In all its business dealings, the Group strives for profitable growth. Investment and acquisition decisions are continually assessed against this criterion. At present, we do not perceive any substantial risks that could have a negative effect on our performance, financial position or our assets.
Wincor Nixdorf’s Outsourcing (Glossary) activities, which have been successfully introduced onto the market in recent years and involve our assuming responsibility for a wide range of related business processes on behalf of our customers, are now a fully integrated part of our business operations. However, the highly complex nature of outsourcing projects brings with it a higher degree of risk. We seek to counter this risk by conducting preemptive risk analyses and ongoing risk management. By concentrating the risk process within a team of specialists and making good use of our experience from previous successful projects, we are able to minimize the risk to which these processes are exposed to the benefit of both ourselves and our customers. In addition, we take out appropriate insurance and use other back-up measures to minimize disruption and potential risk.
Financial Risks.
Wincor Nixdorf’s business is exposed to currency, interest rate, liquidity and credit risks. The Group treasury function and efforts to limit financial risk are to a large extent managed centrally.
The risk of a change in interest rates arises from taking up credit tied to the market rate. Interest expenses are mainly linked to the short-term variable market interest rate (EURIBOR) plus a margin. This margin can be subject to change depending on certain financial ratios. Being tied to a market interest rate, therefore, means that we are exposed to an interest rate risk as soon as that rate increases. We have entered into interest rate derivatives in the amount of €100 million to hedge these risks. As a result, the effective interest rate on our corresponding financial debt (plus margin) – in the same amount – fluctuates between 1.75% and 5.0%. We have also negotiated a fixed interest swap at 3.797% on €50 million, as a hedge against rising money market interest rates.
The global nature of the Group generates payments in both directions in a range of currencies. Incoming and outgoing payments in individual currencies are netted off against each other. Thus, by selecting suitable suppliers and making appropriate location-related decisions, we actively seek to create a natural hedging effect to the greatest extent possible. The netted-off amounts represent our remaining exchange rate risk, which is then hedged up to 100% (depending on volume and currency) on a rolling 12-month basis by means of suitable financial instruments.
Since the companies making up the Wincor Nixdorf Group are largely refinanced centrally, there is a risk that liquidity reserves may be insufficient to settle financial obligations at the correct time. Wincor Nixdorf has provided for this eventuality by establishing reserves in the form of unused credit lines and by treating cash flow as one of the Group’s key control indicators and to a monthly review.
We reduce credit default risks by consistently obtaining credit reports, setting credit limits and running a proactive debtor management function, including a payment reminder system and active debt collection. Letters of credit are used to secure receivables from countries classified as presenting a credit risk.
Details of each of the above financial risk areas can be found in the Notes to the Group Financial Statements.
Capital Market as a Risk to Pension Commitments and Corresponding Plan Assets.
Share, bond, property and other markets are subject to fluctuations in value that can also have an effect on our plan assets. Equally, changes in rate of return can affect our pension commitments. Other considerations, which may also lead to an increase or reduction in pension and other commitments, include income trends, the ratio of those contributing to pension schemes and those receiving benefits from them, mortality rates, increases in health care costs and other factors. We aim to mitigate the impact of these factors by assuring that assets are distributed in a balanced and flexible manner. However, such changes can have a negative impact on pension expenses, future contributions and equity. As such, it is possible that future pension expenses and contributions may have a negative impact on the financial position and profitability of Wincor Nixdorf.
Market and Competition Risks.
Banks and retailers operate in markets characterized by intense competition. This can result in price pressure for our hardware, software and services (Glossary) – pressure that we expect to increase still further in the current fiscal year. In addition to the competitive pressures facing our customers, we also see a risk to our business through increasing internationalization and competition, coupled with diminishing barriers to entry for potential competitors. Increased competition in the market may have a negative impact on future profitability.
Purchasing and Productivity Risks.
As a manufacturing company, Wincor Nixdorf is dependent on the supply of a wide range of raw and processed materials. As such, the major risks we face involve price increases, quality problems and supplier failure. We aim to counter the problem of supplier failure through careful management of our supplier base. The quality assurance process ensures compliance with quality standards.
Price increases for energy and raw materials present a major risk to Wincor Nixdorf. We minimize these risks by purchasing in greater volume and we aim to reduce costs through purchasing management. Nevertheless, a possible increase in the price of raw materials may mean that we cannot meet our cost-reduction targets for the components and assemblies we require.
It is also possible that changing framework conditions within the labor market in Germany, in conjunction with higher costs, will have an adverse effect on expense structures.
Technology and Quality Risks.
Wincor Nixdorf works in an industry that is characterized by innovation and an international environment that demands a constant stream of competitive products and services. Thanks to an intensive process of innovation and development, we are well able to meet the high demands of customers with regard to product and service quality. Furthermore, the range of these demands increases as new business areas are opened up. In order to meet these new demands and to deploy applications at an early stage, we endeavor to work closely with our key customers in the fields of hardware, software and solutions (Glossary) . Benefit of these endeavors are innovative business ideas and customer-specific hardware, software and services.
Wincor Nixdorf’s leading position within the areas of innovation and quality allows us to differentiate ourselves effectively from the competition. Our key goal is to maintain and build on our technological lead over our competitors. In order to achieve this goal, we need to quickly identify any weak points in our products and services and rectify them as soon as possible. To this end, we constantly strive to deliver greater innovation and quality. Risks that might result from quality shortfalls are minimized through our quality and environmental management system. In concrete terms, this means that risks are minimized through preventive integration of risk analysis at all development stages, a rigorous approach to product releases and suitable insurance cover.
IT Risks.
IT is naturally a very important aspect of Wincor Nixdorf’s business environment. Any shortfall in the availability levels of our IT systems not only makes it more difficult to meet our internal productivity targets; it can also lead to compensation claims from our business partners. We have to deal with repeated outside attacks on our IT systems, especially from viruses and trojans, and these attacks are likely to continue. As a result, we constantly strive to optimize our systems with regard to information security.
As part of our information security management system, we make ongoing improvements to existing systems by conducting specific evaluations of security requirements. To prevent operational disruptions caused by external factors, such as viruses penetrating the computer system, we always deploy the latest hardware and software solutions (Glossary) available on the market. In addition, our IT systems and architectures are regularly audited by independent experts. To ensure this level of protection remains in place at all times, the departments concerned work strictly to TÜV/ISO standards and are ISO 27001- certified.
Legal Risks.
We are not presently aware of any actual or potential legal disputes that could affect the financial position of the Group to any significant extent. However, Wincor Nixdorf is exposed to risks in connection with possible legal disputes in the future. Legal disputes may arise in the ordinary course of business, for instance, with regard to claims of incorrect provision of products and services, product liability, product defects, quality issues or industrial property right infringements. There can be no guarantee that the outcome of such or other legal disputes will not be detrimental to the business activities or the reputation of Wincor Nixdorf. Claims of this nature and legal disputes, some of which with a significant impact on the Group’s financial situation, cannot be ruled out entirely for the future.
Personnel Risks.
Employee performance is essential for Wincor Nixdorf’s future development and growth. We are in competition with other businesses for highly qualified specialists and managers. In order to attract and retain qualified people in the long term, we offer attractive employment conditions in addition to extensive training and development opportunities. We do not see any issues that may pose a risk to the recruitment of specialists or managers we need in line with our growth objectives.
Overall Risk.
At present, and in the foreseeable future, we perceive no individual risks that could pose a danger to the continued existence of Wincor Nixdorf. Moreover, the sum of risks does not show Wincor Nixdorf to be in any jeopardy.
