Annual Report 2012 - Knorr-Bremse AG.

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implicit in the changing state of the global economy. The
development of the economies of individual countries
and the worldwide flow of trade are carefully monitored
in order to minimize risks affecting the company‘s sales.
At the same time, Knorr-Bremse’s international presence
renders the Group largely immune to risks that are restricted
to an individual region. The increased volatility
being encountered worldwide in the commercial vehicle
industry also affects Knorr-Bremse and continues to be
carefully monitored. If customer creditworthiness falls,
the risk of the loss of receivables outstanding increases
and Knorr-Bremse counters this risk through effective receivables
management.
In the course of its dynamic growth in recent years, Knorr-
Bremse has integrated a number of companies or shareholdings
into the Group. The financial and cultural risks
typically associated with such integration processes were
effectively minimized by means of systematic analysis
and assessment of the target companies. When it comes
to overcoming cultural barriers, Knorr-Bremse can draw
on 20 years of experience with integration processes related
to the acquisition of numerous companies as well as
to joint ventures in which the company holds a majority
stake and is responsible for operational management.
This experience will pay dividends in any future mergers
and acquisitions and has been mapped in the form of
structured processes.
Knorr-Bremse and its systems are at the leading edge of
technological development. This also engenders risks
which, because of the safety-critical nature of the applications
concerned, require particularly careful monitoring.
To this end, Knorr-Bremse routinely employs comprehensive
quality planning, quality assurance and testing
procedures. To ensure continuous improvement of its
business processes, Knorr-Bremse takes its lead from
international standards. The individual plants regularly
undergo internal and external audits in this context.
Above and beyond this, despite having already attained a
very high level of quality, both divisions work intensively
to continuously improve the quality and reliability of their
products with the aid of the Knorr Excellence quality program
“Quality First”.
Operational risks
Risks due to production downtimes are covered by commercially
appropriate insurance contracts. Flexible working
time models enable unexpected short-term shifts in
capacity requirements to be accommodated efficiently.
Knorr-Bremse maintains a close working relationship with
suppliers and service providers. In order to avoid delivery
delays or quality defects, which in turn could lead to lost
production time and have a negative impact on earnings,
Knorr-Bremse attaches great importance to careful supplier
selection procedures. Suppliers are also continuously
subjected to technical and commercial audits. In the
current economic environment, there is also a risk of business
partners becoming insolvent – a risk to which the
company responds directly.
On the customer side, particularly in the original equipment
segment, it can happen that, due to the expiry of
long-term price agreements and the longer-than-expected
duration of follow-up negotiations, for a restricted period
shipments are made without a valid supply agreement
in place. This can lead to price differences and the
associated risks. Moreover, contractual obligations can
lead to warranty risks. Systematic contract management
to control these risks is ensured by appropriate Knorr Excellence
processes.
Exchange rate risk is not of crucial importance for the
Knorr-Bremse Group because geographic diversification
over recent years has enabled the Group to establish a
high proportion of local manufacturing and local suppliers
within the respective currency zones. In order to limit
the residual exchange rate risk related to transactions
across different currency zones, Knorr-Bremse is increasingly
identifying opportunities to exploit compensatory