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ePaper created 2012-04-27, 18:43:33 | version 1.23.1
Risk of damage The property companies bear the risk of total or partial destruction of the properties. The insurance payouts due in such a case might be insufficient to compensate fully for the damage. It is conceivable that sufficient insurance cover for all theoretically possible losses does not exist or that the insurers may refuse to provide compensation. IT risk Deutsche EuroShop’s information system is based on a centrally-man- aged virtual network solution. Corrective and preventive maintenance of the system is carried out by an external service provider. A virus protection concept and permanent monitoring of data traffic with re- spect to hidden and dangerous content are designed to protect against external attacks. All data relevant to operations is backed up on a daily basis. In the event of a hardware or software failure in our system, all data can be reproduced at short notice. Personnel risk Given the small number of employees of Deutsche EuroShop AG, the Company is dependent on individual persons in key positions. The departure of these key staff would lead to a loss of expertise, and the recruitment and induction of new replacement personnel could temporarily impair ongoing day-to-day business. Legal risk The concept for our business model is based on the current legal situ- ation, administrative opinion and court decisions, all of which may, however, change at any time. Evaluation of the overall risk position On the basis of the monitoring system described, Deutsche EuroShop has taken appropriate steps to identify developments jeopardising its continued existence at an early stage and to counteract them. The Ex- ecutive Board is not aware of any risks that could jeopardise the con- tinued existence of the Company. Currency risk Deutsche EuroShop AG’s activities are limited exclusively to the European economic area. Manageable currency risks arise in the case of the Eastern European investees. These risks are not hedged because this is purely an issue of translation at the reporting date and is there- fore not associated with any cash flow risks. The currency risk from operations is largely hedged by linking rents and loan liabilities to the euro. A risk could arise if the Hungarian forint or the Polish zloty were to plummet against the euro such that tenants were no longer able to pay what would then be considerably higher rents denominated in foreign currency. Financing and interest rate risks We minimise the interest rate risk for new property financing as far as possible by entering into long-term loans with fixed-interest periods of up to 20 years. It cannot be ruled out that refinancing may only be possible at higher interest rates than before. The interest rate level is materially determined by the underlying macroeconomic conditions and therefore cannot be predicted by us. The possibility cannot be completely excluded that, owing for example to a deterioration in the Company’s results of operations, banks may not be prepared to provide refinancing or to extend credit lines. We monitor the interest rate environment closely so as to be able to react appropriately to interest rate changes with alternative financing con- cepts or hedging if necessary. At an average interest rate of 4.59%, this does not currently represent a significant risk within the Group, par- ticularly as the most recent refinancing was concluded at lower interest rates than the original financing and the present average interest rate. Deutsche EuroShop AG uses derivatives that qualify for hedge ac- counting to hedge interest rate risks. These interest rate swap trans- actions transform variable interest rates into fixed interest rates. An interest rate swap is an effective hedge if the principal amounts, ma- turities, repricing or repayment dates, interest payment and principal repayment dates, and the basis of calculation used to determine the interest rates are identical for the hedge and the underlying transaction and the party to the contract fulfils the contract. Financial instruments are not subject to liquidity or other risks. The Group counters the risk of default by stringently examining its contract partners. A test of ef- fectiveness for the hedges described is implemented regularly. DES Annual Report 2011 21