In the course of its business activities, Deutsche Post World Net faces a variety of risks which it addresses with an opportunity and risk management system. Opportunities and risks are systematically identified, assessed, controlled and monitored to uniform standards on a Group-wide basis. Opportunity and risk management is an integral part of all Group decisions and business processes and helps secure our long-term corporate success.
We have set out the material risks potentially affecting our net assets, financial position and results of operations in our 2006 Annual Report and in our Interim Report for January to June 2007. You will find information on further risks at Postbank in the interim reports of Deutsche Postbank AG for 2007.
In addition, the following material development arose in the third quarter of 2007: on 12 September 2007, the European Commission opened a formal investigation against Germany concerning possible subsidies to Deutsche Post. The investigation will focus on whether Germany, using state resources, overcompensated Deutsche Post AG or its legal predecessor Deutsche Bundespost POSTDIENST for the cost of providing universal services between 1989 and 2007 and whether the company was thereby granted state aid incompatible with EU law. According to the decision opening the investigation, the Commission intends to examine all public transfers, public guarantees, statutorily granted exclusive rights, the price regulation of letter services and the public funding of pensions during the period in question. Also to be investigated is the cost allocation within Deutsche Post AG and its predecessor between the regulated letter service, the universal service and competitive services. This also relates to co-operation agreements between Deutsche Post AG and Postbank as well as between Deutsche Post AG and the business parcel service marketed by DHL Vertriebs GmbH.
We hold that the new investigation lacks any factual basis. All public transfers associated with the privatisation of Deutsche Bundespost, the public guarantees and the public funding of pension obligations formed part of the subject matter of the state aid procedure closed by the decision of 19 June 2002. That decision did not identify the measures concerned as incompatible state aid. We are further of the opinion that the statutorily granted exclusive rights and the regulated letter prices do not fulfil the legal criteria to be considered a form of state aid in the first place. Deutsche Post AG also considers the internal allocation of costs with its subsidiaries to be consistent with EU state aid rules and the case law of the European Court of Justice. Nonetheless, based on an overall appraisal, the possibility of the Commission finding a case of incompatible state aid cannot be ruled out.
These are, however, not necessarily the only risks to which the Group is exposed. Risks of which we are currently unaware or which we do not yet consider to be material could also affect our business activities.
Being a service provider, our business activities are substantially shaped by our customers and their global trade relations. Economic fluctuations in key regions can pose risks for our activities. However, we do not currently perceive any material macroeconomic risks facing the Group.
No further material risks have arisen for the Group in the first nine months of 2007 over and above the opportunities and risks set out in the 2006 Annual Report, the Interim Report for January to June 2007 and in the foregoing paragraphs. There are currently no identifiable risks which, individually or collectively, cast doubt on the company’s ability to continue as a going concern.