PDF, 1.2 MB - Pfleiderer AG

management report risk report pfleiderer ag 55
Financial Risks
High levels of capital expenditure and the expansion of operations over the last few years have
increased the risk that loans can only be obtained at high interest rates and on unfavorable
terms.
The Company currently has access to both short-term and long-term credit lines amounting
to a three digit million sum. Reduction of corporate debt resulting from disposal income
has also had a positive effect. As a result, our credit volume available is large enough in terms
of financial and cash funding to safeguard the planned growth of the Group. No substantial
uptake of new loans is planned for the immediate future.
No notable currency exchange risks are foreseen, due to the relatively low volume of
business conducted outside the euro and dollar zones, and the Company’s targeted policy of
exchange rate hedging. This applies equally to the interest rate risks in the planning period
for existing loans and fixed conditions.
Centralization of financial control within the treasury department of the holding company
ensures that such operations, as well as the financial planning and controlling of the Group’s
finances, are carried out professionally. Debtor management, which remains the responsibility
of the individual operating segments, is also overseen by the treasury department – ensuring
that limits imposed by credit insurance are kept. This is becoming more and more important in
view of the increasing number of insolvencies. Derivative financial instruments are only applied
centrally, and then only for strict hedging purposes.
Legal Risks
No litigation or legal procedures are pending or announced which could have a major effect
on the results or operations of the Group or its operating segments. The holding company has
its own legal department which ensures that matters are dealt with formally and correctly
throughout the Group, in particular when drafting contracts or taking legal action.
IT and Other Risks
Major risks concerning IT and data processing have been reduced and removed by outsourcing
hardware, especially mainframes and data networks and the operating of the system, to a
specialist provider.
Conversion to SAP R/3 of the last of Pfleiderer’s affiliated companies, and two further
important functional areas, due to be completed in 2003, will eliminate the not inconsiderable
risks involved in the use of software developed by the Company itself, or software developed
by smaller providers.
Our IT security concept is constantly being monitored and updated, particularly with
respect to illegal access to corporate data from inside and outside the Company. Similarly,
security for external data transfer and defenses against virus attack are constantly being
improved.