The integrated opportunity and risk management system of the GfK Group forms the basis on which all opportunities and risks are identified and managed. The risk management process is carried out using a “bottom-up” approach across a number of aggregation levels. This process also allows for the identification and evaluation of risks on the level of the individual GfK subsidiaries as well as opportunities on the level of the regions, sectors, and the Group. Its general aim is the early recognition of developments that could influence the future existence of GfK SE and the GfK Group. Through our internal risk management reports (contained in the monthly financial reports as well as the annual risk inventory), we ensure that opportunities and risks are constantly monitored. In addition, we ensure that the opportunity and risk management system is properly functioning through regular inspections by Internal Audit.
The Group-wide opportunity and risk management system of GfK is essentially based on a management-oriented enterprise risk management (ERM) approach. It is a fully integral part of the Group’s organization and is structured according to the internationally recognized framework concept of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The opportunity and risk management system is derived from this concept, with its defined processes and related internal risk reports, constituting a solid foundation for the internal control system. The integrated system is compliant with the Group’s guideline (F18 Risk Management Manual) and regulates all the principles of the risk policy and the responsibilities associated with the opportunity and risk management system, the opportunity and risk management process, and the related reports. The guideline can be accessed by every employee on the GfK intranet (gNet).
Principles of risk policy
In order to ensure the continuing success of the GfK Group on the market, opportunities must be taken advantage of consistently but at the same time, risks must be taken on in an economically reasonable and morally responsible way. For this reason, we defined the principles of our risk policy, which constitute the basis of the entire opportunity and risk management system of the GfK Group. The key principles integrated into the structures and business processes of the GfK Group are as follows:
› Entrepreneurial action requires the conscious management of risks.
› No actions, whose inherent risks could result in a threat to the survival of the GfK Group, are permitted.
› Risk management is the obligation of each and every employee.
› Risks must be systematically identified, assessed and managed.
Risk management committee: Under the terms of its overall responsibility for the opportunity and risk management system, the Management Board has established a Risk Management Committee, which is tasked with the central coordination and continual further development of the risk management system. The standing members of this committee are the CFO as Chairperson, the CEO (who is also responsible for the corporate function Human Resources), the Head of Group Controlling, and an employee from the Group Controlling department, who is invested with responsibility for Risk Management. The Committee informs the Management Board and the Supervisory Board about current developments and changes in the risk position within the Group.
Risk management coordinators: Risk management coordinators: The direct responsibility for early identification, management and communication of risks locally lies with the business management of the individual GfK companies. Local risk management coordinators promote risk awareness and ensure that the prescribed central principles are implemented by the respective organizations.
Risk owners: For each identified risk a risk owner is nominated (at each level of the Risk Inventory 2015 process represented in the following diagram) within whose remit the risk lies. The risk owner’s task is to actively manage the risk and to take appropriate countermeasures to prevent the occurrence of risks that are harmful to business or to limit any possible damage. The risk owner can be an individual employee or a group of employees at management level.
Opportunity and risk management process
The opportunity and risk management process comprises continuous identification, assessment and management, complemented by the process-accompanying steps of reporting and monitoring.
Each of the GfK Group’s employees is responsible for identifying risk within their remit. This is carried out within the respective local GfK companies, by the regional management within the regions and by the sector management team at sector level and, where the risk affects the whole GfK Group, at Management Board level. Subsequently, each risk is assessed using the “probability of occurrence”, “potential extent of damage” and “time horizon” criteria, as depicted in the diagram below.
To assess the probability of occurrence, GfK uses four categories: “very unlikely” (less than 10 percent), “unlikely” (between 10 and 40 percent), “likely” (between 40 and 70 percent) and “very likely” (more than 70 percent).
To assess the potential extent of damage, it distinguishes between different categories of impact on the adjusted operating income or consolidated total income: “low” (less than € 3 million), “moderate” (between € 3 million and € 6 million), “high” (between € 6 million and € 10 million) and “very high”, which is subdivided into three levels (between € 10 million and € 20 million, between € 20 million and € 30 million and more than € 30 million).
Finally, to define the time horizon, it uses two categories: “direct” (the risk could potentially have an impact for the first time from financial year 2016) and “indirect” (the risk could potentially have an impact for the first time from financial year 2017).
Specified criteria are used to determine whether the identified risks are of a material nature. Material risks are defined as those, which have a high or very high potential extent of damage and a quite likely or very likely probability of occurrence. In addition, a risk with a quite unlikely probability of occurrence and a very high potential extent of damage or a risk with an average potential extent of damage and a very high probability of occurrence can be classified as a material risk. As part of the risk management, measures are defined and implemented for material risks to prevent the risks occurring or to significantly reduce the potential extent of damage for GfK in the event of occurrence.
In addition, the Group also analyzes potential opportunities that could have a positive impact on the adjusted operating income or consolidated total income. Opportunity and risk management also involves actively dealing with individual risks or identified opportunities, so that it is possible to react promptly to any changes that may occur. For the purpose of opportunity and risk monitoring, GfK monitors the entire portfolio of opportunities and risks on a continuous basis in order to identify changes in good time. The process is rounded off by clearly structured internal risk reporting.
GfK reports on opportunities and risks on an annual basis in a global risk inventory, and on a monthly basis in regular financial reports. Ad hoc reporting and risk reports may also be issued at any time. The annual risk inventory provides a comprehensive assessment of the GfK Group’s overall opportunity and risk situation. The risk inventory process follows a “bottom up” approach and is depicted in the following illustration.
In principle, all GfK companies are obliged to conduct an annual risk inventory. Companies whose planned external sales for 2015 are higher than € 9 million and those which are of strategic interest for the Group are integrated in the risk inventory reporting. The GfK companies of strategic interest are selected by the Risk Management Committee. In order to obtain a complete picture of the opportunity and risk situation for the Group, risk areas, within which the potential individual risks of the companies are identified and assessed, are defined. After incorporating the regional level of the Consumer Experiences sector in the risk identification and assessment process for the first time in 2014, GfK expanded the process further to incorporate the regional level of the Consumer Choices sector in 2015. It also introduced opportunity identification and assessment at regional level for both sectors for the first time in 2015. After the reported risks and opportunities have been validated and summarized at regional and sector level, GfK holds sector-specific opportunity and risk workshops. The aim is to identify material risks and opportunities across all the individual companies that are relevant at regional and sector level. This ensures that opportunity and risk management is anchored in the relevant regional or sector strategy, and ultimately in that of the Group as a whole. As a result of this bottom-up approach, individual risks can be leveled out or risks aggregated and reassessed at regional and sector level.
