also result from business conducted in a foreign currency
(transaction risks). Interest-rate changes influence financing
costs. Defaults on trade accounts receivable or financial
receivables can also have a negative effect on the Group’s
earnings situation and its financial resources. If there is a
lack of availability of financial resources for the implementation
of acquisitions or major investment projects, we might
not reach our strategic targets.
We safeguard against material transaction risks by concluding
forward foreign-exchange contracts in cases where
we assume that the underlying business can be realized with
a sufficient degree of certainty. In the case of risks from
operating activities, the total amount expected is safeguarded
in different tranches to offset short-term exchange-rate
fluctuations. More information on our evaluation and accounting
procedures for hedges can be found in the complete
Consolidated Financial Statements on page 59 ff. (note 27).
To minimize credit default risks, we systematically
examine the credit rating and payment behavior of our counterparties.
The latter include customers, the banks we do
business with, and other business partners where payment
default can have an influence on our financial situation.
We safeguard availability of financial resources through
central control and monitoring of our Group-wide financial
resources. In addition, by utilizing various financing instruments,
we centrally provide a financial resources framework.
It can be used to cover unplanned financial requirements
in the short to medium term arising, for example,
from acquisitions or a crisis-related decline in operating activities.
As in the previous year, the group of financial market
risks is assessed as a medium risk. We evaluate the main individual
risk in this risk group – negative earnings effects
from exchange-rate changes – as having the same probability
of occurrence as in the previous year and a slightly lower
potential to lead to damages. Continued high cash inflows
from operating business activity and the existing general
financial resources framework continue to suffice to cover
the expected cash outflows for investments, repayments,
and dividends.
Innovation Risks
ALTANA’s position as an innovation and technology leader is
a major success factor for the company. It is important for
a supplier of highly specialized chemical products to continually
introduce new products on the market and to be
perceived by our customers as a competent and innovative
partner. If this was no longer the case in the future, risks
could result for our sustainable growth, the attainment of
our profitability targets, and ALTANA’s positioning in the
relevant markets.
With our innovation culture, which is put into practice
at all levels of our organization, we highlight the importance
of innovation and safeguard its status. Both at a decentralized
and at Group level, we can continually evaluate
and control our research and development activities based
on financial and non-financial criteria. By investing above-
average amounts in research and development, we can continually
introduce products on the market that are tailored
to customers’ individual and current needs and thus positively
influence our competitive position.
It is important to protect knowhow we develop with
patents to convert our knowledge edge into economic success.
This includes safeguarding technologies as well as
methods and product properties we currently use so that
other companies cannot patent them.
Due to an expansion of activities in the field of digital
applications and business models and the risks associated
with them, the potential damage has increased. Overall, we
assign the group of innovation risks to the medium risk
group.
80 Expected Developments