Volvo 2014 Annual Report Download - page 89

BOARD OF DIRECTORS’ REPORT 2014 GROUP PERFORMANCE RISKS AND UNCERTAINTIES
Further information
Note 27 Personnel contains information concerning rules on sever-
ance payments applicable for the Group Executive Team and certain
other senior executives.
Note 4 and 30 contain information regarding fi nancial risks as well as
goals and policies in fi nancial risk management.
Further risk information is provided in note 24.
Information about licensable facilities in Sweden is provided on page 48.
Reliance on suppliers
The Volvo Group purchases raw materials, parts and components
from numerous external suppliers. A signifi cant part of the
Group’s requirements for raw materials and supplies is fi lled by
single-source suppliers. The effects of delivery interruptions vary
depending on the item or component. Certain items and compo-
nents are stand ard throughout the industry, whereas others are
internally developed and require unique tools that are time-
consuming to replace.
The Volvo Group’s costs for raw materials and components can
vary signifi cantly over a business cycle. Cost variations may be
caused by changes in world market prices for raw materials or by
an inability of our suppliers to deliver.
Intangible assets
AB Volvo owns or otherwise has rights to patents and brands that
refer to the products the Company manufactures and markets.
These have been acquired over a number of years and are valua-
ble to the operations of the Volvo Group. AB Volvo does not con-
sider that any of the Group’s operations are heavily dependent on
any single patent or group of patents.
Through Volvo Trademark Holding AB, AB Volvo and Volvo Car
Corporation jointly own the Volvo brand. AB Volvo has the exclu-
sive right to use the Volvo name and trademark for its products
and services. Similarly, Volvo Car Corporation has the exclusive
right to use the Volvo name and trademark for its products and
services.
The Volvo Group’s rights to use the Renault brand are restricted
to the truck operations only and are regulated by a license from
Renault s.a.s., which owns the Renault brand. The amount paid
during 2014 to Renault s.a.s. for license fees amounted to SEK
6.0 M (5.2).
Complaints and legal actions
The Volvo Group could be the target of complaints and legal
actions initiated by customers, employees and other third parties
alleging health, environmental, safety or business related issues,
or failure to comply with applicable legislation and regulations.
Information about legal proceedings involving entities within the
Volvo Group are found in note 21 Other Provisions and in note 24
Contingent Liabilities.
Even if such disputes are resolved successfully, without having
adverse fi nancial consequences, they could negatively impact the
Group’s reputation and take up resources that could be used for
other purposes.
Risk related to human capital
A decisive factor for the realization of the Volvo Group’s vision is our
employees and their knowledge and competence. Future develop-
ment depends on the company’s ability to maintain its position as
an attractive employer. To this end, the Volvo Group strives for a
work environment in which energy, passion and respect for the indi-
vidual are guiding principles. Every year a Group-wide survey is
conducted, and according to the survey the share of satisfi ed
employees has been on a high level in recent years, although it
declined in 2014.
SHORT-TERM RISK FACTORS
An increase in demand could potentially result in delivery distur-
bances due to suppliers’ fi nancial instability or shortage of resources.
Uncertainty regarding customers’ access to the fi nancing of prod-
ucts in emerging markets might have a negative impact on demand.
The Volvo Group verifi es annually, or more frequently if necessary,
the goodwill value and other intangible assets for possible impair-
ment. The size of the overvalue differs between the business areas
and they are, to a varying de gree, sensitive to changes in the busi-
ness environment. Instability in the business recovery and volatility
in interest and currency rates may lead to indications of impairment.
For further information on intangible assets, see note 12.
The reported amounts for contingent liabilities refl ect a part of the
Volvo Group’s risk exposure, see note 24 for contingent liabilities.
Contractual conditions related to take over bids
Some of AB Volvo’s long term loan agreements contain condi-
tions stipulating the right for a bondholder to request repayment
in advance under certain conditions following a change of the
control of the company. In AB Volvo’s opinion it has been neces-
sary to accept those conditions in order to receive fi nancing on
otherwise acceptable terms. Provisions stipulating that an agree-
ment can be changed or terminated if the control of the company
is changed are also included in some of the agreements whereby
Renault Trucks’ has been given the right to sell Renault s.a.s.’ and
Nissan Motor Co. Ltd’s light-duty trucks as well as in some of the
Group’s purchasing agreements.
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