A targeted approach to handling opportunities and potentially negative developments is an integral component of value-based company management.
Risk and opportunity management
Every conscious business decision is based on weighing the associated risks and opportunities. Risk management in the Merck Group is supported by a uniform, corporate-wide system. Risk management activities are aimed at identifying risks at an early stage, and evaluating, controlling and managing them. In order to fulfill this task, we have defined and outlined corresponding roles and responsibilities throughout the Group in the form of binding guidelines.
Within the scope of a standardized risk process, the current risk situation is reported to the Executive Board in six-month intervals or, in special cases, on an ad-hoc basis. The risk management system and compliance with the corresponding guidelines are reviewed regularly by the Internal Auditing department.
Division-specific opportunities are identified, analyzed and managed in the respective divisions by means of suitable processes. Information on these opportunities, and particularly with respect to R&D activities, is given in more detail within our divisions Merck Serono, Consumer Health Care, Liquid Crystals as well as Performance & Life Science Chemicals. In agreement with the Executive Board, it is ensured that opportunities are seized actively and in line with the corporate strategy. We discuss risks and opportunities further in the Report on expected developments.
Internal control system for the consolidated accounting processs
The objective of the internal control system for accounting is to implement controls that will provide assurance that financial statements are prepared in compliance with the relevant accounting laws and standards.
As the parent company, Merck KGaA prepares the consolidated financial statements of the Merck Group. This process is preceded by financial reporting by the companies consolidated in the Group financial statements. Both processes are monitored via a stringent internal control system that ensures the accuracy of financial reporting as well as compliance with the relevant legal regulations.
The main features are as follows:
- Accounting guidelines at both Group level as well as in the individual Group companies
- Clearly defined segregation of duties and assignment of responsibilities to the units involved in the financial reporting process
- Involvement of external experts as needed, for example for the valuation of pension obligations
- Use of suitable and largely uniform finance systems and the application of detailed authorization concepts to limit user rights on a need-to-have basis, taking into account principles concerning the principle of segregation of duties
- System-based controls and further process controls for financial reporting in the companies, consolidation of the Group financial statements, and other relevant processes at Group and company level
- Consideration of risks recorded and assessed by the risk management system in the annual financial statements to the extent required by existing accounting rules
The respective heads of Finance of the Group companies are responsible for the implementation of these rules and utilization of the tools. The Group financial statements are the responsibility of the Chief Financial Officer and Member of the Executive Board of Merck KGaA. This responsibility is laid down in the rules of procedure of the Executive Board.
All of the structures and processes described are subject to constant review by Internal Auditing. The Executive Board determines the structures and processes that are to be audited in an annual audit plan. The results of these audits are dealt with regularly in meetings of the Executive Board, the Supervisory Board and the Finance Committee.
Management’s assessment of the overall risk situation
Currently no risks can be identified that could jeopardize the continued existence of the Merck Group. This is the finding of this risk report, which was prepared in accordance with German Accounting Standard 5.
back
