As a result of its operating activities, the Group is exposed to financial risks that may arise from changes in exchange risks, commodity prices and interest rates. The Group uses both primary and derivative financial instruments to manage these financial risks. The use of derivatives is limited exclusively to mitigating primary financial risks. Any use of derivatives for speculative purposes is therefore not permitted under the Group’s internal guidelines.
Changes in exchange rates, interest rates or commodity prices could lead to significant fluctuations in the fair value of the derivatives used. These fluctuations in fair value should not be assessed separately from the hedged underlying transactions as changes in the fair value of derivatives and hedged transactions are offset in the course of hedge accounting.
The universe of actions, responsibilities and controls necessary for using derivatives has been clearly established in the Group’s internal guidelines. Suitable risk management software is used to record, assess and process financial transactions as well as to regularly monitor the effectiveness of the hedging relationships. To limit counterparty risk from financial transactions, the Group only enters into transactions with prime-rated banks. Each counterparty is assigned a counterparty limit, the utilisation of which is regularly monitored. The Group’s Board of Management is informed internally at regular intervals about existing financial risks and the hedging instruments deployed to mitigate them. The financial instruments used are accounted for externally in accordance with IAS 39.
The aim of liquidity management is to ensure that the Deutsche Post DHL Group and the Group companies are in a position to meet their payment obligations on time. To this end, liquidity in the Group is centralised to a very large extent in cash pools and managed in the Corporate Center.
Liquidity is managed based on the centrally available liquidity reserves (funding availability), consisting of central short-term financial investments and committed credit lines. The Group aims to have available at least €2 billion in central credit lines.
The Group had central liquidity reserves of €4.6 billion as at 31 December 2010 (previous year: €6.2 billion). In the previous year, the reserves were composed of a central financial investment of €3.5 billion and additional credit lines with various banks totalling €2.7 billion. The reserves at the reporting date consisted of central financial investments amounting to €2.6 billion plus a syndicated credit line of €2.0 billion that was negotiated in December 2010.