Risk management
The Group has established a stringent risk management system in order to identify and constantly assess Jungheinrich’s exposure to risks arising from the financial services business. A pan-European lease agreement database running on SAP ERP software enables the company to record and assess risks arising from financial services agreements, providing the foundation for a consistent risk management system. Besides the refinancing risk described above, the material risks to which the financial services business is exposed are the creditworthiness risk arising from customer receivables and the residual value risk.
Creditworthiness risk
The credit risk relating to customer receivables was kept very low in the last few years. One of the main reasons were the extensive credit checks carried out before concluding the agreements. Credit insurance is taken out in order to cover concentration risks. Furthermore, truck returns prematurely accepted by operating sales units are marketed in cooperation with the Financial Services Division under firm return conditions. The professional marketing of used equipment within the Jungheinrich organization via the Europe-wide direct sales system and its supplementary Supralift Internet platform give Jungheinrich an outstanding set of reselling tools.
Residual value risk
The internal residual value guarantee offered by Sales to the Financial Services Division gives rise to opportunities and risks from the resale of truck returns by the operating sales units. These residual value guarantees are calculated by the Used Equipment Division, which is assigned to Sales, on the basis of a conservative groupwide standard for maximum allowable residual values. Financial service agreements on hand are subjected to quarterly risk assessments using the lease agreement database from the perspective of the Jungheinrich Group and of the Financial Services Division. This procedure involves establishing the going market price of the residual value of each individual contract. In cases where the going fair value is lower than the residual value of a contract, a suitable provision for this risk is recognized on the balance sheet.