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Risk report

Opportunity and risk management system

Our success is significantly dependent on identifying opportunities and risks in our business activities and actively managing them. The goal of the risk management system is to safeguard the company’s existence for the long term and ensure its successful future development by identifying opportunities and risks and, depending on their nature, appropriately considering these in strategic and operational decisions. Risks and opportunities are understood as negative or positive deviations from planned results.

Our management system is based both on internal organizational workflows, which are managed by way of control and monitoring mechanisms, and on early warning systems that are used to closely observe changes in external conditions and systematically implement the appropriate measures. This approach applies equally to risks and opportunities.

Like all methods intended for dealing with business risk, this system does not offer absolute protection. However, it does serve to prevent business risks from having a material impact on the company with a sufficient degree of certainty.

Structural basis

The principles of our opportunity and risk management system are set forth in a Group directive. The management system, which uses the COSO model as the enterprise risk management framework, comprises many different elements that are incorporated into business processes through the company’s organizational structure, its workflows, its planning, reporting and communication systems, and a set of detailed management policies and technical standards.

The system is based on an integration concept, i.e. the early identification of opportunities and risks is an integral part of the management system and not the object of a separate organizational structure. The management of opportunities and risks is therefore a primary duty of the heads of all business units, as well as of those people in Group companies who hold process and project responsibility. This is why our opportunity and risk management is based on clearly defined business processes, the precise assignment of responsibilities throughout the Group, and reporting systems that ensure the timely provision of the information required for decision-making to the Board of Management or other management levels. Various committees and other bodies discuss and monitor our opportunities and risks.

Roles of key organizational units

At LANXESS, the business units each conduct their own operations, for which they have global profit responsibility. Group functions and service companies support the business units by providing financial, legal, technical and other centralized services. Complementing this global alignment of the business units and group functions, the country organizations ensure the required proximity to markets and the necessary organizational infrastructure.

In line with this division of duties, we have assigned responsibility, i.e. defined the risk owners, for the following:

  • identification and analysis of risks and opportunities,
  • risk prevention (measures taken to avoid, minimize or diversify risk),
  • risk monitoring (e.g. on the basis of performance indicators and, perhaps also, early warning indicators),
  • risk mitigation (measures to minimize damage upon occurrence of a risk event) and
  • communication of the key risks and opportunities to the management committees of the business units and group functions.

The Corporate Controlling Group Function is responsible for collecting and aggregating key information across the Group at the following intervals:

  • twice per year during the intrayear forecasting process,
  • once per year as part of the budget and planning process for the subsequent year and the medium-term forecast horizon.

The reported opportunities and risks are collected in a central database and regularly analyzed for the Board of Management and Supervisory Board. This ensures that when new risks and opportunities arise or when existing ones change substantially, the necessary information can be communicated in a timely manner all the way to the Board of Management and therefore also be specifically integrated into the general management of the company.

The reporting threshold for opportunities and risks is an effect of €1 million on the Group’s net income or EBITDA, taking into account a minimum probability of occurrence. This low reporting threshold guarantees that the information gathered about opportunities and risks is comprehensive and that the collection of information is not just limited to material risks or risks that could jeopardize the future of the company as a going concern. The Corporate Controlling Group Function centrally determines the top opportunities and risks only after the information has been gathered. The threshold for material risks has been defined at €10 million for the Group.

The Corporate Development Group Function systematically analyzes and measures significant and strategic opportunities and risks with the goal of ensuring that the Group is pursuing the correct long-term strategy.

Transactions particularly for the transfer of financial but also operating risk (hedging transactions or insurance) are managed centrally by the Treasury Group Function. This is explained in more detail in “Risks of future development.”

Due to the highly integrated nature of our general business processes, we have specialized committees composed of representatives of the business units and group functions who deal with issues concerning the Group’s risks and opportunities. This enables us to react quickly and flexibly to changing situations and their influence on the company.

Significance of the Group-wide planning process

Corporate planning is a core element of our opportunity and risk management. Opportunities and risks with a likelihood of occurrence greater than the specified minimum probability flow directly into the planning process. Key budget values are calculated and those risks and opportunities considered relatively likely to materialize are presented as worst-case/best-case scenarios. The processes for corporate planning and intrayear forecasting as well as the corresponding analyses and suggestions for action are steered by the Corporate Controlling Group Function, which works closely in this regard with the business units. Certain Board of Management meetings are dedicated to discussing and adopting corporate planning outcomes, including the associated opportunities and risks. We monitor the annual budget in any given fiscal year by regularly updating our expectations for business development.

