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Risk Management

IDS Scheer utilizes systematic risk management for the early detection of risks and opportunities and the initiation of adequate countermeasures. Owing to their similar range of products and services, IDS Scheer group companies have a similar risk structure and are incorporated into the groupwide risk management system. Market and product risks, financial risks, operating risks and legal risks are the essential risk categories regularly covered in risk reporting. Furthermore, the controlling systems in all of the companies are designed to detect risks through improved continuous monitoring of financial development and can initiate countermeasures at an early stage.

The company analyzes and monitors the following risks:

• In the consulting area risks in the calculation and handling of major projects are reduced both by concentrating on controllable products and services in the case of service contracts with fixed-price agreements and by intensive project management and controlling. Guidelines were developed for fixed-price projects and an additional, central project management system was established for quality assurance and risk reduction.
• In the international consulting area price pressure is leading to lower profitability. IDS Scheer is countering this situation by concentrating on global core industries, defined growth topics and customer segments as well as the development of value-added consulting services.
• The economic success of IDS Scheer is dependent on the ARIS product family and the underlying ARIS methodology. It secures its position with an aggressive partner strategy, ongoing customer-oriented development, user conferences and customer surveys.
• The partnership with SAP and the expansion of the development and global reseller agreement have provided IDS Scheer with the opportunity to meet rising customer demand for business process management solutions with the ARIS Platform and to participate in the growth market for serviceoriented architectures (SOA). At the same time, the integration into the SAP sales network both offers opportunities but also places higher demands in terms of partner management and sales channel management.
• In the consulting area in particular, IDS Scheer will continue to rely on the acquisition, integration and retention of qualified employees in future. With its broad range of development and training measures, IDS Scheer is attempting to maintain and further enhance its attractiveness as an employer. IDS Scheer offers a comprehensive training program to bring employees up to date on the changing needs of the market.
• Risks of high turnover rates among acquired personnel result from the acquisition of new companies. To ensure long-term loyalty from management and high performers, IDS Scheer designs appropriate acquisition agreements and provides comprehensive integration seminars for the new employees.
• In previous years, IDS Scheer refocused the company’s global organization into the consulting and products business areas to meet market requirements. This also entails risks and expenses as a result of changes in management and reporting lines within the organization. Despite careful planning of the change projects fluctuations in management and employees are possible.
• The expertise and dedication of executive managers and employees in key positions are also a critical factor in the company’s successful growth. IDS Scheer’s consistent management development strategy features, among other things, attractive incentive programs for managers, identification and promotion of promising employees, the creation of career prospects and groupspecific support.
• Owing to the company’s international scope currency risks exist particularly in the currencies of US$, CAD, CHF and JPY. Currency forwards and combined interest/currency swaps are used to limit or avoid the risk of currency fluctuations. External funds continue to be borrowed with matching currencies and maturities and forwarded for internal company financing. The partners in these hedging transactions are first-class German banks, whose creditworthiness is continuously verified by leading rating agencies.
• Due to the high level of cash and cash equivalents and the company’s short-term investment horizon the company has a low interest and reinvestment risk. The maximum investment for each partner is restricted to the hedging limit established by the deposit insurance fund.
• Currently no litigation or claims for damages exist which are of material importance or which could endanger the future of the company as a going concern.

No guarantee can be given, however, that listing the risks will identify and counter all risks. This is because portions of these risks lie outside the company’s sphere of influence.

There are currently no circumstances at the IDS Scheer group that could endanger the existence of the company as a going concern or impair its development.

Source: Annual Report 2007, page 74-76