Adidas 2000 Annual Report Download - page 52

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As a global company, adidas-Salomon is exposed to a
variety of business risks. We define risks as those events
internal or external, which can impact the achievement of
short-term goals (e.g. earnings targets) or the implemen-
tation of long-term strategies and the financial health
of our Company. Risks can also impact intangible values
such as brand image or our social and environmental
record.
At adidas-Salomon, we believe risk sensitivity should not
compromise the Company’s ability to identify, create and
act on promising business opportunities. Within our Group,
we strive to make all business decisions opportunity
focused, but risk aware. This means we constantly seek
an optimal balance between maximizing entrepreneurial
opportunities and, at the same time, recognizing and
controlling the associated risks. As a result, risk manage-
ment plays a critical role in the financial and strategic
management of our Company.
New Initiatives in 2000
Risk evaluations are standard parts of our budgeting, fore-
casting and strategic business planning processes. In 2000,
adidas-Salomon introduced two new programs to strengthen
the Group’s risk management. First, was the implementation of
formalized risk communication between operating units and
Group headquarters. Second, was the preparation of a Group-
wide risk management manual. This manual formalizes our
compliance with the requirements of the German law regarding
transparency and control in stock companies (KonTraG). More
importantly, it formally documents adidas-Salomon’s risk
management system and provides a common framework for all
operating entities of the Group concerning risk management
values, processes and responsibilities.
Risk Management at adidas-Salomon
As part of our effort to increase risk-aware decision-making
throughout the Group, we endeavor to identify potential risks
as early as possible and reduce, control and transfer them as
appropriate. This has a high priority and is a constantly evolving
process within our Company. The following represents a qual-
itative and quantitative list of the major risk areas we have
identified based on our global presence in the sporting goods
market:
Sporting Goods Sector Risks
 Consumer Preferences and Brand Image Risks: The sale of
adidas-Salomon products is dependent both on brand
image and on consumer preferences. Changes in consumer
sentiment with respect to our brand acceptance, competing
products and market trends have the potential to endanger
our sales and margins globally or in individual markets. For
this reason, our Global Marketing function conducts contin-
uous market and trend research regarding design, quality,
image and price point issues. Further, we are committed to
continuous technology and design innovation to ensure that
new trends are not missed and are managed in a risk-aware
manner.
 Supplier Risks: adidas-Salomon produces a very limited
number of its products directly. Instead, the vast majority of
our products are sourced in third-party factories around the
world. Their delivery performance, pricing and product qual-
ity are critical to adidas-Salomon. To ensure the highest
possible quality products, adidas-Salomon employs around
200 quality control officers to monitor factory performance.
Detailed product cost analyses are performed both before
purchase and historically to ensure competitive pricing
and
opportunities for further margin improvements. To support
best practice standards in all regions, we conduct regular
benchmarking analysis of all our suppliers to identify optimal
product allocation, cost, quality and delivery performance.
Risk Management Report