Lufthansa is an international aviation company and is, therefore, exposed to both company and sector-specific risks. Our permanently updated management systems enable us to identify both risks and opportunities at an early stage and act accordingly. This proven risk strategy allows us to take advantage of favourable business opportunities. A risk-return profile in line with market standards is a prerequisite. The risks must also be appropriate and acceptable in relation to the value created.
The conscious management of opportunities and risks is an integral part of corporate management. For this reason, we have not created a special organisational unit for risk management but have integrated it into the existing business processes. The system enabling risks to be identified and managed at an early stage is composed of several modules. These building blocks are systematically linked. There is an exception from this principle for the control of financial risks. Here the functions of trading, settlement and financial controlling are strictly separated and are based in independent organisational units. In contrast to general and strategic risk management, responsibility for this area is centralised. This is the only way that these homogenous risks can be identified in their entirety and responsibly managed with the necessary economic competence. Here the functions of trading, settlement and financial controlling are strictly separated and are based in independent organisational units. The risk management system for financial instruments is part of central financial management. It is described in Financial opportunities and risks and the notes to the consolidated financial statements, Note 48.
The Risk Management Committee (RMC) ensures on behalf of the Executive Board that risks are permanently identified and evaluated across all functions and processes. The RMC is responsible for continuously improving the effectiveness and efficiency of the risk system. An important instrument for doing so is the risk map. It lists all material risks which could endanger the Company’s earnings and its continued existence. At the same time it lists all the instruments for managing these risks. Risks count as material if they are capable of causing damage of at least one third of the earnings necessary for maintaining the value of the Company. For 2008 this value was set at EUR 300m.
The risk map is updated regularly and its structure is aligned with the risk management process: identification, coordination, communication and control. Lufthansa applies uniform risk management standards throughout the Group.
The managing directors of all Group companies also appoint risk managers in all business segments. They are responsible for implementing the Group guidelines within their respective companies and are in close, regular contact with the RMC.
Opportunity and risk controlling in the course of the planning and coordination processes is a further component of the system. This primarily identifies the potential risks and opportunities which could impact earnings targets as part of an analysis of the market and the competitive landscape.
The established opportunity and risk report, which appears quarterly, tracks identified opportunities and risks throughout the year in relation to planned earnings. Potential departures from plan are quantified by the risk experts in order to focus attention on the most important risks. A discussion of risks and opportunities is also a fixed element of the regular meetings between Group controlling and the managing directors of the Group companies. Finally, they are also examined in separate meetings with departments exposed to risk. The focus of the meetings lies on identifying any action required and the status of measures taken for the systematic measurement of the opportunities and risks identified.
The auditors PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (PwC) examined the early risk warning system in place at Deutsche Lufthansa AG in the light of statutory requirements during the annual audit. It satisfies all the statutory requirements to be made of such a system.
