Porsche 2008 Annual Report Download - page 213

211
[31] Financial risk management and financial instruments
1. Hedging guidelines and financial risk management principles
The principles and responsibilities for managing and controlling the risks that could arise from
financial instruments are defined by the executive board and monitored by the supervisory board.
Internal guidelines exist within the Porsche group which clearly defines the risk management
processes. These guidelines regulate, among other things, the use of financial instruments or
derivatives and the requisite control procedures, such as a clear segregation of functions between
trade and settlement. The guidelines are based on the statutory requirements as well as the mini-
mum standards for risk management at banks. The central treasury departments of the Porsche
and Volkswagen subgroups identify, analyze and monitor the risks throughout the group using
suitable information systems. Moreover, transactions may only be concluded in permitted financial
instruments, only with approved counterparties and to the admissible extent.
The guidelines and the supporting systems are checked regularly and brought into line with current
market and product development. The group manages and monitors these risks primarily via its
business operations and financing activities and, where necessary, by using derivative financial
instruments. The Porsche group mainly uses derivative financial instruments for the management
of currency, interest, commodity and fund price risks. Without using such instruments, the group
would be exposed to higher financial risks.
2. Credit and default risk
The credit and default risk arising from financial assets involves the risk of default by counter-
parties, and therefore comprises at a maximum the amount of the positive fair values of claims
against them and the irrevocable credit commitments. The default risk of financial assets is taken
into account through adequate valuation allowances considering collateral that has already been
provided. Various measures are taken into account to reduce the default risk for primary financial
instruments, such as requesting collateral or guarantees and credit ratings based on information
from credit rating agencies and historical data. The contracting partners for monetary investments,
capital investments and financial instruments are national and international counterparties. Finan-
cial derivatives are used by the subgroups in accordance with standardized guidelines, and are
continuously monitored.
Due to the worldwide spread of business activities and the resulting diversification, there was no
major concentration of risk in the past fiscal year.
It was decided not to present the non-significant classes and a break-down of the securities class
which in the prior year contained a small amount of securities held to maturity. A credit rating is
not performed for the equity instruments.
Notes on the other disclosures