The opportunities and risks identified and assessed in the opportunity and risk workshops at sector level are validated, summarized at Group level and presented to the Management Board. The Management Board discusses the aggregated opportunities and risks and, if necessary, carries out a reassessment for the GfK Group. The opportunities and risks of the GfK Group which are identified and assessed in this way are subsequently summarized in an opportunity and risk report and presented to the Supervisory Board.
Changes in the risk position of the individual GfK companies during the year are covered by monthly risk reporting within the regular financial or ad hoc reporting, and are then reported at Management Board level. Every GfK company is obliged to report new risks as well as changes in existing material risks via its monthly risk reports. The Risk Management Committee must be informed directly if the potential extent of damage of the new risks arising during the year is significant and action at sector or Group level is required.
In order to exploit the opportunities arising and successfully exist in the market, GfK must consciously take certain risks in its business. This affects a broad spectrum of opportunity and risk areas. The opportunity and risk assessment is based on an evaluation after the respective countermeasures are implemented. Since financial year 2014, GfK has been using the “net” perspective in its assessments, whereby it evaluates opportunities and risks after the implementation of suitable countermeasures, because this gives a more accurate reflection of GfK’s risk situation. It also applied this approach for the past financial year 2015.
A number of direct risks were identified within the GfK Group, the effects of which may have an impact on financial year 2016. The order shown within the individual risk categories reflects the evaluation of the potential extent of damage and then the assessment of the probability of occurrence. This portrayal therefore provides information for estimating the individual risk for the GfK Group.
Economic risks: In comparison with the previous year, a slight recovery was observed for large economies while the growth rate in new markets and emerging countries slowed down for the fifth year in a row. The main reasons for this slowdown are reduced investment and a fall in commodity prices (particularly oil) as well as volatility in exchange rates and financial markets.
The eurozone continued to report low but stable growth. In particular, countries such as Italy, Ireland, and Spain were able to counterbalance lower growth in Germany thanks to an increase in domestic demand and lower oil prices. Although the easing of monetary policy (low interest-rate policy) continued in 2015, neither corporate investments nor private investments have yet reached the desired level. Meanwhile, inflation rates remained very low for the most part, although they are expected to increase in 2016. Stronger growth in 2016 compared to 2015 will be seen primarily in France, Italy and Spain, while very moderate growth is forecast for Germany. The debt position of some countries continued to be observed critically in 2015 as in the previous year.
Despite a strong second quarter, growth in North America was lower than expected in 2015, primarily because of reduced investment in the Canadian oil sector. A mild recovery is expected for 2016 compared with the previous year, particularly due to lower energy prices and reduced fiscal measures, which should compensate for the fall in exports resulting from the strong US dollar.
As in 2014, the task of the major economies in the past financial year was still to adopt political, monetary, fiscal and structural measures in order to boost growth further. The USA and Japan seem to have largely weathered the crisis. Japan in particular is expected to continue to enjoy a positive growth rate in 2016, having returned to positive growth in the previous financial year. Growth in China, as in the previous year, is still at a high level but is no longer expected to be as fast as in the past. A particular risk for the development of the global economy is posed by the political tensions in Russia, Ukraine and the Middle East as well as the ongoing Greek crisis. In summary, only a very slow recovery from the effects of the economic and financial crisis can therefore be reported.
If global economic growth in 2016 falls significantly below the current International Monetary Fund’s (IMF) forecast of 3.4 percent, or if there is a threat to the stability of individual currencies, that are significant for the global economy, one must expect that this will have consequences for GfK’s business. The GfK Group is globally positioned and has a very high level of geographical diversification, so it should be able to adopt appropriate countermeasures if the economies of individual countries slow down again. Certain measures – such as restructuring and cost reduction programs – that have been initiated, and greater risk awareness (promoted by training courses) will also help in this regard. Risk assessment after countermeasures as in the previous year: likelihood of occurrence is unlikely; potential extent of damage is high.
Risks in connection with portfolio measures: In order to succeed GfK needs to achieve its strategic aims. To this end, it considers acquisitions, participations in joint ventures, restructuring and disposals in order to optimize the Group portfolio. Risks in connection with disposal projects are listed as separate risks in the risk portfolio.
For projects that are intended to achieve strategic aims, numerous different kinds of risks may arise. As well as operating risks (integration of staff or technology), financial risks (failure to fulfill expected cost-saving potential), legal risks or compliance risks (resulting from a minority stake in a joint venture, for example) may occur. Ongoing financial obligations relating to a business that has been sold, such as obligations arising from property rights, warranties, indemnification or other financial obligations, may also jeopardize the achievement of strategic aims. Thanks to its experienced Mergers and Acquisitions team and Legal team as well as the assistance of external experts, GfK is able to identify risks early and can adopt appropriate measures. These measures primarily include comprehensive due diligence processes, proven procedures for postmerger integration, and monitoring of thresholds, both for acquisitions and for disposals.
The future value of acquisitions and resulting assets depends on the profitability of cash generating units. If the current business trends in acquired subsidiaries do not match expectations, or if lower growth rates are forecast, an impairment loss risk may occur. Among other things, budget values from the Group’s internal reporting are used for assessment purposes. Risks arising from the likelihood of occurrence and changes in market circumstances may result in an impairment loss that needs to be recognized in the income statement but is not a cash item. Depending on the intangible asset, the operating result may be affected. Countermeasures such as strict monitoring and management of budget content, and sensitivity analysis carried out during the year, make it possible to monitor this risk. The risk assessment for the 2015 financial year was the same as that of the previous year. Risk assessment after countermeasures: likelihood of occurrence is likely; potential extent of damage is very high (greater than € 30 million).
Risks in connection with strategic planning and implementation: Big Data, new analyses and methods, and improvements in reporting are just a few of the many challenges that GfK has to face on a daily basis in the industry. In order to stay ahead of these trends and of the competition, GfK needs to consistently promote innovation. In this regard, initiatives and programs may be decided upon during the strategic planning process which are deemed necessary in the short term but could become obsolete in the medium term. This may happen, for example, because of new possibilities and changes in data collection, data availability and method research. Furthermore, the introduction of strategic initiatives could give rise to an inherent risk that the desired financial framework for sustainable and profitable growth will not be possible. Hence, GfK added this risk to its risk portfolio for the past financial year. GfK counteracts this risk with a careful planning process that includes detailed market analysis and competition analysis, continuous monitoring and high-quality project management based on uniform GfK standards applicable across the entire group. Risk assessment after countermeasures: likelihood of occurrence is very unlikely; potential extent of damage is high.
