Opportunities and risks report

Strategy and goals

  • Detect opportunities and risks as early as possible
  • Take measures to limit business losses
  • Avoid risks that threaten the company’s continued existence
  • Create long-term value through improved managerial decisions

The goal of BASF’s risk management is to identify and evaluate opportunities and risks as early as possible and to take appropriate measures in order to seize opportunities and limit business losses. The aim here is to avoid risks that pose a threat to BASF’s continued existence and to make improved managerial decisions to create lasting value.

We understand risk to be any event that can negatively impact the achievement of our short-term operational or long-term strategic goals. We define opportunities as possible successes that exceed our defined goals.

In order to effectively measure and manage identified opportunities and risks, we quantify these in terms of probability and economic impact in the event they occur. We use statistical methods to aggregate opportunities and risks into risk factors. This way, we achieve an overall view of opportunities and risks at a portfolio level, allowing us to take effective measures for risk management.

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Potential short-term effects on EBIT of key opportunity and risk factors subsequent to measures taken1

Possible variations related to:

Outlook
–   2014   +

1

Using a 95% confidence interval per risk factor based on planned values; summation is not permissible

 

 

 

Business environment and sector

Market growth

Margins

Competition

Regulation/policy

 

 

 

Company-specific opportunities and risks

Purchasing/supply chain

Investments/production

Personnel

Acquisitions/cooperations

Information technology

Law

 

 

 

Finance

Exchange rate volatility

Other financial opportunities and risks

 

< 50 million €

 

 

≥ 50 million € < 100 million €

 

 

≥ 100 million € < 500 million €

 

 

≥ 500 million €

 

 

Overall assessment

  • Most significant causes of opportunities and risks are development of economy and important customer industries as well as volatility in exchange rates and margins
  • Considerable risks arise from sovereign debt crisis in Europe and possible deceleration of growth in China
  • No threat to continued existence of BASF Group

We expect the global economy to continue to grow in the next two years. We see material risks in the renewed intensification of the sovereign debt crisis in Europe as well as in possibly decelerating economic growth in China. A new global economic crisis could result if market uncertainty rises again or demand is impaired more than anticipated by extensive fiscal austerity measures. Important opportunities and risks for our earnings are also associated with uncertainty regarding the development of key customer industries as well as volatility in foreign currency exchange rates and margins.

According to our assessment, there continue to be no significant individual risks that pose a threat to the continued existence of the BASF Group. The same applies to the sum of individual risks, even in the case of another global economic crisis.