Page 24 - Hoftex Annual Report 2018 EN

Letter to Shareholders Supervisory Board Report
Group Management Report Consolidated Financial Statements Annexes
24
The Hoftex Group’s system landscape plays a key role in the context of the digitalisation of our business models and processes. As a globally operating company, it is essential for us to ensure information is current, complete and correct and that it can be shared with ease. To ensure this we are always investing in our IT infrastructure and expanding it to adapt to current conditions, both internally and externally. Building on this, our project management will also expand and adapt accordingly.
Due to constantly changing requirements pertaining to the confidentiality and availability of data, the Hoftex Group defined preventative measures to minimise associated risks and possible damages. However, despite all of these precautions, the risk of malfunctions and attacks on our IT systems and improper handling thereof can never be fully mitigated. IT system malfunctions could significantly disrupt operations.
Due to its global operations the Hoftex Group is faced with risks and opportunities related to currency exchange rate fluctuations. These primarily result from fluctuations in the US dollar (USD) and the Chinese Yen (CNY) along with other currencies against the euro (EUR). Risks and opportunities arise in the Group’s operations primarily when sales are generated in a different currency than the cor- responding costs (transaction risk). The resulting risk is closely monitored and forward exchange derivatives are used to hedge against currency risk as needed. The Group is also exposed to risks and opportunities in relation to the translation of single-entity financial statements for consolidated companies outside the Eurozone into the Group’s default currency, the euro (translation risk).
IT
Interest risks and opportunities can arise due to rising or falling financing costs resulting from increases or decreases in interest rates. Interest rate hedges are held and interest rate developments are continuously monitored to mitigate potential risks.
Outstanding receivables from customers or other payment obligations of third parties that remain unmet present a material risk to the Hoftex Group. Group financial control counters these risks by strictly monitoring the risk of default. Furthermore, outstanding customer debts and default risks are covered by trade credit insurance. Our customers’ creditworthiness is reviewed on a regular basis by trade credit insurers and monitored and controlled by our credit insurance team.
The Hoftex Group can be exposed to liquidity risks if outstanding payment obligations are not met. A rolling liquidity plan and a multi-year financing plan help the Hoftex Group secure long-term credit lines and make cash and cash equivalents available. This also helps guarantee the Group’s solvency and financial flexibility.
Financial risks and opportunities
Currency and interest
With our listing on the Munich Stock Exchange, the Hoftex Group is subject to regulatory guidelines and laws, which can also pose risks. We work closely with a law firm that supports our efforts to hedge capital market risks.
Receivables
Liquidity
Capital markets