Network and data security risks: This category specifically concerns risks relating to data security, Internet security and IT security. The continuing transformation process increases the level of centralization and standardization of the IT infrastructure (business applications and sites) within the Group. The high level of complexity of this process and the high levels of dependency between the systems give rise to process risks, which are counteracted by stronger program management, critical point analysis and careful design of system architecture. Within the GfK network, GfK processes data and information which could attract the interest of intelligence services or third parties with criminal intentions. As in the previous year, GfK gave top priority to the implementation, maintenance and further development of security measures to protect information systems and the data stored in them. In order to make itself less vulnerable to these risks, the GfK group has adopted various measures. For instance, in 2014, it implemented a new Information Security Management System (ISMS) based on ISO 27001, which defines IT security policy for the entire Group and sets binding IT security standards based on industry best practice. This guarantees a uniform approach to the regulation and management of IT security risks, from the top down to every local subsidiary. Furthermore, within its Risk Management Guideline (F18 Risk Management Manual), the Group introduced a guideline on the IT risk assessment process. This was derived from ISO 27005, and thus ensures that IT risks are collected, assessed and handled in a way that is compatible with the ISMS that has been introduced. The measures adopted by the Group also include regular external tests, automatic monitoring of applications and systems in order to identify attacks early, the highest possible levels of data security and operational reliability at the central data center site in Nuremberg, and ongoing staff training courses to continuously increase awareness of data protection and data security. Nevertheless, potential residual risks arising from information technology and its applications cannot be completely ruled out. All of the above-mentioned measures, as well as the GfK Group’s IT strategy and the IT security measures implemented throughout the Group, lie within the remit of the Global Head of Information Technology, who reports directly to the CEO. Security issues are resolved by cooperating with the IT security specialists in the GfK companies both domestically and abroad. Furthermore, IT audits carried out by IT specialists are an integral part of the Internal Audit remit.Risk assessment after countermeasures: likelihood of occurrence is likely; potential extent of damage is moderate.
Because of the harmonization which has so far been successfully implemented in key countries and the roll-out within the framework of the Roll-out of Enterprise Applications and Content Harmonization (REACH) project, the risk of inadequate interaction between systems that need to be connected, which was mentioned in 2014, was removed from GfK’s portfolio in the past financial year.
Risks due to transformation: Since 2012, GfK has successfully promoted the strategy “Own the Future”. With the slogan “Getting it done”, 2014 was the year of implementation. In 2015, we added “Shape for Growth” to our strategy in order to provide our clients with unique and relevant market and consumer information, combined with the expertise of two sectors. GfK is concentrating on digital products and services and has invested heavily in new technology and new possibilities for combining and enriching data. The risks associated with this transformation process arise primarily from the possibility that the opportunities offered by this strategy will not be fully exploited. Through successful global measures such as proactive change management on the part of the Management Board, an open and global communications policy, continuous and targeted staff development and training measures, the steady improvement of the international network, and a focus on multi-year contracts and relevant markets, GfK was able to reduce the risk compared with the previous year in terms of potential extent of damage. Risk assessment after countermeasures: likelihood of occurrence is unlikely; potential extent of damage is low.
Risks in connection with product launches: As a full-service provider with a global network and a comprehensive range of studies and analyses, GfK is superbly positioned both to deal with more intense global competition in the industry and to benefit from positive trends in the emerging markets. Because of increasing globalization and digitalization as well as changes in consumer behavior, companies need more and more advice concerning their marketing decisions. Thus, obtaining information on the sales potential of a product or service in different markets and countries is becoming increasingly significant. After all, the only way to make large quantities of data valuable, and to enable the creation of forecast models that will ensure business success for GfK’s customers, is to identify connections, meanings and patterns such as those between marketing and technology, between media and advertising or between planning and market data. At the same time, consumers increasingly consult new media to help them to make buying decisions, more and more of which are determined by ecological criteria. The areas mentioned also harbor the risk for GfK that it will not be able to meet increased needs in terms of consulting and sales services to a sufficient extent or with the correct standard of commercial excellence, that it will not implement marketing campaigns expediently or that it will not be able to offer standard products that provide its customers with a comprehensive and ideal basis for their decisions. Hence, it is very important for GfK to pool its tasks within consulting projects and to focus strategically on a targeted sales process. In this regard, GfK staff receive continuous training on innovations in the product and service portfolio in order to develop their expertise. By improving sales planning, GfK can transparently manage and monitor product launch projects in such a way that it can react in good time if there are any delays. The pooling of tasks in global competence centers is also part of this. The risk assessment has not changed compared with the previous year: likelihood of occurrence is unlikely; potential extent of damage is low.
Risks generated by advances in technology: Unlike in the previous year, when it was classified as an indirect risk, this is now assessed as a direct risk. GfK’s own figures show that millions of devices are being used round the clock all over the world, and that the latest network technology is set as standard. Increasing digitalization, the spread of the (mobile) Internet and the convergence of devices are modifying user behavior. As a result, consumers are making more and more buying decisions with the aid of mobile media or social networks, and thus buying behavior is changing all over the world. The number of points of contact (which means the places, times and ways, in which companies and brands come into contact with customers) and the ways, in which buying decisions are made, are constantly changing. However, companies still need to understand their customers, and therefore new methods and technology are required in order to collect market research data in the digital age. One of GfK’s most important tasks is to develop innovative new products and services as well as new market research methods. One can see the associated risks that the technical implementation of such new products as for instance Mobile Insight/Location Insight can not be developed quickly enough or at an appropriate cost to accommodate changes in market conditions. As in the previous year, as an innovative company with research and development activities, the GfK Group currently sees no substantial risks arising from large, cost-intensive innovation projects. It monitors potential risks associated with these projects through regular reporting and active project management. Moreover, its staff receives project management and negotiation training, in which they learn how to provide GfK clients with reliable and high-quality advice regarding innovative new products and services and market research methods. Thanks to the countermeasures listed here, this risk has been reduced compared with the previous year: likelihood of occurrence is unlikely; potential extent of damage is low.
Currency risks: As a global company, the GfK Group is exposed to currency risks.