There is also provision for immediate internal reporting on specific risk issues such as unexpected operational events with a significant impact on earnings. In 2012, there was no cause for immediate reporting of this kind.

Compliance as an integral component

Risk management also includes preventing illegal conduct by our employees. To this end, we obtain extensive legal advice concerning business transactions and obligate employees by means of our compliance code to observe the law and to act responsibly. The compliance code is part of a comprehensive compliance management system that has been structured in accordance with the principles of an internationally recognized framework for enterprise risk management (COSO). A Compliance Committee promotes and monitors adherence to our compliance guidelines. Its work is supported by compliance officers who have been appointed for each country in which we have a subsidiary. The Compliance Committee is chaired by a Group Compliance Officer, who reports directly and regularly to the Board of Management. In addition, there is provision for immediate notification of the Board of Management and Supervisory Board in the event of serious compliance violations. In 2012, there was no cause for immediate reporting of this kind.

(Group) accounting aspects of the internal control and risk management system

The aspects of the internal control and risk management system relating to the (Group) accounting process include the principles, procedures and measures required to ensure the effectiveness, efficiency and propriety of the company’s accounting, and compliance with applicable legal regulations. To this end, clear organizational, control and monitoring structures have been established. The distinctive features of the chemical industry and the risk management tools used regularly by LANXESS in this regard are taken into account. In addition to the (Group) accounting process in its narrower sense, this also includes the aforementioned structured budget and forecasting process, and extensive contract management. However, the effectiveness and reliability of the internal control and risk management system can be restricted by discretionary decisions, criminal acts, faulty controls or other circumstances. Thus, even if the system components used are applied Group-wide, the correct and timely recording of (Group) accounting issues cannot be guaranteed with full assurance.

The Accounting Group Function, which reports to the CFO, is responsible for the (Group) accounting process and therefore for preparing the annual financial statements of LANXESS AG and the consolidated financial statements of the LANXESS Group. It is also responsible for ensuring the uniform preparation of the single-entity financial statements of the subsidiaries that are included in the consolidated financial statements. The Board of Management prepares the annual financial statements and the consolidated financial statements, which are then forwarded to the Supervisory Board’s Audit Committee without delay. Upon recommendation by the Audit Committee, the annual financial statements and the consolidated financial statements are adopted and approved by the Supervisory Board at its financial statements meeting. The Supervisory Board, and especially its Audit Committee, deal with major questions relating to LANXESS’s accounting and risk management, the audit mandate and the areas of focus for the auditor’s audit of the annual financial statements.

Consolidated interim financial statements are prepared each quarter. The condensed consolidated half-yearly financial statements are reviewed, while the annual financial statements and the consolidated financial statements are subjected to a full audit by the auditor of the company’s annual financial statements and consolidated financial statements.

LANXESS AG’s uniform accounting in compliance with the German Commercial Code is based on a structured process with appropriate organizational structures and workflows, including the related working instructions. In addition to the segregation of duties, the dual-control principle and continual plausibility testing serve as fundamental monitoring tools during the financial statement preparation process. On the IT side, the accounting process is supplemented by an integrated IT system that is based largely on off-the-shelf software and is protected by security measures against unauthorized access. The correctness of the automatically generated postings and the master data required for them is regularly reviewed. Manual postings are based on a systematic voucher system, documented to the necessary extent and verified downstream.

The foundation for uniform and IFRS-compliant consolidated financial reporting at LANXESS is the Group Financial Statements Guideline. This governs the way the provisions of the International Financial Reporting Standards (IFRS) applicable to the Group are applied by the subsidiaries as reporting entities. Moreover, the guideline also defines charts of accounts that are binding throughout the Group. On the IT side, the guideline is supplemented by a uniform, Group-wide delivery and consolidation system that is based largely on off-the-shelf software and is protected by security measures against unauthorized access.

By controlling and monitoring LANXESS’s (Group) accounting process, we ensure that generally accepted accounting practices in line with the applicable laws and standards are applied and guarantee the reliability of our financial reporting. The (Group) accounting-related internal control system we use is based on generally accepted standards (COSO model). There were no material changes to this system during the period under review. Corresponding standards also apply to the single-entity financial statements of the subsidiaries.

