DHL 2005 Annual Report Download - page 73

As a result of its operating activities, the Group is exposed to nancial risks resulting from
changes in exchange rates, commodity and fuel prices, and interest rates. We employ pri-
mary and derivative nancial instruments to limit these risks. e necessary universe of
actions, responsibilities and controls have been established in internal guidelines. Hedg-
ing transactions are recorded, assessed and processed using risk management soware.
e Group only uses prime-rated banks as counterparties for hedging transactions. It
constantly monitors counterparty limits and the extent to which these have been utilized.
e Group’s Board of Management receives regular information on the existing risks and
the hedging transactions eected. Financial instruments are accounted for in accordance
with IAS 39.
Currency risks arise mainly from the international business of the MAIL, EXPRESS and
LOGISTICS Corporate Divisions, a large percentage of which is conducted in foreign-cur-
rencies. ese risks are managed centrally. All Group companies report their foreign-cur-
rency risks to Corporate Treasury, which calculates a consolidated position per currency
from these reports. is net position is hedged externally with banks, depending on the
risk and market estimates. Recorded currency risks and risks arising from nancial trans-
actions are usually hedged in full, and up to 80% of planned currency risks are hedged for
a maximum of 18 months. e largest planned net requirements are in US dollars, Czech
koruna and Singapore dollars. e Group generates the most substantial net surpluses in
pound sterling, Japanese yen, Korean won and Chinese yuan.
Commodity price risks arising in the context of the purchase of kerosene, fuel oil, diesel
and petrol are hedged centrally for a period of up to 18 months. As far as is possible, we
pass on commodity price increases to customers via surcharges and corresponding con-
tract clauses.
Interest rate risks are actively managed and centrally monitored. We record all substan-
tial interest-bearing receivables and liabilities and then use these to calculate the respec-
tive positions for the Group’s key currency blocks. Based on this information, primary and
derivative nancial instruments are used to reduce nancing costs and optimally manage
interest rate risks by adjusting the ratio of xed to variable interest agreements.
Controlling corporate division risks
e fact that both the Group and its subsidiaries provide some of their services in a regu-
lated market gives rise to further risks.
e MAIL Corporate Division operates within the following regulatory framework in par-
ticular: on January 1, 2003, the EU directive on further deregulation of the European post-
al markets was implemented into German law. As a result, letters and addressed catalogs
over 100g and/or three times the standard rate, and outgoing cross-border mail services,
were opened up to competition. On January 1, 2006, these ceilings were cut to 50g and two
and a half times the standard rate. While the relevant change in the Postgesetz (German
Postal Act) entails competition risks in Germany, the deregulation of other European mail
markets opens up new opportunities.
Further information on existing hedges against
currency, interest rate and commodity price risks
is provided in item 51.2 in the “Notes“ section.
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Risk Management
Group Management ReportConsolidated Financial StatementsAdditional Information