The currency translation risk results from the conversion of the balance sheets and income statements of GfK companies outside the eurozone into euros, the reporting currency of the GfK Group. One example of this would be the revaluation effects arising from GfK SE’s cash pool liabilities in foreign currency (USD, GBP or CHF) with respect to its subsidiaries, which could have a negative impact on the financial result. These translation-related effects are not hedged and are posted under other operating income in the GfK consolidated financial statements. Carrying amounts of participations are currently covered only to a small extent by natural hedges. To do this, financing is provided in the currency of the relevant company, so as to reduce the effects of currency fluctuations. In order to limit volatility in the income statement relating to the reporting date valuation of currency liabilities and receivables, where possible, GfK uses hedge accounting according to the applicable regulations. The risk assessment after the described countermeasures is unchanged compared with the previous year: likelihood of occurrence is very likely; potential extent of damage is moderate.
The transaction risks result from the sale and purchase of goods and services that are not invoiced in the local currency of the respective GfK unit. Due to high volume of local business, all GfK operating companies generate most of their income and expenses in their local currency, and the currency risk of the GfK Group’s operations is therefore restricted. However, because of internal cross-accounting of international contracts, some currency effects may arise which can only be partly hedged. Group guideline (F14 Treasury Policy) requires all GfK companies to monitor their external currency risks and to hedge against currency fluctuations for projects of or exceeding a certain size and duration. As a rule, GfK provides in-house financing for its subsidiaries in their local currencies. The Group Treasury hedges the resulting currency risks centrally, partly by using financial instruments when economically viable. Hedging transactions generally have a maximum term of 18 months. The offsetting effects of the underlying transaction and the currency hedge are identified in the income statement. The risk assessment is also unchanged compared with the 2014 financial year: likelihood of occurrence is unlikely and potential extent of damage is low.
Liquidity risks: The liquidity risks of the GfK Group include potentially being unable to meet its financial obligations, for example the repayment of financial debt, or of the ongoing capital requirements of its operating business.
In March 2015, GfK SE terminated the variable part of the € 40 million bonded loan. At the same time, this sum was fully refinanced by a new € 90 million bonded loan with terms of three and five years. GfK SE also took out various bilateral bank and forward loans amounting to € 70 million (with a term up to 2021) and a new € 130 million bonded loan with a term of 12 years in 2015. The payment dates of these financial instruments are February and March 2016 and therefore are not included in the financial liabilities.The funds from the bilateral bank loans and bonds was used to replace short-term bank loans, and it will serve to refinance our € 200 million corporate bond in April 2016 .In May 2015, part of the bond was repurchased with a total volume of € 13,833 million. As a result of these transactions our maturity structure and future interest expenses have improved considerably. By year-end, the syndicated credit line comprising € 200 million had not been utilized. Last year, this credit line was prematurely extended to 2020. In total, on the reporting date, the unutilized credit lines amounted to € 286 million (2014: € 280 million). The financing elements mentioned and an existing cash holding as at the reporting date of € 129 million (2014: € 93 million) assure the Group’s liquidity position. The covenants agreed for the syndicated credit facility, and the bonded loans were all met in every reporting period in 2015. A liquidity risk may also occur if financial institutions with which GfK works become insolvent. This risk, known as an asset management risk or market-to-market risk, is also included in this risk position. In order to counteract this risk, the Group makes financial investments and derivative transactions over €100,000 only with banks with an investment grade of at least BBB–. GfK also introduced a Treasury Middle Office in the Group Treasury division. Here, the focus is on dividing incompatible tasks between System Administration, Trading and Settlement, and Trading and Risk Monitoring. The risk assessment after the described measures shows a slight increase in potential extent of damage compared with the previous year: likelihood of occurrence is very unlikely; potential extent of damage is moderate.
Interest rate risks: At GfK, interest rate risks mainly relate to financial liabilities. As of December 31, 2015, GfK SE had hedged around 86 percent (2014: around 90 percent) of its financial liabilities through fixed-rate agreements by placing the GfK bond with an interest rate of 5 percent, the bilateral fixed-rate loan agreement and the borrower’s note loan. As at the reporting date, the interest rate hedges had a negative fair value of € 171 thousand (2014: –€ 20 thousand). GfK SE derivative financial transactions and investments are only conducted with reputable German and international banks with an investment grade rating. In addition, it reduces any possible credit risk by spreading the transactions between several banks. To hedge an intercompany foreign currency loan of our Brazilian subsidiary in US dollars, a cross-currency interest rate swap was concluded in 2014 to hedge interest rate and foreign currency risks. On the reporting date this derivative was valued with a positive market value of approximately € 4.8 million. Risk assessment after countermeasures is unchanged compared with the previous year: likelihood of occurrence is very unlikely; potential extent of damage is low.
Tax risks: Naturally, accounting and optimization of the Group’s structure for tax purposes will generate tax audit risks for an international concern. By introducing Group guideline F21, Transfer Pricing Guideline, with effect from January 1, 2014, GfK took an important step towards the provision of transfer pricing and documentation for all relevant business transactions. It adopted further measures in 2015, developing a tax compliance organization and establishing processes and controls. Hence, the likelihood of occurrence has fallen slightly compared with the previous year. Risk assessment after countermeasures: likelihood of occurrence is very unlikely; potential extent of damage is low.
Continuity of IT systems: As a result of a large number of transformation processes, centralization of IT systems and increased use of the global IT infrastructure, among other things, existing systems were in the past financial year substantially modified, extended and altered to meet global requirements. Centralization does not in itself mean that risks of failure are likelier to occur, but it does mean that the potential extent of damage is greater in the event of failure. This makes it all the more important to quickly remedy any malfunctions of this kind within the systems involved. After all, centralization means that system failures would not only affect individual GfK companies, but could also potentially have an impact on parts of the GfK Group. For example, if GfK’s most important business applications or the underlying infrastructure were affected by total system failure (which may also be caused by fire or power cuts) for several days, this could result in substantial losses in terms of sales, customers could assert claims for damages, or it could harm GfK’s reputation. In order to prevent IT system failure, GfK keeps a list of critical components in order to monitor their availability and to replace any malfunctioning components with other components.
In financial year 2015, it consolidated its regular reviews of back-up processes and carried out risk assessments in order to identify weak points in the infrastructure. Furthermore, it expanded life cycle management for global applications, created emergency procedures and took action to prevent denial of service attacks that could block the availability of online services for certain periods of time.
