2018 Integrated Report – On track towards a better Railway

Opportunity and risk report

Capital markets and taxes

  • Scope: interest rate and currency developments, taxes

A currency risk arises from our international business. This risk, however, is largely limited to the so-called translation risk since there is usually a high regional match between production and sales markets. We use primary and derivative financial instruments as one means of countering interest rate and currency risks from our operating business. Their use is only permitted for hedging purposes in DB Group. There is a risk that these hedging measures will not pay off, or not in the way expected.

To prevent counterparty default risk from financial and energy derivatives, we conclude credit support agreements (CSA) for all longer-term hedges.

Due to the long-term capital employed, we also use long-term, fixed-interest financial instruments. As a result, only new issues are exposed to the risk of rising interest rates. We apply a conservative planning approach to deal with risks arising from capital market performance or a deterioration in credit ratings.

Pensions and similar retirement benefit obligations are partially covered by plan assets from stocks, real estate, fixed-income securities and other investments. Value losses in these assets reduce the cover of pension obligations by plan assets, potentially resulting in DB Group having to provide additional cover.

In addition, there are potential risks from retrospective tax payments resulting from tax audits in progress and from amendments to tax laws.