The Management Board currently believes that the reorientation of the financing structure can be implemented successfully in the near future. Based on this, the annual financial statements have been drawn up under the assumption that the Company will continue to exist.
The other financial environment risks have also increased in the area of sales financing. The crisis has resulted in an increase in the volume of receivables from our sales financing that are past due. The risk of payment losses under financing contracts with customers therefore rose. The risks from counter-liabilities that we took over were also up. The portion of our portfolio that consists of claims against customers in emerging markets has grown. The currency devaluations in some countries are enormously encumbering our customers from repaying their installments denominated in euros or US dollars. The Ukraine, Mexico, and Brazil, for example, are especially affected by this development.
We form an appropriate provision to cover recognizable risks under our policy on risk provision, which is generally conservative. We systematically monitor foreign currency and payment risks on the basis of guidelines that set out the fundamental strategy, the directives concerning the structural organization and workflow management, as well as the regulations setting out responsibilities.
We are striving to reduce the foreign currency exposure of the Heidelberg Group and thereby also our dependency on exchange rate structures. We have hedged in the medium term the risk that the exchange rates of our principal foreign currencies might fall. Nevertheless, although risks exist in this area, we would also have opportunities should the exchange rate situation improve.
We reduce legal risks arising from individual contracts by relying on standardized master contracts wherever possible. We systematically protect our interests in the area of patents and licenses.
Substantial job cutbacks that also entail numerous business-related job terminations are always difficult – not only for the concerned employees, but for the entire Group. Important expertise could be lost, highly experienced teams are subject to change, processes and procedures need to be redesigned – and a degree of flexibility in case of a sudden economic upswing could be lost. Nevertheless, we strive to reduce the risks in the human resources area to the greatest possible extent based on modern human resources approaches and training opportunities.
For our new format category, there is a risk that the start-up costs of production and the general cost of manufacturing could be higher than planned. Overall, in the production area we have an opportunity to realize considerable cost reductions through the enhancement of processes within the framework of our Heidelberg Production Systems.
We minimize environmental risks through an efficient environmental management system – both in the area of product design and in the manufacturing process.
Since risk management is an integral component of our supply management, we protect ourselves against many risks of procurement at the outset. We respond to the risk of a supplier’s failure to deliver and a delay in the delivery of components or the risk of receiving substandard components by means of a supplier monitoring system based on key data parameters, consistent and systematic observation of all significant markets, and through the utilization of a material planning system with a rolling twelve-month forecast. We also integrate our suppliers within this process. The risk of losses consequently rose only slightly despite the difficult underlying conditions, although insolvencies of firms, especially in the engineering industry, will continue to be widespread. The price level of raw materials, metals, and energy is lower than in the past. A sudden and hefty price resurgence would entail a risk to our cost of manufacturing.
We reduce the risk from bad investments by including all planned investments in our worldwide uniform planning system. This system forms the basis for our focused financial management. Before each capital goods investment, we implement a make-or-buy analysis, which a team of engineers and financial specialists monitor. Our system proved its helpfulness during the financial year, as a result of which we have been able to quickly reduce planned investments – with no increase in our risks from production!
Thanks to our effective global IT management and our investment in the latest technology, we do not envisage any serious risks in the IT area. We are prepared for a potential breakdown of our systems thanks to suitable security measures. Through comprehensive preventive measures, we have considerably reduced the danger of cyber attacks.