Because GfK increasingly uses strategic suppliers with a global presence, this risk also includes dependency on third-party systems, such as telephone, network and cloud service providers as well as software suppliers. In terms of purchasing, GfK has adopted measures to improve and standardize purchasing processes, to monitor the market, to select better service providers and to retain them more effectively.
Moreover, in order to reduce the extent of damage in the event of fire or power cuts, it has taken out appropriate insurance policies. In 2014 and 2015, it also introduced and implemented staff training courses to raise awareness regarding hazardous situations (such as the outbreak of fire), as well as the use of turnstiles and the new security systems on entry doors, among other things.
However, despite all the measures listed, the risk has to be classified as very high in terms of potential extent of damage, unlike in the previous year. Risk assessment after countermeasures: likelihood of occurrence is very unlikely; potential extent of damage is very high (more than € 30 million).
Risks in connection with product groups: GfK does not only collect vast quantities of data every day from a very wide range of sources and in extremely varied fields and dimensions, but it also measures market sizes and trends for its clients all over the world. In particular, the fact that it has a global network and its own extensive database really makes it stand out. In financial year 2015, its aim was to expand its Media Measurement business, which involves measuring TV, radio, print media, and cross-media audiences. Using innovative technology, Media Measurement offers information services on audiences, intensity and type of use of media and media products and services as well as comprehensive insights into media consumption in a dynamic media market, and information on their acceptance in different countries. Every new country, in which a media measurement system is set up, presents different technical requirements and challenges. Moreover, political and economic developments are difficult to predict in some regions. Among other things, risks arising from loss of reputation may also occur. A further risk can be found in the potential failure to gain additional TV networks. GfK can reduce these risks through rigorous project and resource management and weekly status reports from the local management in the reporting line to the Global Head of Media Management, additional support at management, project and operational levels, and a greater focus on data quality control processes. The risk assessment is unchanged compared with the previous year: likelihood of occurrence is unlikely; potential extent of damage is moderate.
Data quality risks: GfK has many years of experience in the collection and analysis of data. Using innovative technology and scientific methods, GfK generates intelligent information out of large quantities of data in order to provide its clients with reliable and relevant market and consumer information. As well as interpreting data from one of the world’s largest retailer networks, it also analyzes the results of ad hoc studies and consumer panels, so that it can use this information to develop an overall picture of the market. Because it is impossible to completely rule out certain residual risks concerning data quality (resulting from technical or human error), particularly those relating to data acquisition, data processing and data interpretation and analysis, this risk is also closely associated with a possible reputation risk for GfK. This may be caused by system errors, process changes or specific data configurations that result in the provision of incorrect information and consultancy services. Therefore, in order to prevent this, GfK implements checking algorithms that are relevant to the system, as well as automatic quality controls, and it continuously improves its current quality measures and auditing processes. In addition, quality checks are carried out at suppliers’ premises, and regional coding hubs are being expanded further. Furthermore, GfK introduced the quality program “Innovating our Core” in 2015. It can also proactively counteract risks through training courses and by making improvements in the area of procurement. Compared with the previous year, the risk increased slightly in terms of likelihood of occurrence. Risk assessment after countermeasures: likelihood of occurrence is unlikely; potential extent of damage is moderate.
Data acquisition risks: In order to be able to provide its clients all over the world with important insights concerning local markets in more than 100 countries, GfK collects data from wholesalers, retailers as well as panel and sample respondents concerning their sales trends, buying decisions and radio and TV usage. As in the previous year, GfK sees a risk that these data suppliers may no longer be prepared to provide data because of concerns about data protection, among other things, and that GfK may not be able to adequately replace this data. By using alternative recruitment channels (for instance, by cooperating with agencies for field surveys), by continuously optimizing its recruitment of panel members, and by researching new data collection techniques, GfK developed appropriate emergency concepts. Despite the measures that it has introduced, GfK deems the risk to be slightly higher than in the previous year in terms of potential extent of damage, whereas the likelihood of occurrence remains unchanged. Risk assessment after countermeasures: likelihood of occurrence is unlikely; potential extent of damage is moderate.
Legal risks connected with data protection: Particularly because of discrepancies between the legal requirements of some countries, such as Russia and the USA (Safe Harbor), the risk arising from increased public awareness and sensitivity concerning data protection and data security is a top priority for GfK, just as it was in the previous year. In order to raise awareness of compliance and data-protection-related issues further, GfK provides a CEO webcast on its intranet (gNet), which is accessible to all staff and explains the “tone from the top” on these issues. It also implemented targeted in-house training measures in financial year 2015. Furthermore, the internal data protection guidelines and ethical guidelines were extended considerably in 2013. GfK’s other measures involve providing a process definition for the use of cloud systems, continuously expanding the IT architecture and data management, consistently monitoring changes in the law and carrying out internal audits. Nevertheless, it is impossible to completely rule out a certain residual risk of possible infringements. Compared with the previous year, the likelihood of occurrence has increased, whereas the potential extent of damage has fallen. Risk assessment after countermeasures: likelihood of occurrence is likely; potential extent of damage is low.
Risks in connection with divestment projects: The risks arising from divestment projects have now been added to the risks in connection with restructuring measures from the financial year 2014, which have been renamed accordingly. The market research industry is still under increasing pressure from competition, and its services are still subject to pricing sensitivity. By improving and further expanding its productivity program, which includes divestment projects as well as restructuring projects, it is expected that GfK will be able to further consolidate and increase its competitiveness. At the present time, risks relating to divestment projects primarily affect the Consumer Choices sector, and one can see that these risks lie in the selection of suitable potential buyers or the pursuit of alternative exit strategies within a specified time frame and cost framework. GfK can counteract these risks by implementing further productivity measures in the area of purchasing, by creating global service centers in specific regions, by restructuring unprofitable units, by adopting initiatives to improve data quality, by improving the margin, and by making staffing adjustments. Therefore, the potential extent of damage has been reduced compared with the previous year. Risk assessment after countermeasures: likelihood of occurrence is unlikely; potential extent of damage is low.