Preparation of the consolidated financial statements is based on a very detailed process that includes specifying a financial statement calendar containing deadlines for the delivery of certain data. A further component is regular reviews of the correctness and completeness of the scope of consolidation. The principle of the segregation of duties as expressed in structured authorization and approval procedures and the dual-control principle as well as continual plausibility testing on data is applied end-to-end throughout the preparation and consolidation process.

For the consolidated financial statements, all subsidiaries subject to reporting requirements transmit their Group reporting data using the above-mentioned consolidation system. Validation rules integrated into the system ensure that the data reported by the subsidiaries are consistent at the time of delivery. The ultimate responsibility for ensuring the correctness of the reported data content lies with the accounting departments of the subsidiaries. The Corporate Accounting Department within the Accounting Group Function conducts more detailed testing of the correctness of the data content. To this end, the department evaluates standardized reports in which the companies explain material facts relevant to financial reporting. After the process-based controls have been applied, Group consolidation including currency translation is carried out in the same system, without additional interfaces, utilizing both automated and manual procedures. The correctness of the automated consolidation steps and of the master data necessary for this purpose is reviewed regularly. Consolidation information that must be entered manually is posted separately, documented to the extent required and verified downstream. This is supplemented by validation rules that are integrated into the system.

Regular coordination with other financial group functions, particularly the Treasury, Tax and Controlling group functions, assists the financial reporting process. A continual exchange of information with the operating business units and other group functions makes it possible for the Accounting Group Function to identify and deal with issues arising outside of accounting processes. These include litigation risks, projections for impairment testing and special contractual agreements with suppliers or customers. In addition, third-party service providers are consulted on special issues, particularly relating to the valuation of pensions and other post-employment benefits.

Monitoring of risk management and the internal control system (ICS)

Within the Group, the Internal Auditing Group Function is tasked with overseeing whether the internal control and monitoring system is functioning properly and whether organizational safeguards are being observed. The planning of audits (selection of audit subjects) and audit methods applied by this group function are correspondingly aligned with risks. To assess the effectiveness of the ICS, an annual self-assessment is also carried out in major Group companies, operating units and group functions. In addition, the early warning system is evaluated by the auditor as part of the audit of the annual financial statements. The Supervisory Board also exercises control functions, including regular monitoring of the efficiency of the management systems described above by the full Supervisory Board and by its Audit Committee. The Audit Committee reviews reports about the Compliance Committee’s activities and findings, the work of the Internal Auditing Group Function, and the status of the risk management and internal control system.

Risks of future development

The main sources of risk are shown in the table below:

Main Sources of Risk
   
Macroeconomic Regional differences in performance
Long-term exchange-rate parities
Demographic trends
Strategic Corporate strategy
Investments
Information technology
Human resources
Operational Sales markets
Plant operations
Environmental risks
Procurement markets
Financial risks
Regulatory Legal aspects
Regulatory measures
Taxes
 

Regional differences in economic trends

LANXESS is inherently exposed to the general economic and political opportunities and risks of the countries and regions in which the LANXESS Group operates. Regional differences in economic performance and the associated demand trends can affect the Group’s pricing and sales potential in its various geographical markets, with corresponding effects on its earnings. We address these issues with our broad regional presence and by expanding our profile in selected growth regions. This approach is discussed in further detail in the “Strategy” section of this combined management report.

Long-term exchange rate trends

Depending on the country of production, shifts in exchange rate parities can affect sales revenues as reported in the Group’s currency and the gross profit margins on sales as they relate to the production costs of products. In addition to the hedging we perform as described under “Financial risks,” we also make a point of expanding our production sites in the key growth regions in order to build a natural hedge position by matching production and sales in the regional markets.

Demographic trends

We actively manage the risk of demographic change as well. To ensure continued access to a highly skilled workforce, we launched a comprehensive package of measures known as XCare in 2009, starting in Germany. Interdisciplinary working groups are collaborating closely with employee representatives at LANXESS to develop innovative concepts to preempt and actively address shifts resulting from demographic change – ranging from increasing the number of vocational training positions to measures allowing older employees to enjoy a longer working life.

