Report on Future Perspectives and on Opportunities and Risks Opportunities and Risks As a global enterprise with a diversified portfolio, the Bayer Group is exposed to a wide range of internal or external developments or events that could significantly impact the achievement of our financial and nonfinancial objectives. Bayer regards opportunity and risk management as an integral part of corporate governance. Our risk management process and the opportunity and risk status are outlined in detail in the Annual Report 2017, Chapter “Opportunity and Risk Report.” There have not been any material changes to Bayer’s risk profile compared with our description in the Annual Report 2017, without taking the Monsanto acquisition into account. Change in the risk portfolio due to the Monsanto acquisition Monsanto retained responsibility for managing Monsanto-related risks during the reporting period. These risks will be accounted for in our ERM process in the course of the coming integration measures. The following risk overview therefore pertains to the risks identified and recently published by Monsanto. The risks were not evaluated with regard to their probability or damage potential. Risks that ceased to exist due to the closing of the transaction are not listed here. The following table shows an allocation of risks reported externally by Monsanto to Bayer’s main risk categories. Each of these risks was allocated solely to what we regard as the primary risk category. The occurrence of such risks could impact the entire Group and its reputation in the same way as risks pertaining to the original Bayer segments. Material Risk Areas of Bayer and Risks Reported by Monsanto Bayer risk areas Extracts from Monsanto’s external risk report 1 Significant developments that have occurred in respect of the legal risks since publication of the Annual Report 2017 (Note “Legal Risks” to the Consolidated Financial Statements) are described in the Notes to the Condensed Consolidated Interim Financial Statements under “Legal Risks” Strategic risks Business transactions Operational performance risks Intellectual property Development and commercialization of pipeline products Fluctuations in commodity prices Production Seasonal working capital needs and indebtedness Safety, quality and compliance risks Regulation of seed biotechnology, agricultural products, and research and manufacturing processes Public understanding and public acceptance of biotechnology and other agricultural products Compliance with quality controls and regulations Legal proceedings1 External risks Competition Business operations outside the United States Weather, natural disasters, accidents and security breaches (incl. cybersecurity incidents) The sections of Monsanto’s risk report that we currently do not believe were reported on in comparable form in the Bayer Annual Report 2017, Chapter “Opportunity and Risk Report,” are described below: Fluctuations in commodity prices Production is contracted with multiple growers at fair value, and the seed is retained in inventory until it is sold. These purchases constitute a significant portion of seed manufacturing costs. Additionally, chemical manufacturing operations use chemical intermediates and energy, which are subject to increases in price as the costs of oil and natural gas increase. Accordingly, increases in commodity prices may negatively affect the cost of goods sold or lead to seed or chemical price increases, which could adversely affect sales. Hedging strategies and raw material supply agreements are applied that contain terms designed to mitigate the risk of short-term changes in commodity prices. However, this is not possible with regard to medium- and long-term increases. Farmers’ incomes are also affected by commodity prices, fluctuations in which could impact the demand for seed and chemical products. Seasonal working capital needs and current levels of indebtedness Current levels of indebtedness and seasonal working capital needs may reduce financial and operational flexibility. For example, credit is regularly extended to customers in certain areas of the world to enable them to acquire crop production products and seeds at the beginning of their growing seasons. Due to these credit practices as well as the seasonality of sales and costs, short-term debt may need to be issued at certain times of the year to fund cash flow requirements. Levels of short-term debt may be greater to the extent that customer receivables are unable to be collected when due. Overall assessment by the Board of Management Compared with our commentary in the Annual Report 2017, we see no material changes in our risk situation, as we had anticipated an intensification of our risk situation as a result of the acquisition of Monsanto, which had been imminent at the time. Now that the transaction has closed, Monsanto’s risks have been transferred to Bayer. We currently are not aware of any individual risks, risk combinations or risk interdependencies that could endanger the Bayer Group’s continued existence. Significant developments that have occurred in respect of the legal risks since publication of the Bayer Annual Report 2017 (the Note “Legal Risks” to the Consolidated Financial Statements) are described in the Notes to the Condensed Consolidated Interim Financial Statements under “Legal Risks.” That section also contains Monsanto risks that appear material from the viewpoint of the Bayer Group.