Competitive risks: The term “competitive risks” refers to a further increase in competition in the market research industry. This increase is the result of simplified handling of large quantities of data, and of easier and faster data acquisition, including acquisition through cooperation. Furthermore, the advent of local market research companies and individual specialized niche providers has only intensified the level of competition. Increased pricing pressure, which is closely associated with the above-mentioned conditions and is a result of intensifying competition, must also be recognized as a sales market risk. Moreover, there is continuous competition for the market research budgets of large global groups. This risk category also includes the risk that, because of pricing pressure, GfK will have to pass on the efficiency gains that it has generated (for instance, through cost savings) directly to its customers. GfK has positioned itself as a high-quality global market research company that uses uniform methods. Hence, GfK sees an opportunity to offer its customers excellent added value, and thus to stand out clearly and successfully from the competition by using its global network and further expanding its future-oriented innovation projects. As an additional measure to counteract these risks, GfK is developing its contract management further towards framework contracts. Competitive analysis, negotiation training, faster data delivery and improved visualization also enable GfK to actively counteract these risks. In addition, thanks to the cost-saving measures that it has adopted, GfK is well-equipped to remain successful in spite of the prevailing competitive conditions and the aggressive pricing strategies of its rivals. Therefore, the risk assessment is unchanged compared with the previous year: likelihood of occurrence is likely; potential extent of damage is moderate.
Legal and compliance risks
Compliance risks: As part of the established opportunity and risk management system and the internal control system, GfK carries out continuous monitoring to check whether additional risks have arisen for which it may need to adopt countermeasures. Although it has firmly established corporate guidelines (Code of Conduct, corporate values) and internal guidelines, there is still a certain residual risk that individual GfK employees will disregard these guidelines or will not fully comply with them. Compliance risks may arise from breaches of corporate guidelines or criminal behavior. GfK is aware of this risk and has introduced and implemented various measures, such as continuous staff training courses and regular internal audits. In 2015, in order to further raise awareness among all its staff regarding ethical behavior and compliance, GfK implemented a comprehensive online training course which was mandatory for all staff, after which they all had to complete a questionnaire. Initially, this e-learning platform only dealt with the Code of Conduct, but in the following years it will be expanded to include significant Group guidelines. In addition, by introducing new processes and reviewing and adapting existing ones, GfK helps to ensure that compliance risks are identified early. Thanks to the successful implementation of countermeasures, the potential extent of damage in this risk category was reduced compared with the previous year. Risk assessment after countermeasures: likelihood of occurrence is very unlikely; potential extent of damage is high.
Legal risks in connection with contractual penalties and liabilities: This risk category was added to the GfK Group’s risk portfolio for the first time in the past financial year. It includes the failure to fulfill customer contracts in accordance with the contractual provisions and the resulting contractual penalties and liabilities. There could be many different reasons for this. As a countermeasure, GfK could, for example, negotiate lower contractual penalties if possible. Risk after countermeasures: likelihood of occurrence is very unlikely (approaching zero); potential extent of damage is, however, very high (greater than € 30 million).
Legal risks in connection with fictitious self-employment of freelancers and interviewers: As in 2014, the issue of “fictitious self-employment” was discussed in the past financial year. This term refers to the risk that interviewers and other freelancers working for GfK must be classified as employees, which would result in additional employment expenses. For example, GfK uses freelancers to carry out various interviews. In recent years, social security authorities have made increasing efforts to check whether freelancers and other independent workers are actually employees. GfK continuously reviews its employment relationships and is careful to comply with the legal provisions. In this regard, GfK is currently involved in legal proceedings in various countries. Accordingly, it has taken appropriate precautions to proactively counteract the relevant risk in these and other countries. In addition, for new projects involving freelancers, GfK is bringing its internal processes and contracts in line with the legal requirements in order to minimize any tax and social security risks, that may potentially arise, and to ensure compliance with social security legislation in the relevant countries. It also increasingly uses service agencies. Risks arising from cases of damage and from issues of liability are either covered by local or Group insurance policies or sufficient provisions that have been set aside for them, although potential residual risks cannot be completely ruled out. Although GfK has implemented appropriate measures, it deems the risk to be unchanged compared with the previous year. Risk assessment after implementation of country-specific countermeasures: likelihood of occurrence is very unlikely; potential extent of damage is low.
The following indirect risks which could have an impact for the first time starting from the financial year 2016 have been identified within the GfK Group. Within the individual risk categories, the risks are presented primarily in order of assessed potential extent of damage, and risks with the same potential extent of damage are listed in order of assessed likelihood of occurrence. This gives an indication of the assessment of the individual risk for the GfK Group.
Risks in connection with cross-sector initiatives: The success of cross-sector initiatives, such as the expansion of the digital product and service portfolio, depends on successful cooperation at sector and regional level and on an efficient exchange and correct composition of skills within the GfK Group. In this way, the Group expects to achieve synergy effects while simultaneously expanding global cooperation within the GfK network. In this context, risks may arise from the failure to achieve set aims or to comply with a set schedule or from an unsuitable composition of skills within GfK. In order to counteract this risk of failing to completely fulfill the stated potential or to fully achieve the set aims, GfK took more action to prevent or minimize risk. For instance, it continued to promote successful cooperation in the cross-sector development of the product GfK Crossmedia Link, which is a benchmark for other projects. GfK Crossmedia Link is a global single-source panel that measures consumer behavior through a range of media, such as TV, PC, tablet and smartphone. Thanks to the countermeasures adopted, the risk was reduced further compared with the previous year. Risk assessment after countermeasures: likelihood of occurrence is unlikely; potential extent of damage is low.
Financial risks: Refinancing on the capital markets is a very important tool for GfK SE but it also entails risks. The company complies with the regulations governing the prohibition of insider trading or various notification and communication obligations in order to avoid a general loss of reputation and therefore prevent a possible deterioration in the share price. This includes efficient communication based on investor and analyst interests, with the aim of promoting the trust of investors, especially through permanent transparency. In addition, the risk of dependency (refinancing risk) on one group of investors is minimized through diversification of financing instruments. In addition, credit agreements were negotiated on improved terms in the past financial year. Other than the shareholders, GfK’s current group of investors includes a large number of national and international banks (banking syndicate) as well as numerous promissory note investors who are not just from the banking industry (e.g. insurers, pension funds). The risk in the potential extent of damage has slightly increased as compared with the previous year. Risk assessment after countermeasures: likelihood of occurrence is very unlikely; potential extent of damage is moderate.
