Risk Management System

Wincor Nixdorf regularly finds itself confronted by risks and opportunities that can have both a positive and a negative impact on the Group’s assets, profits, and cash flow (Glossary, as well as on intangibles such as its reputation. In this report, we will present the most important risks we face and describe the principles underlying Wincor Nixdorf’s risk management system.

We see risks as the potential occurrence of internal or external events that may adversely affect our ability to achieve the Company’s short-term goals or the implementation of its long-term strategy. Risks can also take the form of our missing or insufficiently exploiting the opportunities available to us.

In general, opportunities can be defined as strategic and operational developments, both internal and external, that can have a positive impact on the Group’s future performance if used in the right way.

We look on risk management as the ongoing challenge of identifying, analyzing, and evaluating the entire range of potential and actual developments so that we can control our response wherever possible. Risk management is an integral part of Wincor Nixdorf’s overall management system, allowing us to spot risks that might jeopardize the Company’s growth and/or existence at an early stage and limit their impact as far as we are able. This approach is not restricted to risk, however. Another key aim of risk management is to identify opportunities and exploit them for the benefit of Wincor Nixdorf.

To this end, we have clearly defined the management and corporate structure of Wincor Nixdorf and separated certain functions in order to preserve the integrity of individual Group functions. A vital principle of risk management is that opportunities and risks should be evaluated wherever they might occur. This means managing risk both in our legally independent units and at Group level, with operating units enjoying a high degree of autonomy so that they can react flexibly to opportunities as they arise.

To be more precise, risks are identified, analyzed, and evaluated in each of our operating units on the basis of the Group’s overall aims and the corresponding aims of individual units. Parameter-based reporting processes are used to coordinate the activities of the relevant Group functions and determine the involvement of the Board of Directors. Risk Review Boards, whose members are also drawn from the Board of Directors, have been set up to analyze the main issues. Our centralized Risk Management department is responsible for controlling this risk management process and defining our risk standards and risk control tools. By embedding Risk Management within overall Group Controlling, we can ensure that it is treated as an integral component of everyday business management rather than as a response to specific risks, e.g., relating to particular projects. In this context, we produce an annual risk report and, at our meetings to discuss monthly, quarterly, and year-end results, we examine the opportunities and risks that concern Wincor Nixdorf and the individual units that make up the Group.

The main elements of Risk Management at Wincor Nixdorf have also been documented in our management handbook and in Group directives.

Description of the Main Features of the Internal Control and Risk Management Systems with Regard to the Group Accounting Process (Section 315 (2), No. 5 of the German Commercial Code – Handelsgesetzbuch, HGB).

A key element of our strategy for minimizing and avoiding risk, especially in the areas of accounting and financial reporting, is the internal control system. Wincor Nixdorf’s internal control system contains a series of principles, procedures, and measures that are intended to ensure that the accounting process is effective and cost-efficient as well as complying with statutory regulations. Wincor Nixdorf’s internal guidelines on accounting and financial reporting under IFRS (Glossary provide a framework of uniform accounting policies for all the domestic and international companies that make up the consolidated Group. They also include stipulations for the Group financial statements as well as detailed and formalized requirements to be applied by Group companies. In addition, with regard to finances and financial reporting, integrity and responsibility are ensured by the inclusion of an obligation to that effect in the Group’s internal Code of Conduct.

We promptly evaluate the impact of all new regulations and amendments to existing accounting rules and, where they concern us, incorporate them into the accounting process.

Wincor Nixdorf has established a largely uniform IT platform, a uniform system of accounts, and standardized, computer-based accounting processes. This standardization ensures that all significant transactions are recorded in a proper, timely, and uniform manner. Mandatory rules are in place for any additional manual recording of transactions. In most cases, accounting valuations, e.g., testing for the impairment of goodwill, are carried out by the Group’s own specialist staff, although in isolated cases, such as the measurement of pension obligations, this task is performed by external valuation experts.

In order to prepare Wincor Nixdorf’s Group financial statements, the separate financial statements of those companies whose accounts are maintained using the Group’s standard IT platform are transferred to an IT consolidation system based on SAP SEM. Data for the financial statements of all other Group companies is delivered using a web-based interface. The data provided to the parent company is automatically checked by the system. The separate financial statements submitted by Group companies are subjected to further centralized checks with due regard for the reports prepared by the auditors. Information relevant to the consolidation process is automatically identified and obtained by the system, thus ensuring that Group internal transactions are properly and completely eliminated. All consolidation processes involved in drawing up the Group financial statements are performed and documented within the IT-based consolidation system. The components of the Group financial statements, including any significant disclosures for the Notes to the financial statements, are derived from the resulting information.

At the heart of the internal control system lie a series of both process-integrated and process-independent measures. One fundamental element of the first of these is automatic, IT-based process control, while additional control functions, including manual process controls such as the “four-eyes principle,” have been established through the organizational separation of administrative, executive, billing, and authorization functions. The IT systems we use for this purpose are also protected as far as possible against unauthorized access through a system of access rights and restrictions. It should be noted, however, that even the use of appropriate and properly functioning systems cannot provide absolute certainty.

Other control tasks are performed by specific Group functions such as the central tax department. Both the Supervisory Board of Wincor Nixdorf AG (in particular its Audit Committee) and Internal Audit are integrated into the internal control system and are tasked with carrying out independent checks.

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