Opportunities and risks report 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 is to avoid risks that pose a threat to BASF’s continued existence and to make improved managerial decisions to create 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 potential successes that exceed our defined goals. Opportunities Potential successes that exceed our defined goals Risks Events that can negatively impact the achievement of our goals Risk management Identifying opportunities and risks as early as possible and planning effective courses of action In order to effectively measure and manage identified opportunities and risks, we quantify these where appropriate in terms of probability and economic impact in the event they occur. Where possible, 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. Overall assessment Significant risks and opportunities arise from overall economic developments and volatility in exchange rates and margins For 2018, we expect the global economy to continue to grow at around the same pace as the previous year. Important opportunities and risks for our earnings are associated with uncertainty regarding market growth, the development of key customer industries, acquisitions and divestitures, as well as volatility in exchange rates and margins. In particular, a considerable slowdown of the Chinese economy continues to pose significant risks. Such a development would negatively affect demand for intermediate and investment goods. This would impact the emerging markets that export raw materials as well as the advanced economies. This is especially true for Europe. Further risks to the global economy arise from an escalation of geopolitical conflicts and an increased tendency toward protectionism. Potential short-term effects on EBIT of key opportunity and risk factors subsequent to measures taken1 Possible variations related to: Outlook− 2018 + < €100 million ≥ €100 million < €500 million ≥ €500 million < €1,000 million ≥ €1,000 million < €1,500 million 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/divestitures/cooperations Information technology Law Finance Exchange rate volatility Other financial opportunities and risks 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. Ultimately, however, residual risks remain in all entrepreneurial activities which even comprehensive risk management cannot exclude. back next
