PDF, 1.2 MB - Pfleiderer AG
PDF, 1.2 MB - Pfleiderer AG PDF, 1.2 MB - Pfleiderer AG
56 being focused: being better Our insurers already increased the premium in 2002. Apart from a further big increase in the premium, Pfleiderer and the whole of the particleboard industry expects to see a large rise in excess charges in 2003. Together with its insurance broker, Pfleiderer is examining the whole insurance concept within the Group and looking at alternatives, including new insurers. An environmental manager is to be appointed, based at central services, but with responsibility for all operating areas. This person will draft guidelines, especially with respect to production and storage facilities, and will monitor operations to eliminate any weaknesses. In view of the products and raw materials used, Pfleiderer does not envisage any particular risks here. Studies for environmental contamination from old wooden mast and sleeper plants, closed down over a decade ago, have been performed by our staff and by outside specialists. Those areas affected are being treated on an ongoing basis. The resulting expenditure has been estimated and accruals set up to cover these costs. Overall Risk No risks, seen individually either in terms of damage levels or probability of occurrence, are recognizable within the Pfleiderer Group which could endanger the Company’s existence. Similarly, no risks are perceived with a high correlation to other risks which could endanger the existence of the Group. Nor have any risks been ascertained that could threaten the Company’s existence within a foreseeable period after 2003. The number of risks reported in the Group risk report is significantly lower at 45, compared to 68 in the previous year. This is largely due to the divestiture of the two Business Centers Insulation Technology and Doors and Windows. The number of risks reported for the remaining operating segments has not changed compared to the previous year. Around half of those risks determined in the previous year either no longer exist, or are no longer relevant, and thus have not been included in the risk portfolio 2003. The potential damage to the remaining business centers arising from those risks determined is 15 percent lower compared to the previous year. More than one third of these risks is below one million euros. The damage potential of the highest risk in the 2003 portfolio is 50 percent lower than the highest risk reported for 2002. It is important to note that the chance of these risks becoming reality is very slight. The number of high-level risks for the whole Group is down by 75 percent for the same period. In December 2002, the international rating agency Fitch Ratings lowered Pfleiderer AG’s rating for senior unsecured debt from BBB- to BB+. This despite the successful sale of the two Business Centers Insulation Technology and Doors and Windows and a stable cash flow from the Infrastructure Technology Business Center which is supporting the Group. According to the rating agency, the business environment for wood-based panels will continue to remain difficult. The lower rating may mean that taking up new funds could prove more expensive in future.
management report risk report pfleiderer ag 57 Risk Management and Early-Warning System Pfleiderer’s early risk warning system complies with the German Control and Transparency Act (KonTraG) which demands clear organization taking into account the needs of a conglomerate, including such elements as predetermined corporate strategy and planning. Appropriate planning and monitoring systems have been set up at Pfleiderer. These include the continual reporting and monthly monitoring of the Business Centers, with full participation by the members of the Group’s Executive Board. The reporting system ensures that the Executive Board is kept up to date with comprehensive information about all areas of the Group. Organizational guidelines are updated and amended by a central unit within the holding company. Pfleiderer AG’s corporate audit unit carries out regular inspections to ensure the economic efficiency, and organizational and operational compliance, of the Company, as well as its adherence to legal requirements and internal guidelines. Quality control management in all the Business Centers, a centralized legal department, environmental protection managers at plant and Group level, a centralized Group treasury department, as well as institutionalized cooperation with one of the biggest insurance brokers, ensure that risks to the Group are avoided to the greatest extent possible. In compliance with the German Control and Transparency Act, the Company’s risk management system covers ■ Risk determination and assessment ■ Determination of how current risk is being acted on ■ Identifying new, additional ways to act on risk ■ Monitoring of risk developments and the action taken. The risk management unit in the holding company has been instructed to continue to develop the risk management system, to coordinate and monitor work in this area, to produce corporate reports and to make sure that this information is passed on quickly to the Executive Board, as well as supporting the Business Centers in their day-to-day risk management. The operating segments of the Company are responsible for recognizing and dealing appropriately with risks. All risks are assessed, including the extent of potential damage and the likelihood of it occurring. In this process, objective quantification of potential risk is given preference over verbal description. Risk inventories for the Company’s Business Centers are collated during workshops attended by senior management and employees from the business units. The results of these studies are compiled into a risk report which is presented to the full Executive Board, where it is discussed. The report is then presented to the Supervisory Board and the Company’s auditors. The risk report and risk inventories from the business centers are regularly updated during the course of the year and any changes or measures taken explained and documented.
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management report risk report pfleiderer ag 57<br />
Risk Management and Early-Warning System<br />
<strong>Pfleiderer</strong>’s early risk warning system complies with the German Control and Transparency Act<br />
(KonTraG) which demands clear organization taking into account the needs of a conglomerate,<br />
including such elements as predetermined corporate strategy and planning. Appropriate<br />
planning and monitoring systems have been set up at <strong>Pfleiderer</strong>. These include the continual<br />
reporting and monthly monitoring of the Business Centers, with full participation by the members<br />
of the Group’s Executive Board. The reporting system ensures that the Executive Board<br />
is kept up to date with comprehensive information about all areas of the Group. Organizational<br />
guidelines are updated and amended by a central unit within the holding company. <strong>Pfleiderer</strong><br />
<strong>AG</strong>’s corporate audit unit carries out regular inspections to ensure the economic efficiency,<br />
and organizational and operational compliance, of the Company, as well as its adherence to<br />
legal requirements and internal guidelines. Quality control management in all the Business<br />
Centers, a centralized legal department, environmental protection managers at plant and<br />
Group level, a centralized Group treasury department, as well as institutionalized cooperation<br />
with one of the biggest insurance brokers, ensure that risks to the Group are avoided to the<br />
greatest extent possible.<br />
In compliance with the German Control and Transparency Act, the Company’s risk<br />
management system covers<br />
■ Risk determination and assessment<br />
■ Determination of how current risk is being acted on<br />
■ Identifying new, additional ways to act on risk<br />
■ Monitoring of risk developments and the action taken.<br />
The risk management unit in the holding company has been instructed to continue to<br />
develop the risk management system, to coordinate and monitor work in this area, to produce<br />
corporate reports and to make sure that this information is passed on quickly to the Executive<br />
Board, as well as supporting the Business Centers in their day-to-day risk management.<br />
The operating segments of the Company are responsible for recognizing and dealing<br />
appropriately with risks. All risks are assessed, including the extent of potential damage and<br />
the likelihood of it occurring. In this process, objective quantification of potential risk is given<br />
preference over verbal description. Risk inventories for the Company’s Business Centers are<br />
collated during workshops attended by senior management and employees from the business<br />
units.<br />
The results of these studies are compiled into a risk report which is presented to the full<br />
Executive Board, where it is discussed. The report is then presented to the Supervisory Board<br />
and the Company’s auditors. The risk report and risk inventories from the business centers are<br />
regularly updated during the course of the year and any changes or measures taken explained<br />
and documented.
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