Adjustment of the competence portfolio: At a time when our clients are confronted with increasing amounts of data and are required to take decisions quicker than ever before, both new and existing providers are exploiting the opportunities offered by digitalization and globalization. Increasing digitalization is bringing new challenges in terms of methods and technologies for gathering market research data. To be able to fully utilize the resultant growth potential, GfK must build up and develop comprehensive skills and expertise amongst its staff in order to be able to keep up with the changing requirements. A corresponding successful adjustment of the underlying organizational structure is necessary, particularly that of management positions. GfK is countering this risk by defining and implementing globally integrated employee strategies. Through ongoing training and qualification programs, staff skills and expertise are continuously adapted to the advancing technological progress, and they are familiarized with innovations. Particular value is attached to identifying and acquiring the right talent for all manner of new portfolio application areas and furthering them accordingly. Attractive career paths are being developed and a varied qualification and training program is being continuously expanded. If, however, a sufficient number of talented people cannot be recruited for GfK, we may also consider entering into partnerships or outsourcing the company’s services in order to be able to respond to the risk accordingly. Risk assessment after countermeasures is unchanged compared with the previous year: the likelihood of occurrence is unlikely and the potential extent of damage is moderate.
Risks in connection with sales market consolidation: GfK’s top ten clients accounted for around 16 percent of total consolidated sales (previous year: 15 percent), GfK’s dependence on individual key accounts at Group level is still relatively low. However, this dependence exists in some countries. Furthermore, the process of consolidation, where clients are concerned, is set to continue, whereby individual market research budgets are often combined and the total volume reduced. To counter this risk in the past financial year, GfK further expanded and strengthened its long-standing key account relationships by appointing Key Account Managers and through continuous client relationship management, while continuously expanding its new, qualitatively high-end product and service portfolio as a value driver for its clients. Therefore, in GfK’s view, the extent of damage is relatively high as compared to the previous year. Risk assessment after countermeasures: likelihood of occurrence is very likely; potential extent of damage is moderate.
Sales market risks: This risk arises from a reduction in the market research budgets of GfK’s clients due to economic or macroeconomic developments as well as technological change in terms of digitalization, resulting in lower barriers to entry into the market, particularly by competitors outside of the industry. In the past, the development of the market research industry has virtually mirrored that of the global economy. At the moment, the risk of a renewed descent into global economic crisis (as in 2008/2009) or the break-up of the eurozone cannot be totally excluded. However unlikely it may be, in a scenario of this nature, the global economic situation should worsen significantly and severely affect the business of GfK clients; this could also have an impact on GfK. Some clients affected by the current uncertainty caused by macroeconomic factors in their major export markets have been compelled to implement cost-saving programs and to reduce their market research budgets. GfK is actively responding to this risk by continually developing its portfolio of innovative products to improve its clients’ competitive strength. As in the previous year, innovative products, the range of individual modules as well as customer relationship management and data quality have been steadily improved and further extended through cost-saving programs. Therefore, as compared to the previous year, this risk could be classified as indirectly identified, rather than a directly identified one. Risk assessment after countermeasures (unchanged compared with the 2014 financial year): likelihood of occurrence is very likely; potential extent of damage is moderate.
The following indirect and direct opportunities have been identified within the GfK Group. The order shown within the individual opportunity categories reflects the evaluation of the opportunity potential. This portrayal therefore provides clues for estimating the individual risk for the GfK Group. The identified opportunities and risks of future developments were categorized and grouped. A potential impact on the adjusted operative income highlights the importance of individual opportunities and risks, categorized as follows: low, moderate, high, and very high (I–IV). The individual opportunities and risks were categorized into seven different areas.
Opportunity and risk profile of the GfK Group:
Opportunities connected with economic development: As described in section 11.2.1 (“Identified direct risks”), in comparison with the previous year, a slight recovery was observed for large economies. Moderate growth is currently forecasted for Germany, whereas stronger growth is expected in countries such as France, Italy and Spain. This gives potential opportunities to GfK given the global positioning and very high level of diversification of the GfK Group. Should the growth in the global economy rise to 3.4 percent in 2016, as forecasted by the International Monetary Fund (IMF), additional opportunities for the business of GfK will arise. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: significant direct business possibilities with a possible, moderate positive opportunity potential.
Expansion potential of the product and service portfolio: Increasing digitalization, the spread of the (mobile) Internet and the convergence of devices are modifying consumer behavior. Thus, buying behavior is changing worldwide. However, faster development opportunities and availability of data pose new challenges to the market research sector, which may well prove to be opportunities. One of GfK’s most important tasks is to develop innovative new products and services and new market research methods. In addition, GfK is focusing sharply on increased efficiency, improved strategic pricing and greater advancements in the point-of-sales measurement business. In connection with expansion potential additional opportunities can be generated on the market through increased innovative capability in the roll-out of cross-sector products, such as GfK Crossmedia Link. Opportunity assessment (unchanged as compared with the previous year): significant direct business possibilities with a possible, moderate positive opportunity potential.
Cross-sector cooperation: GfK sees intensification of the cross-sector cooperation between Consumer Experiences and Consumer Choices as an additional opportunity to extend its selling options and utilize synergy effects in the medium term. A close collaboration and a successful exchange of best practices between the Group’s divisions as well as the right mixture of skills should guarantee the supply of perfectly matched solution concepts from one service portfolio. Constant refinement of the offering, modern research methods and long-term client relationships constitute a solid basis for success. This is complemented by the valuable databases and the comprehensive, high-quality panels. Recent examples of successful, cross-sectoral cooperation with subsequent market launch of GfK Experience Effects on Demand, GfK Brand Vivo on Demand and the launch of GfK Crossmedia Link in other countries such as Italy and the Netherlands. Opportunity assessment: in comparison with the previous year, this opportunity was classified as indirect rather than direct, and the positive potential of this business opportunity fell from medium to low.
Development of the business position: GfK is investing heavily in new digital technologies and new methods to connect and enhance data. With the aid of newly developed methods and technologies, large data volumes from all kinds of sources can be analyzed. As compared with the previous year, GfK see this as an opportunity to offer convincing products and services based on a comprehensive innovation offensive. The future potential arising from the new technical possibilities should be utilized on the market consistently through continuous expansion of data processing processes on the market as well as the use of a global network, thereby clearly and successfully distinguishing itself from its competitors and increasing client loyalty. The Group sees a direct opportunity in the targeted development of the business and a rapid roll-out of products in promising growth regions. Further growth is to be generated particularly in Latin America, Asia and the Pacific as well as in Africa and Eastern Europe by rolling out tried and trusted products and services to countries not yet covered. Opportunity assessment: significant direct business opportunities with a possible medium positive opportunity potential.
