Financial Statements and Management Report - Thyssenkrupp

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1.6 Management report Expected developments and associated opportunities and risks Expected financial and liquidity situation Despite the problems on the European financial markets and the associated difficult conditions, our financing and liquidity will remain on a solid basis in fiscal 2011/2012. Net financial debt is likely to vary significantly in the course of the year. Opportunity report Identifying opportunities in market and technology trends and incorporating them into the Group’s strategy going forward is a key element of our Groupwide strategic dialogue. The business areas carry out SWOT analyses to identify the relevant strengths, weaknesses, opportunities and threats for their operating units. An opportunity reporting system is being developed that will feed into the business areas’ standard monthly reports. The management of our opportunities is a task shared by all our decision makers The global growth areas of demographic change, urbanization and globalization offer wide-ranging opportunities for ThyssenKrupp Ag and the Group companies. With our high-quality products, sophisticated innovations and efficient production sites we see good opportunities for growth particularly in the international markets, in which we position ourselves as a premium supplier. In parallel with our strategic growth we will evolve our organizational structure and further improve our internal structures and processes. The corporate program impact will increase the Group’s efficiency and reduce costs. Risk report In the past fiscal year the Group’s standardized risk management system again played a major role in increasing the transparency of the risk situation at ThyssenKrupp and enhancing our ability to identify, evaluate and control risks. From the present perspective all risks are contained and manageable. The future existence of the Company is secured. Risk policy embedded in corporate strategy Binding throughout the Group, the risk principles at ThyssenKrupp are based on our corporate strategy. Our risk management system is targeted at safeguarding existing assets and sustainably increasing the value of the Company; it therefore fulfills a core business function. To achieve an appropriate increase in value, we make optimum use of opportunities while consciously and responsibly taking business risks in our core processes and managing these actively. As part of our efficient risk management, other risks are transferred, reduced or completely prevented. Overall the Group can extensively cover all risks taken. The Group Policy Statement on Risk Management documents the framework conditions and responsibilities for orderly and forward-looking risk management and is binding for all employees. Groupwide codes of conduct such as the Group’s compliance standards and the prohibition of speculative transactions also form part of the risk principles. Regular control measures and numerous training programs help communicate the importance of the requirements to all employees. 12
1.6 Management report Expected developments and associated opportunities and risks Risk management system established throughout the Group Alongside the risk principles, the Group Policy Statement on Risk Management includes other binding standards for the risk management process. In various reporting elements we communicate information on operating and strategic risks in a standardized process which permits the identification, assessment, control and monitoring of risks. Because it is integrated in the Group’s corporate controlling department, risk management is also closely interlinked with planning and other reporting processes. Risk maps for all Group entities are prepared with the help of a web-based reporting tool in which Group companies report on the status of their risk situation using tiered threshold values, identify risk management measures and update the early warning indicators for assessing risks. Each business area updates its assessment of the opportunities and risks in the current fiscal year on a monthly basis and provides information on any changes to material risks in the risk map. The material risks – clearly defined at Group level on the basis of probability of occurrence and loss amounts - are discussed in the Risk Committee and then communicated in a systematic and transparent report to the Executive Board and the Supervisory Board Audit Committee. This standardized and transparent risk management system was introduced by the Executive Board of ThyssenKrupp AG for the entire Group and has proven itself to be efficient. In addition, ad hoc risks and losses incurred are communicated directly to the risk management officers outside the normal reporting channels. To ensure the efficient monitoring of the risk management system, Corporate Center Internal Auditing carries out regular audits worldwide. Their findings help us further improve the way risks are managed throughout the Group. In addition we continuously optimize the tools and methods for registering and managing risks so as to enhance the quality of the information generated and further strengthen the interlinking of internal processes. Key features of the internal control and risk management system with regard to the Group accounting process Our internal control system, defined as the entire body of coordinated principles, processes and measures applied in the Company to ensure business and control objectives are achieved, is continuously optimized to guarantee the security and efficiency of business management, the reliability of financial reporting, and compliance with laws and policies. For the accounting process at ThyssenKrupp this means that implemented controls adequately ensure that despite any risks the consolidated financial statements comply with the requirements. Various integrated and independent supervision measures are in place to help achieve this aim. Our consolidated financial statements are prepared on the basis of a standard accounting policy which is regularly updated and made available to all relevant employees via an internal internet platform. A specially developed consolidation tool based on standard software is used, which ensures a uniform procedure and minimizes the risk of false statements in the Group’s financial accounting and external reporting. Financial reporting is organized in clearly defined sub-processes. Clear-cut responsibilities in line with the principle of segregating functions and the dual-control principle reduce the risk of fraudulent conduct. As the department responsible for the preparation of the consolidated financial statements, Corporate Center Accounting and Financial Reporting issues the decentralized units with binding standards for content 13
Page 1 and 2: Financial Statements and Management
Page 3 and 4: 1.1 Management report Profile and s
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Page 7 and 8: 1.2 Management report Results of op
Page 9 and 10: 1.3 Management report Financial pos
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Page 13: 1.5/1.6 Management Report Subsequen
Page 17 and 18: 1.6 Management report Expected deve
Page 23 and 24: 1.7 Management report Legal informa
Page 29 and 30: 2.8 Management report on the Group
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2.5 Financial statements Auditors
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