Mercedes 2012 Annual Report Download - page 121

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We systematically assess the effectiveness of the internal
control and risk management system with regard to the corporate
accounting process. The first step consists of risk analysis
and definition of control. Significant risks are identified relating
to the process of corporate accounting and financial reporting
in the main legal entities and corporate functions. The controls
required are then defined and documented in accordance
with Group-wide guidelines. Regular random tests are carried
out to assess the effectiveness of the controls. Those tests
constitute the basis for self-assessment of the appropriate extent
and effectiveness of the controls. The results of this self-
assessment are documented and reported in a global IT system.
Any weaknesses recognized are eliminated with consideration
of their potential effects. At the end of the annual cycle, the
selected legal entities and corporate functions confirm the effec-
tiveness of the internal control and risk management system
with regard to the corporate accounting process. The Board
of Management and the Audit Committee of the Supervisory
Board are regularly informed about the main control weak-
nesses and about the effectiveness of the control mechanisms
installed. However, the internal control and risk management
system for the accounting process cannot ensure with absolute
certainty that material false statements are avoided in
accounting.
In order to ensure the complete presentation and assess-
ment not only of material risks and risks threatening the
existence of the Group, but also of the control and risk process
with regard to the corporate accounting process, Daimler
has established the Group Risk Management Committee (GRMC).
It is composed of representatives of the areas of Finance &
Controlling, Accounting and Integrity & Legal Affairs, and is
chaired by the Board of Management Member for Finance (CFO).
The Internal Auditing department contributes material state-
ments on the internal control and risk management system.
In addition to fundamental issues, the committee has the follow-
ing tasks:
– The GRMC creates and shapes the framework conditions
with regard to the organization, methods, processes and
systems we need to ensure a functioning, Group-wide and
thorough control and risk management system.
– The GRMC regularly reviews the effectiveness and functio nality
of the installed control and risk management processes.
Minimum requirements can be laid down in terms of the design
of the control processes and of risk man agement and cor-
rective measures can be commissioned as necessary or appro-
priate to eliminate any system failings or weaknesses
exposed. But responsibility for operational risk management
for risks threatening the existence of the Group and for
the control and risk management processes with regard
to the corporate accounting process remains directly
with the corporate areas, companies and central functions.
The measures taken by GRMC ensure that relevant risks
and any existing process weaknesses in the corporate account-
ing process are identified and eliminated as early as possible.
In the Board of Management and the Audit Committee of
the Supervisory Board of Daimler AG, regular reports are given
regarding the current risk situation and the effectiveness,
functions and appropriateness of the internal control and risk
management system. Furthermore, the responsible managers
regularly discuss the risks of business operations with the
Board of Management.
The Audit Committee of the Supervisory Board is responsible
for monitoring the internal control and risk management
system. The Internal Auditing department monitors whether
the statutory conditions and the Group’s internal guidelines are
adhered to in the Group’s entire monitoring and risk manage-
ment system, and if required develops appropriate measures
which are initiated by the management. The external auditors
audit the system for the early identification of risks that is inte-
grated in the risk management system for its fundamental
suitability to identify risks threatening the existence of the Group;
in addition, they report to the Supervisory Board on any sig-
nificant weaknesses that have been discovered in the internal
control and risk management system.
Economic risks
2012 was another difficult year for the world economy,
so overall expansion of 2.5% was significantly below the exist-
ing growth potential and also lower than the previous year’s
growth of 3.2%. The world economy was and still is sensitive
to external disturbances. We see the biggest individual risks
for the year 2013 in a renewed worsening or escalation of the
sovereign-debt crisis in the euro zone, the resulting turmoil
in the financial markets and the banking sector, uncertainty about
budget and fiscal policy in the United States, a growth slump
in China, high price volatility in raw-material markets due to geo-
political unrest in the Middle East, further inflationary pressure
and nascent protectionism. The development of the world
economy in 2013 that is expected by the majority of economic
research institutions, and also by Daimler, is highly dependent
on those risk factors. Some of those risk factors certainly have
the potential, if they occur, to lead the world economy into
a renewed recession. This means that there are still consider-
able economic risks for Daimler’s financial position, cash
flows and profitability.
The measures taken for the reduction of the burden of debt
on public budgets in Western Europe, the United States and
Japan are still one of the dominant issues for the world econ-
omy and could dampen economic prospects and have a substan-
tial negative impact on the financial markets once again in
2013. This applies in particular to the risk of a sovereign default,
which cannot be entirely ruled out above all for Greece, but
also for some of the other peripheral countries despite the sup-
port programs provided by the European Union and the Inter-
national Monetary Fund (IMF). Austerity measures have the poten-
tial to depress domestic demand in the affected countries
even further, so that their national economies might contract
even more than previously expected. Another risk is that after
the countries of the euro zone, the financial markets might
focus on other highly indebted countries such as Japan or the
United States.