Group’s earnings, financial, and asset situation in the years to come and thus give rise to a negative deviation from the forecast development. For individual risks categorized as “me- dium” and “high” we address changes in our appraisal compared to the previous year. In 2015, risks categorized as “very high” were not identified. Economic and Industry Risks The development of the general economic conditions world- wide has a decisive impact on our business performance. The performances of the important U.S., Chinese, and Ger- man economies have a particularly strong impact on the direction and intensity of demand for our products. A global economic crisis leading to an economic collapse would bring about significant sales decreases with corre- sponding influences on our earnings. Recessions limited to certain regions in sales markets important for us could also significantly impair our business performance. With the global orientation of our sales activities, we try to shape our de- pendence on regional or national markets in such a way that the effects of geographically confined economic crises on the Group are limited. Thus, our largest market currently ac- counts for 20 % of total Group sales. The distribution of our business activities in the core regions of Europe, Asia, and the Americas also has a balanced structure. At the same time, we continually update our appraisal of the regional economic development in our internal report- ing system to be able to react to foreseeable effects by control- ling our procurement, production, and sales activities. We react to long-term shifts in regional economic performance by adjusting our sales and local production structures. In addition to general economic risks, there are market- related sales risks concerning individual product groups or application areas. Particularly medium- to long-term trends that structurally lead to a decrease in demand in our target markets can mean that we will not achieve our growth and profitability targets. We try to control industry-related sales risks by broadly diversifying our offer. We supply many dif- ferent industries, which in turn sell their end products in various markets. Therefore, our dependence on the underly- ing consumer segments is limited. We estimate that no single consumer segment (e. g. the automotive industry) ac- counts for more than 20 % of our sales. The analysis of our industry-specific and application- related sales is an elementary component of our annual strat- egy process. In addition, we examine changes in future growth potential arising from demand trends and technologi- cal developments, and adjust our strategic orientation in the divisions if necessary. The occurrence of a global economic crisis or the emer- gence of regional economic crises, are two significant eco- nomic and industry risks that are rated as “high” or “medium” risks. In the 2015 fiscal year, we did not assess the proba- bility of these risks occurring as being different from the pre- vious year. Due to the measures implemented and our increased diversification, we estimate potential damages to be slightly lower than in the previous year. Sales Risks Sales risks result mainly from intensified competition or shifts in customer structure. They include risks for individual products or product groups due to specific demand trends. This can lead to decreasing sales revenues, which can be caused by declining sales volumes or falling prices. Since in many cases the cost structure cannot be adjusted in the short term, this can lead to a drop in profitability. We counter sales risks by continually optimizing our product and service portfolio, above all on the basis of our innovative ability. In the process, it is decisive that we coop- erate closely with customers at an early stage of development work to adapt to market needs. With our innovation strat- egy, we can counter increased competition in our markets. A loss of customers, mergers, or backward integra- tion of customers can lead to major changes in the customer 60 Expected Developments
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