Financial Statements and Management Report - Thyssenkrupp

1.6 Management report Expected developments and associated opportunities and risks
Financial risks
Central responsibilities of ThyssenKrupp AG as parent company include the coordination and management
of financial requirements within the Group and securing the financial independence of the Company as a
whole. To this end we optimize Group financing and limit the financial risks. Risks in the individual financial
risk areas are minimized through an ongoing process of monitoring and intensive controls.
Credit risk (default risk): We enter into financial instrument transactions in the financing area only with
counterparties who have a very high credit standing and/or are covered by a deposit guarantee fund.
Transactions are concluded only within specified counterparty risk limits. Outstanding receivables and
default risks in connection with supplies and services are constantly monitored by the Group companies; in
some cases they are additionally insured under commercial credit policies. The credit standing of key
account customers is monitored particularly closely.
Liquidity risk: To secure the solvency and financial flexibility of the Group at all times, we maintain longterm
credit facilities and cash funds on the basis of a multi-year financial planning system and a liquidity
planning system on a rolling monthly basis. The cash pooling system and external financings are
concentrated mainly on ThyssenKrupp AG and specific financing companies. We use the cash pooling
system to allocate resources to Group companies internally according to requirements.
Market risk: Various measures are used to mitigate or eliminate the risk of fluctuations in the fair values or
future cash flows from non-derivative or derivative financial instruments due to market changes. These
mainly include off-exchange-traded foreign currency forward contracts, interest-rate swaps, interestrate/foreign
currency derivatives and commodity forward contracts with banks and commercial partners. To
hedge against commodity price risks we also use exchange-traded futures. The use of derivative financial
instruments is extensively monitored, with checks being carried out on the basis of policies in the framework
of regular reporting.
Currency risk: To contain the risks of our numerous payment flows in different currencies – in particular in
US dollars – we have developed Groupwide policies for foreign currency management. All companies of the
Group are required to hedge foreign currency positions at the time of their inception; companies based in the
euro zone hedge via our central clearing office. Translation risks arising from the conversion of foreign
currency positions are generally not hedged.
Interest rate risk: To cover our capital requirements, we procured funds on the international money and
capital markets in different currencies and with various maturities. The resulting financial liabilities and our
financial investments are partially exposed to risks from changing interest rates. To manage these risks,
regular interest rate risk analyses are prepared, the results of which feed into our risk management system.
Order risks
Cost overruns and/or schedule delays can occur in the handling of major orders. We counter these risks by
deploying experienced project managers and continuously improving our management instruments. We
select our customers carefully and minimize the risk of default by collecting progress payments.
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