Another area of activity is health. The goal is to increase productivity, while continuing to reduce the risk of lost workdays. Measures aimed at prevention and reintegration have been successfully expanded. Additionally, in 2011 we worked closely with our employee representatives to agree a multi-stage concept that will make it easier for employees to care for family members while continuing their jobs. One feature of the concept is individually agreed part-time working for caregivers. Further modules were added in 2012. These include helping our employees in Germany to find care facilities for family members close to their workplaces and low-interest caregiver loans. Overall, we are expanding our concepts to facilitate employees’ work-life balance. In November 2012, for example, construction started on a new childcare facility near the Leverkusen site.

Thus far, there has not been a major shortage of labor in our global markets. However, in the interests of a forward-thinking, sustainable human resources policy, we continued to expand our cooperations with research institutes, colleges and universities in Germany and other important target markets in 2012. We were also able to position our company as an attractive employer through participation at numerous events around the world. Our admission to the DAX helped in this regard. We additionally extended our programs for interns and new talents in several regions, especially in the BRICS countries.

A key element in the globally responsible management of human resources is the Board of Management’s Diversity & Inclusion initiative. The program aims to create a more diverse workforce in terms of age, gender and nationality over the medium and long term that can better respond to the challenges of global markets and diverse customer requirements. The Diversity & Inclusion initiative was launched in 2011 and entered a decisive phase in 2012 with many different sub-projects. In this context, LANXESS also set its first concrete target: to increase the proportion of women in middle and upper management worldwide from 15% to 20% by 2020. At the same time, we aim to find intelligent solutions that bring together diversity and demographic management. In Germany, for example, our Senior Trainee Program is helping a group of academically trained men and women of varying ages return to employment after a long period spent raising a family. The idea is to better deal with demographic-related trends by focusing on a frequently overlooked segment of the German labor market and, as a socially responsible company, promoting equal opportunities for women at the same time.

Corporate strategy risks

We actively pursue the strategic optimization of the enterprise. Our efforts include ongoing efficiency enhancement, strengthening of core businesses, active portfolio management, and proactive participation in industry consolidation through partnerships, divestments and acquisitions.

The success of the decisions associated with these efforts is naturally subject to forecasting risk in respect of predicting future (market) developments and making assumptions about the feasibility of planned measures. For example, the entry into or exit from a business segment could be based on profitability or growth expectations that prove to be unrealistic over time. We mitigate this risk by carefully and systematically analyzing the information that is relevant to decision-making. During this process, the business units affected and the Board of Management receive support from departments with the requisite expertise and, if necessary, from external consultants.

When gathering information about potential M&A candidates, it is possible that certain facts required to assess a candidate’s future performance or to determine the purchase price are not available or are not correctly interpreted. We reduce this risk by conducting well-structured due diligence analyses and, where possible, by concluding appropriate agreements with the sellers. Insufficient integration of acquired companies or businesses can result in expected developments not materializing. For this reason, we have processes in place with which full integration of acquired businesses is assured.

Investment risks

The preparatory work for investments that exceed a specified significance threshold is the responsibility of the relevant business units. After review by an Investment Committee set up for this purpose, the information is presented to the Board of Management for a decision. By following this procedure, we ensure that investments are in line with our corporate strategy and satisfy our profitability and security requirements.

IT risks

Our IT systems support LANXESS’s business activities worldwide, including the processes from receiving an order to receiving payment and from placing an order to paying a vendor. It is important that the people who use the systems receive correct and meaningful information when they need it. We support this by developing a uniform, integrated system architecture and investing in the expansion and improvement of IT services worldwide.

The operation and use of IT systems entails risks. For example, networks or systems may fail, or data and information may be compromised or destroyed because of operator and programming errors or external factors. In both cases, this can cause serious business interruptions. To mitigate such risks, we invest in suitable data protection systems, such as mirror databases designed to prevent the loss of data and information. Various security and monitoring tools, like firewalls and access restriction and authorization systems, are used to ensure the integrity, confidentiality and availability of data and information and the trouble-free operation of systems. The risk management practices employed by the Information Technology Group Function comply with recognized standards.

HR policy risks

The risk of industrial actions in some countries resulting from disputes in connection with negotiations concerning future collective bargaining agreements or associated with restructuring measures cannot be ruled out. We counter this risk by fostering open communication with our employees and their representatives in a culture of active labor relations. QUEST, our qualification, deployment and job management center, is part of these efforts. Formed in 2009 and firmly anchored in our German organizations, this internal job placement unit enables us to redeploy surplus headcount and keep expertise within the company.

