The KION Group encounters business risks that may jeopardise its business objectives. Its risk management systems therefore form an integral part of its day-to-day management. To ensure that these risk management systems are fully integrated into the KION Group's overall financial planning and reporting process, they are located in the Group Accounting & Finance function. The procedures governing the KION Group's risk management activities are laid down in internal risk guidelines. For certain types of risk, such as financial risk or risks arising from financial services, the relevant departments also have guidelines that are specifically geared to these types of risk and describe how to deal with inherent risks.
The organisational structure of risk management corresponds directly to the structure of the Group itself. Consequently, risk officers supported by risk managers have been appointed for each company and each division. A central Group risk manager is responsible for the implementation of risk management processes in line with procedures throughout the entire Group. His or her remit includes the definition and implementation of standards to ensure that risks are uniformly captured and evaluated.
The risk management process is organised on a decentralised basis. Firstly, a Group-wide risk catalogue is used to capture the risks attaching to each company. Each risk must be captured individually to ensure that no information is lost. If the losses caused by a specific risk or the likelihood of this risk occurring exceed a defined limit, an ad-hoc report is sent to the KION Group's Executive Board and to its Accounting & Finance function. A specially developed module within the internet-based reporting system used for the entire planning and reporting process is used to document each risk.
The risks reported by the individual companies are combined to form divisional risk reports as part of a rigorous reporting process. To this end, minuted risk management meetings are held once a quarter. Material risks are discussed at the quarterly business review meetings. The divisional risk reports are then used to compile an overall risk portfolio for the KION Group as a whole. The Executive Board and the Supervisory Board's audit committee are informed of the KION Group's risk position at least once a quarter.
Material features of the internal control and risk management system pertaining to the (Group) accounting process
Principles
The primary objective of the special accounting-related internal control system is to avoid the risk of material misstatements in financial reporting, to identify material mismeasurement and to ensure compliance with the applicable regulations. Nevertheless, an internal control system – irrespective of the form that it takes – cannot give absolute certainty that this objective will be achieved.
Material processes and controls in the (Group) accounting process
For its (Group) accounting process, the KION Group has defined suitable structures and processes within its internal control and risk management system and implemented them in the organisation. Changes to the law, accounting standards and other pronouncements are continually analysed with regard to their relevance and effect on the consolidated financial statements; the relevant changes are then incorporated into the Group's internal policies and systems.
Besides defined control mechanisms, this special accounting-related internal control system includes, for example, system-based and manual reconciliation processes, separation of functions, the double-checking principle and adherence to policies and instructions.
The employees involved in the Group's accounting process receive regular training in this field. Throughout the accounting process, the local companies are supported by central points of contact. The consolidated accounts are drawn up centrally using data from the consolidated subsidiaries. A consolidation department with specially trained employees carries out the consolidation activities, reconciliations and monitoring of the stipulated deadlines and processes. Employees monitor the system-based controls and supplement them with manual checks. The entire accounting process contains a number of specific approval stages. Employees with the relevant expertise provide support on specialist questions and complex issues.
The central Internal Audit department also checks, among other things, the reliability of the accounting work by the subsidiaries in Germany and abroad. It focuses primarily on the following aspects:
- Compliance with legal requirements, directives from the Executive Board, other policies and internal instructions
- Integrity and effectiveness of the internal control systems for avoiding financial losses
- Correct performance of tasks and compliance with business principles
- Formal and material correctness of the accounting and of the financial reporting that is based on the accounting.
