Risk management

Freudenberg operates a standardized global risk management system for the timely identification of risks to which the company is exposed and the initiation and control of countermeasures. Risks are classified by risk category, likelihood and scale of damage. The external auditor assessed the structure and implementation of the risk management system during the audit process. The system is appropriate for the timely identification of developments that could pose a threat to the continued existence of Freudenberg.

As a global company, Freudenberg is exposed to macroeconomic risk. The economic situation of most industrialized nations is characterized by a high degree of uncertainty as to future developments, giving rise to exchange rate risk and interest risk which are monitored by the risk management system.

In its function as a supplier, Freudenberg is exposed to the business risk and product risk of the sectors it serves; these are primarily the automotive industry and the mechanical engineering industry, the textile and clothing industry and the construction industry. Freudenberg responds to the economic risk in these customer groupings by an unceasing effort to constantly improve customer performance through innovative and reliable products and services.

As a broadly diversified company, Freudenberg is also exposed to the legal risk of the sectors it serves. This risk is incorporated in the risk management system and limited by the implementation of countermeasures.

In 2003, the special focus of the Freudenberg Group again concerned the prevention of product liability risks.

The analysis of present risks concluded there are no risks to the continued existence of the Freudenberg Group.

Freudenberg largely implements the rules of the German Corporate Governance Code on a voluntary basis. The only provision of relevance to Freudenberg that is not implemented concerns the publication of individual executive compensation for the Management Board and the Board of Partners.