Beiersdorf is exposed to a wide variety of risks that are inextricably linked with its entrepreneurial activities as part of its global business. Our risk policy therefore aims to maximize existing opportunities and to incur risks only if they offer the prospect of a corresponding increase in value. Part of our fundamental risk policy is that we only take risks that can be managed using established methods and measures within our organization.

Risk management is thus an integral part of company management and business process design at Beiersdorf. Management of operating risks is largely decentralized. Cross-functional international risks associated with brand management, production and safety standards, financing, and value development within the Group are monitored centrally. Integrated controlling and regular strategy reviews ensure that opportunities and risks are well balanced when entrepreneurial decisions are made, and that they are identified in good time. Our internal audit department monitors compliance with the internal control system and ensures the integrity of our business processes. The risk management system is examined as part of our annual financial statement audit.

Maintaining and increasing the value of our major consumer brands – especially NIVEA – is of central importance for Beiersdorf’s business development and continued existence. We have therefore geared our risk management system towards protecting the value of our brands and utilizing the associated opportunities.

Our compliance with high standards of product quality and safety is the basis for our customers’ continued trust in our brands. We therefore perform in-depth safety assessments when developing new products. Our products are subject to a high-quality assurance system throughout the entire procurement, production, and distribution process.

We counter procurement risks relating to the availability and price of raw materials, merchandise, and services by continuously monitoring the relevant markets, ensuring careful supplier selection, and concluding long-term master agreements. Occupational safety, environmental, and business interruption risks in our production and logistics activities are minimized by process control checks. We also transfer selected risks to insurance companies, when appropriate.

The steady expansion of our patent and trademark position plays a key role in safeguarding the value of our brands. In particular, the systematic registration of our intellectual property rights prevents the imitation and counterfeiting of our products and thus contributes to ensure the potential earnings from investments made in the field of marketing and innovation.

Beiersdorf’s economic development is crucially dependent on the market acceptance of our products, which is why continuous innovation and prudent brand management based on intensive market and competitive analyses are of key importance. Strong brands based on innovation and expertise are our response to the intensive global competition in terms of price, quality, and innovation. They also counteract the risks arising from growing retail concentration and from the regional emergence of private label products.

Our project management successfully supported and dealt with changes in Group organization and processes in 2004 as part of the reorganization of responsibilities within the Executive Board. The experience we gained through this will help us to continue efficient development of our organization in the future.

We minimize risks relating to the availability, reliability, and efficiency of our IT systems through continuous monitoring, process improvements, as well as emergency trainings.

Foreign exchange, interest rate, and liquidity risks are subject to active treasury management based on global guidelines. In most cases they are managed and hedged centrally. In this context, the specific requirements for the organizational separation of the trading, settlement, and controlling functions are taken into account. Derivative financial instruments serve solely to hedge operational activities and financial transactions essential to the business. They do not expose the Group to any additional risks.

We maintain close contact with universities to recruit and retain qualified specialists and management personnel. We develop management trainees and employees internally using dedicated international support programs and further education measures. The new management guidelines strengthen our managers’ and employees’ commitment to Beiersdorf and help us to remain an attractive employer.

At present, Beiersdorf is not exposed to any risks that could endanger its continued existence.