Commercial excellence and the role of the market research industry: Additional potential in the future role of the market research industry is created through a global and digital market environment. This opportunity is, compared to last year, still in GfK’s potential opportunities. In particular, by using and developing data merger systems and combining this data with various media measurements, especially in real time, new possibilities are opened up. Hence, market research as a reliable partner and supplier of high-quality consumer information can represent an even more important service for our clients. To be able to further establish GfK as a leading market research company, the company consistently pursues the strategy of increasing commercial excellence. This includes identifying additional growth areas, coming up with measures for optimizing the use of resources, designing more efficient processes and developing processing and management tools. Opportunity assessment: significant indirect business opportunities with a high positive opportunity potential.
Currency fluctuations and currency translation opportunity: As a global company, GfK Group is exposed to currency fluctuations. This opportunity results from the upward potential of currency translation related to foreign exchange effects. The currency translation risk results from the conversion of the balance sheets and income statements of GfK companies outside the eurozone into euros, the reporting currency of the GfK Group. This currency translation opportunity has been in GfK’s opportunity portfolio for the financial year 2015. Opportunity assessment: significant direct business opportunities with a moderate positive opportunity potential.
Financial opportunity and interest rates: By replacing the corporate bond with an interest rate of 5 percent and by entering into loans with a lower interest rate, GfK sees significant direct business opportunities with a moderate positive opportunity potential. This opportunity has been included in GfK’s opportunity portfolio.
Tax optimization: GfK continues to improve the tax structure in order to initiate corresponding measures within the bounds of the legal possibilities. This is carried out via ongoing monitoring of the legal, global and local environment and adaption to GfK’s situation. Opportunity assessment (unchanged as compared to the previous year): significant direct business possibilities with a low, positive opportunity potential.
Opportunities relating to product groups: Further expansion of the Media Measurement business in the area of monitoring TV, radio, print media and cross-media audiences was the motto of the year 2015 at GfK. Traditionally, TV and radio measurement is characterized by long-term client contracts. Through intensive long-standing cooperation with its clients, GfK has acquired specific knowledge. In view of the pleasing market development, particularly due to the use of new technologies for recording real-time data as well as strengthened digital media measurement area, GfK sees the competitiveness of the media measurement product geared to win further contracts, especially in syndicated business. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: significant indirect business opportunities with moderate positive opportunity potential.
Legal opportunities relating to the data protection: Increased public awareness and sensitivity with regard to data privacy and data protection continues to be the highest priority for the GfK Group. By storing the collected data mainly in Germany and a partially pioneering role in the industry, GfK sees direct opportunity to be more reliable for its clients as its competitors who store the data in less secure countries. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: significant direct business opportunities with a low positive opportunity potential.
Commercial excellence in terms of data quality: Due to its many years of experience in the collection and analysis of data, GfK is a trusted supplier of reliable, relevant and intelligent market and consumer information. Due to continued optimization and improvement of internal data collection processes, GfK sees the opportunity to continue to successfully position itself as qualitatively high-end global market research company that distinguishes itself from its competitors. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: significant direct business opportunities with a low positive opportunity potential.
Opportunities relating to data collection: GfK delivers a unique combination of consumer, retail, and media data, which are interconnected using scientific methods and innovative technologies. To be able to deliver this data to our clients, we collect consistent and globally important findings on local markets in over 100 countries regarding their use of radio and television, as well as their sales trends and purchasing choices. GfK believes that the use of alternative recruitment channels as well as continued optimization of the recruitment of panel members and investigation of new techniques of data gathering provide a cost-saving opportunity. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: a significant direct business opportunity with a low positive opportunity potential.
Commercial excellence and adjustment of the expertise portfolio: Increasing digitalization and globalization present GfK with increased growth potential. Through ongoing training and qualification programs, the skills of employees are continuously adapted to the advancing technological progress. As a reputable employer, GfK attaches particular importance to identifying and acquiring the right talent for all manner of new portfolio application areas and furthering them accordingly. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: a significant direct business opportunity with a low positive opportunity potential.
New market potential/competitive advantages: Due to the changed market and competitive conditions, GfK believes that a focus on globally defined product groups for all kinds of industries, especially with regard to the traditional market research, will provide an opportunity to significantly increase the Group’s market share. Moreover, the increasing rate of change in the industry, the continuous analysis of corporate strategy with regard to competitive environment as well as understanding of evolving client needs provide additional opportunities for GfK. Opportunity assessment: significant indirect business opportunities with a low positive opportunity potential.
Legal and Compliance segment
Commercial excellence and compliance: The GfK Group sees additional indirect opportunity potential through continued expansion and implementation of internal guidelines as well as ongoing training. Because processes tend to get standardized and error sources thus get reduced, internal and operational processes are likely to be improved and optimized. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: a significant indirect business opportunity with a low positive opportunity potential.
Legal and strategic opportunities: GfK sees an opportunity in continuing to successfully position itself as qualitatively high-end global market research company for its customers and shareholders. To exploit this opportunity, all employees of the GfK Group should foster new values and the “tone from the top” spirit. This is the basic requirement for the success in bringing about a change in corporate culture within the Group. This opportunity has been included in GfK’s opportunity portfolio. Opportunity assessment: significant direct business opportunities with medium positive opportunity potential.
The opportunity and risk management system described in 11.1 forms the basis for the assessment of the opportunity and risk situation by the Management Board. Risks are identified and assessed at the level of the individual companies in the GfK Group, while opportunities and risks at regional level are identified and assessed at sector and Group level.
Compared with the previous year, the overall risk of the GfK Group remains largely unchanged. The new risks included in this year’s risk portfolio are predominantly strategies and legal risks for which specific countermeasures were defined and implemented to manage the risks. Compared with financial year 2014, in addition to a sharp decline in global economic output, the main risks are primarily connected with the continuity of IT systems, legal risks connected with contractual penalties and liabilities. Other notable large risks are compliance risks and risks connected with portfolio measures. After the implementation of appropriate measures, however, the likelihood of these risks occurring should be considered unlikely.
Due to its strong global positioning and continuous provision of innovative products and services, especially based on the ever increasing digitalization and greater availability of huge volumes of data, GfK will consistently exploit the direct and indirect opportunities that are presented to it as a result of the expected further stability of the global economy.
To summarize, it can be concluded that at the time of publishing this Annual Report, the Management Board was not aware of any individual risks, reciprocity or accumulation of risks which might jeopardize the continued existence of GfK SE and the GfK Group.