Enterprise Risk Management at Siemens

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Excerpts

The markets, in which Siemens operated, often saw rapid and significant changes due to the introduction of new technologies. To meet customer needs, Siemens had to continuously design new products, update existing products and develop new technologies. This required a significant commitment to research and development...

Siemens' strategy involved divesting its interests in some businesses and strengthening other business areas through acquisitions, strategic alliances or joint ventures. Such transactions were inherently risky because of the difficulties of integrating people, operations, technologies and products...

Siemens performed a significant portion of its business, especially large projects, under long-term contracts that were awarded on a competitive bidding basis. The profit margins on such fixed-priced contracts varied from original estimates as a result of changes in costs and productivity over time. Siemens sometimes had to bear the risk of cost overruns or contractual penalties caused by unexpected technological problems, unforeseen developments at the project sites, problems with subcontractors and other logistical difficulties. Some multi-year contracts also contained demanding installation and maintenance requirements, in addition to other performance criteria relating to timing, unit cost requirements and compliance with government regulations...

Changes in regulatory requirements, tariffs and other trade barriers and price or exchange controls might limit operations and make the repatriation of profits difficult. In addition, the uncertainty of the legal environment in some regions might limit Siemens' ability to enforce its rights...

Siemens might face liability for damage or remediation for environmental contamination at its facilities. To deal with such risks, Siemens maintained liability insurance at levels that it believed were appropriate and in accordance with industry practice...

Siemens was subject to numerous risks relating to legal proceedings. The company might become implicated in lawsuits, involving allegations of improper delivery of goods or services, product liability and product defects and quality problems and intellectual property infringement...

Competition for highly qualified management and technical personnel remained intense in the industries in which Siemens operated. In many of its businesses, Siemens needed highly skilled employees...

Exhibit I: Siemens: Financial Highlights
Exhibit II: Siemens: Segment Information
Exhibit III: Market Risk Exposures
Exhibit IV: Siemens: Foreign Exchange Market Risk Exposures by Currency
Exhibit V: Siemens: Foreign Exchange Market Risk Exposures by Currency