Adidas 2002 Annual Report Download - page 88

RISK IDENTIFICATION AND ANALYSIS /// The international
sporting goods industry is highly competitive and success
depends on the correct assessment of future trends and
challenges. Management continuously gathers and analyzes
business intelligence, including a qualitative assessment of
the future business environment, in order to best identify
strategies to avoid or lower risk. The major risks inherent
either to the Group specifically or to the sector in which we
operate are as follows:
CONSUMER SPENDING /// The sporting goods industry is
sensitive to changes in the economic environment. Recession,
inflation and political instability often result in considerable
changes in consumer sentiment and buying behavior. This can
result in lower sales and/or profits, however we believe that
the sporting goods industry tends to be less subject to these
influences than other consumer goods sectors. In addition, we
believe that our geographical sales are balanced in such a
way as to compensate for consumer spending shortfalls in
individual countries from having a critical impact on the
stability of our Group’s business.
CONSUMER PREFERENCES AND BRAND IMAGE /// The
image of our brands and overall consumer preferences can
affect how well our products are accepted. Changes in con-
sumer sentiment with respect to brand identity, competitors’
products and market trends have a potential impact on sales
and margins. To manage this risk, we conduct market and
trend research regarding design, quality, image and price
point issues. We continuously work on the development of
technology and design innovations to ensure that our products
are up-to-date and that they meet consumer needs and
expectations.
86 REPORTING MANAGEMENT DISCUSSION & ANALYSIS /// RISK MANAGEMENT
Risk Management /// AS A RESULT OF OUR INTER-
NATIONAL GROWTH AND PROFIT TARGETS, adidas-Salomon
IS CONTINUOUSLY CONFRONTED WITH A VARIETY OF
GLOBAL AND LOCAL BUSINESS RISK FACTORS. THESE
RISKS CAN BE INTERNAL OR EXTERNAL, AND IF NOT
APPROPRIATELY MANAGED MAY AT TIMES NEGATIVELY
INFLUENCE THE GROUP’S GOALS, STRATEGIES, BRAND
IMAGE, OR FINANCIAL PERFORMANCE AND HEALTH. TO
ADDRESS THESE RISKS, adidas-Salomon HAS CREATED
AND UTILIZES A COMPREHENSIVE RISK MANAGEMENT
SYSTEM. THE MAJOR ELEMENTS OF OUR RISK MANAGE-
MENT INCLUDE THE IDENTIFICATION, ANALYSIS, REPORT-
ING AND COMMUNICATION OF RISKS.
RISK MANAGEMENT PHILOSOPHY /// Risks are a part of
business, and our focus is to balance risk awareness with
the need to identify, create and fully exploit opportunities.
adidas-Salomon approaches risk management by:
>Fully integrating it into day-to-day business functions at
all organizational levels.
>Configuring our organization to allow for early identification,
evaluation, effective communication and management
of risk. This requires suitable action for risk avoidance,
reduction, transfer or acceptance, and continuous
monitoring.
>Preparing and implementing an appropriate reporting
structure and contingency plans to reduce the potential
risk impact to an acceptable level.
>Requiring participation in risk management from managers
and employees at all levels of the Group. In particular, the
Executive and Supervisory Boards support the develop-
ment of a pro-active, forward-looking risk management
culture within all brands and regions of the Group.
adidas COLOURS /// PARKA