Our employees’ expert knowledge of internal processes and issues relating to their areas of specialization is a critical factor in the efficiency of our business operations. We take various approaches to mitigate the risk of losing this expertise and to increase our employees’ loyalty to the company, including attractive compensation models, challenging jobs and international career options. Additionally, we use personnel conferences and development centers as a means of identifying particularly well-qualified employees for subsequent appointment to key functions and management positions. This allows us to further develop the expertise already available within the company and avoid the loss of know-how. To this end, we are also continually expanding the international exchange of experts between the various group functions and business units. We continue to invest in the next generation of employees as well, by increasing the number of training opportunities in Germany, launching and expanding regional internship and trainee programs in, for example, Brazil, India and China, and offering a central Corporate Trainee Program that includes international assignments. One indicator of our success so far in limiting the loss of know-how is the low employee fluctuation rates in all regions and steadily increasing applicant numbers. Overall, we estimate as low the risk of our business being impaired by a loss of knowledge.

In 2011, to further increase productivity at LANXESS, we developed and launched the International LANXESS Sales Academy (ILSA) for our global sales organization within the context of our strategic growth program GOFOR 1.4. We continued this offering in 2012. To date, 200 sales employees from all regions have been trained in three modules.

Risks in sales markets

The volatility and cyclicality that are typical of the global chemical and polymer markets and their dependence on developments in customer industries harbor risks to LANXESS’s business. In addition to being subject to these demand-side market risks, LANXESS’s risk profile is influenced, and its earnings power can be impaired, by structural changes in markets, such as the entry of new suppliers, the migration of customers to countries with lower costs, and product substitution or market consolidation trends in some sectors. We counter such trends by systematically managing costs and by taking comprehensive measures designed to achieve a sharper focus and arrive at a product portfolio with which we can operate successfully for the long term.

Risks in the course of operations

A lack of plant availability and disruptions of plant and process safety can make it impossible for us to meet production targets and adequately service existing demand, resulting in a loss of marginal income. We use a comprehensive range of measures to counter this scenario. These include proactive facility maintenance, regular compliance checks, the preparation of risk assessments and systematic training of employees to improve standards and safety.

Environmental risks from production processes

Although LANXESS applies high technical and safety standards to the construction, operation and maintenance of production facilities, interruptions in operations, including those due to external factors, such as natural disasters or terrorism, cannot be ruled out. These can lead to explosions, the release of materials hazardous to health, or accidents in which people, property or the environment are harmed. In addition to systematically monitoring compliance with quality standards in order to avoid such stoppages and accidents, we are also insured against the resulting damage to the extent usual in the industry.

LANXESS was and is responsible for numerous sites at which chemicals have been produced for periods that in some cases exceed 140 years. This responsibility also extends to waste disposal facilities. The possibility cannot be ruled out that pollution occurred during this time that has not been discovered to date. We are committed to the Responsible Care® initiative and actively pursue environmental management. This includes constant monitoring and testing of the soil, groundwater and air. We have set up sufficient provisions within the scope permitted by law for necessary containment or remediation measures in areas with identified contamination.

LANXESS’s product portfolio includes substances that are classified as hazardous to health. In order to prevent possible harm to health, we systematically test the properties of our products and draw our customers’ attention to the risks associated with their use. We also carry product liability insurance that is customary in our industry.

Risks in procurement markets

On the procurement side, the principal risk lies in the volatility of raw material and energy prices. If the price of the materials we use increases, our production costs increase. If the price of the materials we use decreases, write-downs may have to be recognized on inventories. We mitigate this risk by following a sensible inventory and procurement policy. Most of the company’s raw material needs are met by long-term supply contracts that have price escalation clauses, and many agreements with customers also contain price escalation clauses. We also hedge this risk in some cases via derivatives transactions if liquid futures markets are available for hedging raw material and energy price risks (see also “Financial risks”). Detailed information is contained in the section headed “Raw material price risks” under Note [35], “Financial instruments,” to the consolidated financial statements.

