Mercedes 2010 Annual Report Download - page 114

110
Procurement market risks. Procurement market risks arise
for the Group from fluctuations in prices of raw materials.
After falls in those prices at the end of 2008 and their subse-
quent recovery in 2009, they have now reached a very high level
once again. This recovery of prices is highly dependent on eco-
nomic recovery in the various economic regions of the world.
But the outlook for future price developments remains uncertain
not least due to the increasing influence of institutional investors.
This influence is apparent in the increased demand for raw-mate-
rial investments and thus explains the high level of price volatility
in the raw-material markets. In general, our scope to pass on
the increased cost of raw materials and purchased components
in the form of price increases for our vehicles is very limited
because of intense pressure of competition in the international
automobile markets. Daimler counteracts procurement risks
by means of targeted commodity and supplier risk management.
We attempt to reduce our dependency on individual materials
in the context of commodity management, by making appropriate
technological progress for example. Daimler protects itself
against the volatility of raw-material prices by entering into long-
term supply agreements, which make short-term risks for mate-
rial supplies and the effects of price fluctuations more calculable.
Furthermore, in connection with some metals, we make use
of derivative price hedging instruments. Supplier risk management
aims to identify suppliers’ potential financial difficulties at an
early stage and to initiate suitable countermeasures. As a result
of the financial market crisis, some of our suppliers’ refinancing
possibilities have worsened significantly. This has necessitated
individual or joint support actions by vehicle manufacturers
to safeguard their own production and sales. In the context of
supplier risk management, regular reporting dates are set for
suppliers depending on our assessment of them, in which key per-
formance indicators are reported to Daimler and any required
support actions are decided upon.
Information technology risks and unforeseeable events.
Production and business processes could also be disturbed by
unforeseeable events, such as natural disasters or terrorist
attacks. Consumer confidence would be significantly affected
and production could be interrupted by supply problems and
intensified security measures at territorial borders. Information
technology plays an important role in our business processes.
Storing and exchanging data in a timely, complete and correct
manner and being able to utilize fully functioning IT applications
are highly important for a global company such as Daimler. Possi-
ble risks, the occurrence of which could result in the interruption
of our business processes due to the failure of IT systems or the
loss or corruption of data, are therefore identified and evaluated
over the entire life cycles of applications and IT systems. Daimler
has defined suitable actions for risk avoidance and limitation
of damage, continually adapts these actions to changing circum-
stances, and monitors their implementation. These activities
are embedded in a multi-stage IT risk management process. For
example, the Group minimizes potential interruptions of operat -
ing routines in the data centers by means of mirrored data sets,
decentralized data storage, outsourced archiving, high-availability
computers and appropriate emergency plans. In order to coun-
teract the growing threat for the operation of central IT systems
and the security of confidential data, we have our own risk
management system for information security. Due to the wide-
ranging security measures we take, most IT risks have a low
probability of occurrence, but can have a significant impact on
business operations if they do occur.
Reputation. The general public is becoming increasingly aware
of companies’ behavior in matters of ethics and sustainability.
Compliance of corporate actions with applicable law and ethical
principles is essential for the Daimler Group. Furthermore, cus-
tomers and capital markets critically observe how the Group
reacts to the technological challenges of the future and the
extent to which we succeed in placing up-to-date and technologi-
cally leading products on the market. Dealing securely with sensi-
tive data is also a precondition for conducting business relations
with customers and suppliers in a trusting and fair environment.
Daimler applies comprehensive packages of measures so that
risks affecting the Group’s reputation are subject to formal inter-
nal controls.