how that we use but have not protected, as we would
then no longer be able to use it, or only at additional cost.
With our innovation culture, which is put into practice
at all levels of our organization, we highlight the importance
of innovation and safeguard its status. Both at a decen-
tralized and a Group level, we continually evaluate and control
our research and development activities based on fi-
nancial and non-financial criteria. By investing above-average
amounts in research and development and focusing on
product adjustments and new developments, we can contin-
ually introduce products on the market that are tailored
to customers’ individual and current needs and thus heighten
our competitive edge.
It is important to protect knowhow we develop with
patents to convert our knowledge edge into economic success.
This includes safeguarding technologies as well as
methods and product properties we currently use so that
other companies cannot patent them.
In 2016, there was no significant change in our assessment
of innovation risks in comparison to the previous year.
Other Risks
Production risks concern technical disruptions or human
failure in production plants that can be harmful to people or
the environment. Our goal is to minimize the effects of
machine failure on the value chain by operating production
lines independently from one another. It is compulsory
for our staff to receive training in the clearly defined process
and quality standards in the areas in question. In addition,
we conclude property damage as well as plant and equipment
breakdown insurances.
Information technologies form the basis of nearly all
of ALTANA’s business and communications processes. Breakdowns
or other disruptions of IT systems can lead to far-
reaching impairments in all of the Group’s value-added stag-
es, which can have significant effects on business performance
(IT risks). In addition, potential risks arise from data
72 Expected Developments
we assume that the underlying business can be realized with
a sufficient degree of certainty. The total amount expected
is safeguarded in different tranches to offset short-term exchange
rate fluctuations. We generally counter risks result-
ing from changes in interest rates by hedging interest rates
over the corresponding term of the respective underlying
transaction. More information on our evaluation and account-
ing procedures for hedges can be found in the online
Consolidated Financial Statements on page 47 ff. (note 28).
To minimize credit default risks, we systematically
examine the credit rating and payment behavior of our coun-
terparties. The latter include customers, the banks we do
business with, and other business partners where payment
default can have an influence on our financial situation.
We safeguard availability of financial resources through
central control and monitoring of our Group-wide finan-
cial resources. In addition, by utilizing various financing in-
struments, we centrally provide a financial resources
framework that covers medium-term needs going beyond
the planned financial cash inflow from our operating
business.
Our assessment of the financial market risks is largely the
same as in the previous year. Continued high cash inflows
from operating business activity and the existing general fi-
nancial resources framework suffice to cover the expected
cash outflows for investments, repayments, and dividends.
Innovation Risks
ALTANA’s position as an innovation and technology leader is
a major success factor for the company. It is important for
a supplier of highly specialized chemical products to continually
introduce new products on the market and to be
perceived by our customers as a competent and innovative
partner. If this was no longer the case in the future, risks
could result for our sustainable growth, the attainment of our
profitability targets, and ALTANA’s positioning in the relevant
markets. The same applies if competitors patent know-