
parent company on the basis of a cash pooling program. Cash and cash equivalents are deposited with several
banks and are mainly denominated in euros. As in the past, Sennheiser implemented a conservative investment
strategy with the aim of minimizing default risks in 2011. Fluctuations of Sennheiser’s most important trading
currencies once again had a significant impact on business developments in 2011. The high percentage of
turnover generated in US dollars again created currency risks in 2011. These were successfully offset by conclud-
ing an increasing number of purchases in the US dollar zone, a strategy that the company has been continuously
employing for years.
Sennheiser counteracts the general default risk with not only effective customer management, but also an
overall broadly diversified customer structure.
The globally valid property, liability and transport insurance policy covers the interests of the entire Group,
including all affiliated companies. A Group-wide insurance policy is also in place to protect against reciprocal
risks within the Sennheiser Group and against consequential damages caused by defaulting suppliers. The brand
and product piracy risk has become a permanent threat for renowned manufacturers in the wake of globaliza-
tion. Sennheiser cooperates with lawyers and authorities to effectively curb this risk. The implemented measures
include crackdowns, seizing of products by customs, shutting down trade stalls and legal action against parties
in breach of industrial property rights. In 2011, Sennheiser again increased its cooperation with competitors,
especially in Asia, to increase the effectiveness of these measures.
The re-allocation of the majority of UHF frequencies for new digital applications (DVB-H, wireless broadband
Internet, etc.) and the resulting threat to the frequency resources that have traditionally been used by profes-
sional wireless microphone and monitoring systems has already started. The implementation process is still in
its infancy and will take many years in Germany and across all of Europe. The attempt of large companies to
establish cognitive devices for the transfer of data that use the UHF band poses a further risk to the uninter-
rupted use of this frequency range for wireless production tools. For some years now, Sennheiser has been
preparing for the restriction of the UHF spectrum to provide its customers with disruption-free productions and
therefore safe investments in the future. These measures include the development of cognitive technologies
and the lobbying of the negative impact of these developments to decision-makers in politics and
administration.
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OUTLOOK FOR FUTURE DEVELOPMENT
The restructuring of Sennheiser Group into seven divisions was completed in financial year 2011. Internal pro-
cesses and systems have also been following this new way of thinking since January 1, 2012. This changeover
saw the renaming of the Installed Sound division to Integrated Systems, the move following efforts to reflect
the new status quo. The Executive Management Board has been complete since mid-2011 when Peter Claussen
was appointed President, Integrated Systems Division.
The new organization will increase the focus on customer benefits and specific requirement, thereby forming
the basis for future growth, a stable operating position as well as for flexibility in more volatile markets.
The company expects to further increase its turnover in the coming financial years. The new organizational
structure in particular will generate additional profitability.
Wennebostel, Germany, March 31, 2012
The Executive Management Board
Volker Bartels
President, Corporate Services,
and Speaker of the Executive
Management Board
Dr. Heinrich Esser
President, Professional
Systems
Daniel Sennheiser
President, Strategy and Finance