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Last Update: 03/12/2009
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Part of the audited Consolidated Financial Statements and Management´s Analysis

Risk Report

Identifying, evaluating and minimizing risks

BASF risk management’s goal is to identify and evaluate risks as early as possible and limit business losses by taking suitable measures, thus avoiding risks that pose a threat to the company’s continued existence. We understand risk to be any event that could negatively impact the achievement of our short-term operational or long-term strategic goals. We define opportunities as possible successes that exceed our defined goals.

Risk management is integrated into our planning and controlling processes to ensure its effectiveness and a close relationship to the business. Opportunities and risks are included and quantified within the planning framework; this ranges from short-term business planning to long-term strategic and investment planning.

RISK MANAGEMENT


Strategy and goal

  • Earliest possible identification of risks
  • Taking measures to limit business losses
  • Avoid risks that threaten the company’s continued existence

Processes

  • Identification of opportunities and risks
  • Assessment and quantification
  • Aggregation
  • Control and measures

Overall assessment

Our planning takes into account significantly lower economic growth. At present, it is exceptionally difficult to make forecasts. This is primarily due to the increased volatility in raw material prices as well as uncertainty regarding the overall economy and the performance of important customer industries. In 2008, events occurred that we had assessed as having a low probability of occurrence: Globally, the credit markets almost collapsed and the oil price increased considerably before dropping dramatically. The possible knock-on effects of further negative developments would be considerably more serious than in the previous years. Nevertheless, based on our assessment, there are currently no significant individual risks that pose a threat to the continued existence of the BASF Group. That also applies to the sum of the individual risks.

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Significant areas of opportunity and risk

 

 

Measurement

Development in the economic situation
and sales markets

High contribution to
overall volatility

Availability and price volatility of raw materials

High contribution to
overall volatility

Exchange rate volatility

Medium contribution to
overall volatility

Remaining financial risks

Low contribution to
overall volatility

Regulatory and political risks

Long-term effects,
strategic significance

Specific opportunities and risks in the individual divisions

Medium contribution;
high diversification

Further risk areas (Human resources, R&D,
IT, acquisitions, etc.)

Long-term effects,
strategic significance

OVERALL ASSESSMENT


  • Forecasts currently subject to great uncertainty
  • Uncertainty regarding economic growth and important customer industries
  • 2009: Planning takes lower growth into account

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