ANNUAL REPORT 2008 - Gorenje Group

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Sales risks are associated with the competition in the sale of products and services in individual
markets and include risks of appropriate marketing strategy (brand name, price and functional
competition of products, design etc.), risk of increasing negotiating power of major industrial customers
and trade chains and risk of quality of after-sales services. The management board of the
Gorenje Group has assessed that the exposure to such risks is moderate and will be very high in
the following year.
The financial crisis and recession have increased unpredictability in raw-material markets, and daily
fluctuations on stock exchanges have reached a two-digit percentage. The measures for the decrease
in exposure to purchase risks have been adjusted accordingly. Forward purchases of metals
have changed from long-term ones into short-term ones and instead of hedging against the increase
purchasing is carried out currently. Long-term partnerships have remained the strategic advantage
of purchasing, but exclusively on competitive bases. Hedging measures against purchase
risks are also derived financial instruments for raw materials. The development of supply sources in
the LCC markets has continued and these are mostly US $ areas by which natural hedging of sales
in $ has been provided. In spite of the concluded hedging and the anticipated slow-down of the global
economy, and reduction in prices of raw materials in world stock exchanges, the management
board of the Gorenje Group has assessed that the exposure to purchase risks is moderate.
Product risks have been focused on the control of risks that may lead to incorrect operation of
appliances in the market and finally to a mass failure or product responsibility of the producer.
Risks are limited by suitable development systems and quality assurance in scope of production,
sales and after-sales processes and additionally by the insurance of product liability. A quality
management system in accordance with the requirements of SIST EN ISO 9001/2000 and the
system of accredited methods under ISO 17025 and the six sigma quality management system
have been established. The use of the new program for the SAS cancellation analysis shortens
the time to detection of any possible cancellations and limits costs arising from serial failures. The
management board of the Gorenje Group has assessed that the exposure to product risks is
moderate with respect to the measures mentioned.
Risks associated with the achievement of the planned economic of investments, successful activation
of investments in the development of new product generation and successful introduction of
new technologies are of key importance among investment and development risks. Thereby appropriate
planning and control of investment effects is relevant. Risks related to the introduction
of new generations and new technologies have been reduced in the preparation project phases by
exact preparation of business plans, in the implementation phases by systematic, active project approach
where achievement of the objectives set has been regularly monitored as well as the definition
of the corrective activities in case of deviations. In spite of all activities reducing the exposure to
the risk the management board of the Gorenje Group has assessed that the exposure to investment
and development risks is high due to unforeseeable changes in the business environment
influencing the reliability of planning.
The reduced scope of orders and thus the reduced scope of production dictates a decrease in the
number of employees and reduction in labour costs tightening the conditions for a social dialogue
and increases human resources risks. Great attention has been now paid to adequate and timely
informing, answers to questions and unclear issues that the employees discuss in relation to the
reduction of employees, healthy working environment relating to the problems of leaving of quality
employees and experts. The management board of the Gorenje Group has assessed that the
exposure to human resources risks is moderate due to the activities mentioned.
Property loss risks are related to the control of property and transport risks where the Group
companies systematically transfer key property risks to insurance companies or business partners
and thus reduce the exposure to such risks. The management board of the Gorenje Group has
assessed that the exposure to such property loss risks is small.