To guard against possible supply bottlenecks due to factors such as the failure of a supplier or of an upstream operation at a networked site, we pursue an appropriate inventory strategy and line up alternative sources of supply. We also face increases in our personnel expenses because of future wage increases. Such an increase in the cost of human resources can be just as detrimental to earnings as increases in raw material prices, as described above, but in the case of personnel we cannot hedge the risk in futures markets or pass it on to our customers. In order to cushion the impact of such negative developments on our cost base, we pursue a market-oriented pricing policy that is in line with the premium nature of our products. Additionally, we are constantly looking for ways to use our resources more efficiently so that we can offset higher costs by raising productivity.

Financial risks

The Treasury Group Function centrally manages financial risks. The chief financial risks are:

Financial Risks
       
Price risks Liquidity and refinancing risks Default risks Investment risks
       
Interest Availability of cash Banks Investments in pension assets
Currencies Access to multi- and bilateral capital markets Customers  
Raw materials      
Energy      
 

Price risks are managed using derivative financial instruments within approved limits for hedging. We ensure our access to the capital markets and our solvency through a conservative financing policy and a target capital structure that is largely based on the ratio systems used by leading rating agencies. We mitigate default risks by setting sensible credit limits. The Pension Committee, which is made up of the CFO and representatives from the Treasury, Accounting and Human Resources group functions, limits investment risk by making decisions about the allocation of the pension fund’s investments, insofar as LANXESS is able to exercise its influence in this regard.

Detailed information about our financial risks and how we manage them is contained in Note [35], “Financial instruments,” to the consolidated financial statements.

Legal Risks

Companies in the LANXESS Group are parties to various litigations. The outcome of individual proceedings cannot be predicted with assurance due to the uncertainties always associated with legal disputes. To the extent necessary in light of the known circumstances in each case, we have set up risk provisions for the event of an unfavorable outcome of such proceedings. Taking into account existing provisions and insurance, as well as agreements reached with third parties in respect of liability risks arising from legal disputes, it is currently estimated that none of these proceedings will materially affect our future financial condition or earnings.

In our reporting in previous years, we referred to heightened risks relating to certain antitrust proceedings brought by regulatory authorities or civil courts in the United States, Canada and Europe concerning certain products of the former Rubber Business Group, which was transferred to the LANXESS Group in the course of the spin-off from Bayer AG. LANXESS AG and Bayer AG agreed on specific rules governing their respective share of the liabilities in connection with these proceedings. The rules provide that LANXESS will bear 30% and Bayer AG 70% of such liabilities. LANXESS’s total liability was limited to an amount that has now been exhausted by the payments which have since been made. In addition to this maximum amount, it is liable for the reimbursement of income tax payable as a result of limited tax deductibility and the proportionate costs of external legal counsel, which are also split between LANXESS and Bayer at a ratio of 30:70.

Additional information on legal risks can be found in Note [14], “Other current and non-current provisions,” to the consolidated financial statements.

Risks from regulatory measures

Possible tightening of safety, quality and environmental regulations or standards can lead to additional costs and liability risks. Particularly noteworthy in this regard is the implementation of the E.U. Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH). In addition to direct costs that could arise due to additional measures necessary to comply with these standards, market structures could change to our disadvantage as a result of a shift by suppliers and customers to regions outside Europe.

Tax risks

Tax matters are subject to a degree of uncertainty in terms of their assessment by the tax authorities in Germany and other countries. Even if we believe that all circumstances have been reported correctly and in compliance with the law, the possibility cannot be ruled out that the tax authorities may come to a different conclusion in individual cases.

Summary of LANXESS’s overall risk exposure

Despite mixed economic developments across regions and sectors, our risk exposure during the reporting year was not materially different from our risk exposure during the previous year due to our broadly diversified product and customer portfolios. Nonetheless, all planning is subject to a certain degree of forecasting risk, which could necessitate flexible adjustments to rapidly changing business conditions over the course of the year. This is particularly true in view of the fact that planning and forecasts in general have become somewhat less reliable due to the drastic changes observed recently in our global procurement and customer markets.

In light of the systematic improvements made in our financing structures during the reporting year, our sound liquidity position, and our demonstrated ability to adapt our business, even on short notice, to significant changes in the business environment, we are confident that we will be able to successfully master any risks that materialize in the future.

Based on an overall evaluation of risk management information, the Board of Management at the present time cannot identify any sufficiently likely risks or risk combinations that would jeopardize the continued existence of LANXESS.

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