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## Risks and their management continued 

## Operational excellence 

Dialog recognises that time-to-market is a critical factor for the success of our customers. The efficiency of our internal operation is a relevant factor to our performance. We run programmes to drive continuous improvement through all facets of the value chain from design to fulfilment. We also test and evaluate the quality of the supporting business functions. 

Our business model is fuelled by the funds trusted to Dialog to run its operations. We realise that our financial transactions bring the risk of currency and interest rate fluctuations and bad debts. We seek to have enough free cash flow to invest in growing our business and select the right financial service providers and products. 

## Risk 

Design capacity Dialog develops both Application Specific Integrated Circuits for individual customers as well as Application Specific Standard Products to address multiple customers in a market sector. Dialog respects that time- to-market is of critical importance to our customers’ success. With strong demand for new innovations and the limited capacity of design engineers, we must balance the allocation of our resources to both our business models. 

## Supply chain 

Dialog runs a fabless model and does not participate directly in the highly capital intensive production environment. The manufacturing of our products run over multiple stages of production with multiple suppliers. Each supplier must manage capacity to ensure a healthy financial return, leading to constraints in times of increasing demand. Long-term capacity planning and short-term fine-tuning are crucial to align production cycle time with order lead times for our customers. 

## Interest rates fluctuations 

Interest earned from bank and money market deposits can vary according to market fluctuations and Dialog’s cash requirements. 

## Actions 

Dialog has selected specialised outsourced agencies to support the rapid recruitment of highly skilled personnel. 

In-house we dedicate human resource managers to drive the further development of our personnel and benchmark our employment terms against top industry peers. 

In 2012, Dialog expanded its design capacity by 21%. We recruited engineers into our current design centres in the UK, Germany, Austria, Japan, the Netherlands and Greece and set up new design centres in Turkey and Italy. 

Dialog continues to expand its Technical Ladder, a forum of our top engineers, to share knowledge, align design technologies and generate ideas for new products. 

Dialog carefully selects its suppliers and regularly audits their quality and performance. We keep a close relationship with our suppliers and have implemented automated feeds to ensure swift turnaround of production orders and to manage the transition of production stages over multiple manufacturing locations. 

We keep inventory buffers to respond to unplanned demand fluctuations, but seek to manage these to consume a minimum of working capital. 

In 2012, we have rolled out state-of-the-art Supply Chain Network Planning software, based on SAP, which supports the automated scheduling of production work orders, taking into account the capacity constraints of our suppliers. 

Dialog manages its interest income using a matched investment strategy with a mix of fixed and variable interest rate facilities in highly liquid funds, which are offered by highly reputable and rated financial institutions. This includes investing excess funds, even over the short term, once the operating business has been financed. 

During the year, the Group has held cash on deposit with a range of maturities from one week to three months. 

