Adidas 2003 Annual Report Download - page 98

Risk Management /// THE GLOBAL BUSINESS LAND-
SCAPE OF THE SPORTING GOODS INDUSTRY REMAINED
HIGHLY VOLATILE IN 2003 WITH MACROECONOMIC UNCER-
TAINTIES AND RAPIDLY CHANGING CONSUMER PREFER-
ENCES. AS A RESULT, THE adidas-Salomon GROUP IS CON-
TINUALLY CONFRONTED BY A VARIETY OF RISKS WHILE AT
THE SAME TIME EXPLORING OPPORTUNITIES TO MAXIMIZE
EARNINGS AND INCREASE SHAREHOLDER VALUE. OUR RISK
MANAGEMENT SYSTEM PROVIDES THE FRAMEWORK FOR
SAFEGUARDING OUR STRONG COMPETITIVE POSITION
GLOBALLY AND FOR SUSTAINING THE SUCCESS OF OUR
GROUP INTO THE FUTURE.
RISK MANAGEMENT PHILOSOPHY /// Risk management at
adidas-Salomon addresses both short-term operational as
well as long-term strategic risks. Opportunity-focused, but
risk-aware decision-making is a central element of the
Group’s management practice across all brands, regions and
functions. It is not our goal to avoid all potential risks, but to
maintain an optimal balance between risk avoidance, risk
reduction, risk transfer and controlled risk acceptance. Risk
sensitivity must not compromise our capability to identify,
create and act on opportunities, and thereby generate
attractive shareholder returns.
RISK MANAGEMENT – VALUES AND PRINCIPLES /// Respon-
sibilities within the risk management system are reflected in
the Group’s existing functional and hierarchical organization
structure. This system is characterized by the following values
and principles:
>Risk management must ensure early identification, appro-
priate communication and continuous monitoring of risks,
in combination with suitable action for risk avoidance,
reduction, transfer or acceptance.
>In cases where risk cannot be avoided or transferred, it is
the responsibility of functional management on all organi-
zational levels to prepare and implement contingency
plans with the objective to reduce the potential risk impact
to an acceptable level.
>Risk management is fully integrated into the day-to-day
management practice in all functions and on all
organizational levels. It is primarily the responsibility of
functional management, supported by the strategic direc-
tions from regional and brand business units and global
headquarters.
>Further, it is the responsibility of functional management
on all organizational levels to report risk-relevant infor-
mation in a timely, accurate and complete manner to the
appropriate management levels.
>All employees of the adidas-Salomon Group are encour-
aged to be active participants of the risk management
system within their area of responsibility; the Executive
Board and senior management are committed to sponsor
the risk management system by building risk management
awareness throughout the organization.
RISK AREAS /// Risks that may impact the future perfor-
mance of the adidas-Salomon Group are in the following
areas in particular:
CONSUMER SPENDING /// The sporting goods industry is
sensitive to changes in the global macroeconomic environ-
ment. Recession, inflation, political developments and even
weather conditions often result in considerable changes in
consumer sentiment and buying behavior. As experienced in
2003 with SARS and the war in Iraq, consumer spending
was temporarily negatively impacted in Asia and the North
American markets respectively. Such incidents have the
potential to impact the Group’s financial performance. How-
ever, adidas-Salomon enjoys the competitive advantage of a
well-balanced business portfolio across numerous brands
and geographic regions. Consumer spending related short-
falls in individual markets are therefore unlikely to threaten
the stability of the Group.
94 REPORTING GROUP MANAGEMENT REPORT /// RISK MANAGEMENT