As an internationally operating logistics company, we are faced with numerous changes and uncertainties. Our aim is to identify the resulting opportunities and risks at an early stage and to manage them with the aim of achieving a sustained increase in enterprise value. Our Group-wide opportunity and risk control system facilitates this aim. Each quarter, our managers estimate the possible impact of future scenarios and evaluate the opportunities and risks in their departments. Risks can also be reported at any time on an ad hoc basis. The approvals required by the risk management process ensure that management is closely involved.
Our early identification process leads to uniform reporting standards for risk management in the Group. To achieve this, we have made constant improvements to the relevant IT application. We also have stochastic models such as Monte Carlo simulations at our disposal for the purpose of aggregating risk during standard evaluations.
|A.68 Opportunity and risk management process|
The most important steps in the process are as follows:
Identify and assess: Opportunities and risks are defined as potential deviations from projected earnings. Managers in all divisions and regions provide an estimation of our opportunities and risks on a quarterly basis and document relevant actions. They use scenarios to assess best, expected and worst cases. Each risk is assigned to one or more managers, who assess it, monitor it, specify possible procedures for going forward and then file a report. The same applies to opportunities. The results are compiled in a database.
Aggregate and report: The control units responsible collect the results, evaluate them and review them for plausibility. If individual financial effects overlap, they are noted in our database and accounted for in the subsequent aggregation. After being approved by the department head, all results are passed on to the next level in the hierarchy. The “aggregate and report” step is complete when Corporate Controlling reports to the Group Board of Management on the significant opportunities and risks as well as any overall impact each division might experience.
Overall strategy: The Group Board of Management determines fundamental opportunities and risks to which the divisions are exposed and indicates how these can be managed successfully. The reports made by Corporate Controlling provide a regular basis of information for the overall management of opportunities and risks. Compliance management complements risk management. As part of compliance management, the Chief Compliance Officer reports directly to the CFO. The Global Compliance Office he heads develops Group-wide standards and supports the divisions’ activities in this area.
Operating measures: As part of the strategy, the divisions determine the measures to be used to take advantage of opportunities and manage risks. They use cost-benefit analyses to assess whether opportunities should be taken and whether risks can be avoided, mitigated or transferred to third parties.
Control: For key opportunities and risks, early warning indicators have been defined that are monitored constantly by those responsible. Corporate Internal Audit has the task of ensuring that the Board of Management’s specifications are adhered to. It also reviews the quality of the entire opportunity, risk management and compliance management operation. The control units regularly analyse all parts of the process as well as the reports from internal audit and the independent auditors with the goal of identifying potential for improvement and make adjustments where necessary.