Group Management Report Products Safety Environment Human Resources Social Commitment Consolidated Financial Statements 71
innovative ability. In the process, it is decisive that we co-
operate closely with our customers at an early stage of devel-
opment work to adapt to market needs. With our inno-
vation strategy, we can counter increased competition in our
markets.
A loss of, mergers of, or backward integration of custom-
ers can lead to major changes in the customer structure.
Due to our very diversified customer structure, however, these
risks are limited. In addition, we cooperate closely with
our core customers within the framework of our key account
management.
In the year under review, we slightly changed our assessment
of the probability of occurrence and loss potential
from sales risks. The probability of risks occurring was assessed
to be higher and the loss potential was assessed to be
lower than in the previous year. Overall, we assessed sales
risks as being lower.
Risks from Company Acquisitions and Investments
Apart from operating growth, acquisitions play a key role for
the implementation of the strategy for profitable growth
at ALTANA. Depending on the size of the activities acquired,
unsuccessful integration can place a burden on the Group’s
earnings situation and limit its financial headroom. In addition,
a business performance that is worse than what was expected
when the acquisition was made can lead to impairments
of assets with a negative impact on earnings.
To minimize the effects of the risks from company acqui-
sitions, we examine our acquisition targets systematically
and comprehensively and analyze them in detail in a multistage
approval process.
The assessment of the risk of impairments of assets
from acquisitions is the same as it was last year. The impairment
risk is categorized as being a medium risk.
Procurement Risks
Limited availability of certain raw materials or substantial raw
materials price increases that we cannot or can only par-
tially pass on to the markets in the short term constitute the
primary procurement risks. These can have a negative impact
on the Group’s earnings situation.
We continually analyze the situation on the raw materials
markets that are relevant for ALTANA. By doing so, we can
identify price trends and structural shifts on the part of suppliers
at an early stage and devise suitable measures. We
take this knowledge into account when we arrange supply
contracts. In addition, we take account of the volatility of
raw materials prices in our customer relations. To be able to
pass on price increases to the markets in the short term,
we increase the flexibility of price mechanisms and price lock-
up periods.
Financial Market Risks
Financial market risks primarily concern short-term and signif-
icant changes in exchange-rate relations and interest
rates, as well as default risks and the covering of financial
resource needs.
Due to exchange-rate fluctuations, the translation of
foreign currency values into the Group currency, the euro,
can have a negative effect on the Group’s sales and earnings
performance (translation risks). Such negative effects can
also result from business conducted in a foreign currency
(transaction risks). As in the previous year, we categorize
translation risk as being a medium risk. Interest-rate changes
influence financing costs. Defaults on trade accounts re-
ceivable or financial receivables can also have a negative effect
on the Group’s earnings situation and its financial resources.
If there is a lack of availability of financial resources
for the implementation of acquisitions or major investment
projects, we might not reach our strategic targets.
We safeguard against material transaction risks by concluding
forward foreign-exchange contracts in cases where