bmw risk management

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Datum : 04-06-2016 Page no: 1 BMW annual report 2014 Risk Management Präsentiert von : Palnivelrajan Manokaran

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Page 1: BMW Risk Management

Datum : 04-06-2016

Page no: 1

BMW annual report 2014 Risk Management

Präsentiert von : Palnivelrajan Manokaran

Page 2: BMW Risk Management

Problem

Purchase Related Risk action plan

Risk management - why risk management system in BMW?

Page no: 2

Page 3: BMW Risk Management

Task covered

Risk action plan – Purchasing related risk

How risk has been evaluated ?

Overview of relevant risk

Page no: 3

Overview of Risk Management

Conclusion

Why risk management in BMW

Page 4: BMW Risk Management

Why risk management in BMW

Page no: 4

BMW Group, owner of the BMW, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916.

In recent years, China has become BMW’s fastest-growing market, accounting for 14 per cent of BMW’s global sales volume

Despite rising sales revenues, BMW was conscious that its profits were often severely eroded by changes in exchange rates.

Page 5: BMW Risk Management

Overview of Risk Management in BMW

Page no: 5

To identify, record and actively manage internal and external risks which pose a threat to the attainment of corporate targets

How does it work in BMW?

Why should we do Risk Management ?

Steps for analyzing Risk management

Page 6: BMW Risk Management

Overview of Risk Management in BMW

Page no: 6

Risk Management

Social risk Environmental risk

Operation( purchasing) Financial Risks Financial services

Risklegal

Page 7: BMW Risk Management

HOW RISK HAS BEEN EVALUATED ?

RISK

Medium

High

Low

> €500 – 2,000 million

> € 2,000 million

> €0 – 500 million

> €50 – 400 million

> € 400 million

> €0 – 50 million

Earning Impact Risk amount

The significance of risks for the BMW Group is determined on the basis of risk amounts

Impact (net of appropriate countermeasures) Likelihood of occurrence

Risk measuring models Value at risk model Cash flow at risk model

Amount of potential loss Probability of that amount of loss Time frame

Page no: 7

Page 8: BMW Risk Management

Overview of relevant risk

Page no: 8

Political and global economic risksHigh Stable

Strategic and sector risksMedium Increased

Risk amountChanges compared to prior year

Extensive scenario analyses (> €50 – 400 million)

Cash flow risk approach method ( > € 400 million )

Risks relating to operations

Medium StableProduction and technology (> €50 – 400 million)

High StablePurchasing ( > € 400 million )

High StableSales and Marketing ( > € 400 million )

High StablePension obligations ( > € 400 million )

Medium StableInformation, data protection and IT ( > € 400 million )

Relevant risk

Electrical power train in BMW I Series

Page 9: BMW Risk Management

Mercedes-Benz’s VS BMW

Page no: 9 http://www.bloomberg.com/news/articles/2016-01-11/bmw-sales-growth-in-2015-decelerated-to-slowest-pace-since-2009

Sales 1.855

1.861.865

1.871.875

1.881.885

1.891.895

1.91.905

S a l e s VO L UM E i n m i l l i o n

BMW BENZ'S

"We will need to be prepared for market volatility in China in the short term," Ian Robertson, BMW’s sales chief, said at the North American International Auto Show in Detroit in Jan 2016 

Risks relating to operations is high

Page 10: BMW Risk Management

Leading automobile Groups worldwide in 2014

Page no: 10

Page 11: BMW Risk Management

Overview of relevant risk

Page no: 9

Risk amountChanges compared to prior year

Financial risks

High StableForeign currencies ( > € 400 million )

High StableRaw Material ( > € 400 million )

Low StableLiquidity (> €0 – 50 million)

Relevant risk

Risks relating to the provision of financial services

High StableCredit risk ( > € 400 million )

High StableResidual value ( > € 400 million )

Medium StableInterest rate changes (> €50 – 400 million)

Medium StableLiquidity / operational risks (> €50 – 400 million)

Legal risks (> €0 – 50 million)Low Increased

Page 12: BMW Risk Management

Risk action plan – Purchasing related risk

Purchasing risk

HighRisk amount

StableChanges compared to prior year

Source : BMW annual report 2014, Page no : 72

insufficient availability of raw materials in Asia.

BMW Group Sustainability Standard is a three stage sustainability and risk management approach

BMW Group-specific sustainability risk filter

A sustainability questionnaire

A sustainability audit

Page no: 12

Addressing the claim that 10% of parts are not immediately available in the central warehouse in Dingolfing,

Germany, BMW’s Manfred Grunert , Group Corporate and Governmental Affairs said via e-mail to Bloomberg

Business Week today issue in 2013.

Page 13: BMW Risk Management

Risk action plan – Purchasing related risk

Risk Explanation Risk Amount Risk response / treatment

Modular-based production High Preselection process High ecological Social and corporate governance standards are measured

Loss of supplier or supplier failure High (Asia ) Continuously monitored during both the development and production phases

Exposure to natural hazard( Floods , Earthquakes…)

High Identify at anearly stage and implement appropriate countermeasures

Availability of raw materials High Alternative raw materials as a substitute.

Page no: 13

Page 14: BMW Risk Management

Conclusion

Page no: 14

Early identification and penetration of risk , compressive analysis and risk measurement , the coordinated views of suitable management tools and also the montering and evaluation of measure taken.Risk is reported to the centralized risk management team from within the network

Risk management has been tested regularly by internal audit

Social risk

Environmental Risk

Financial services

Risk

Financial Risks

Operation( purchasing)

legal

Risk Management

Page 15: BMW Risk Management

Vielen Dank

Page no: 15