DES GB2015 Englisch

Risk And Opportunity report PRINCIPLES GOVERNING THE RISK MANAGEMENT SYSTEM AND INTERNAL CONTROL SYSTEM Deutsche EuroShop’s strategy is geared towards maintaining and sus- tainably increasing shareholders’ assets and generating sustainably high surplus liquidity from leasing real estate, thereby ensuring that the shareholders can share in the success of the company over the long term through the distribution of an appropriate dividend. The focus of the risk management system is therefore on monitoring compliance with this strategy and, building on this, on the identification and assess- ment of risks and opportunities as well as the fundamental decision on how to manage these risks. Risk management ensures that risks are identified at an early stage and can then be evaluated, communicat- ed promptly and mitigated. Monitoring and management of the risks identified are the focus of the internal control system, which at Group level is essentially the responsibility of the Executive Board. The inter- nal control system is an integral part of the risk management system. Within the framework of its legal mandate for auditing the annual finan- cial statements, the auditor checks whether the early warning system for risks is suitable for detecting at an early stage any risks or devel- opments that might endanger the Company. Risk analysis involves the identification and analysis of factors that may jeopardise the achievement of objectives. The risk analysis process answers the question of how to deal with risks given ongoing changes in the environment, the legal framework and working conditions. The resulting control activities are to be embedded into processes that are essential to the realisation of business targets. KEY FEATURES Under existing service contracts, the Executive Board of Deutsche EuroShop AG is continuously briefed about the business performance of individual property companies. Financial statements and financial control reports are submitted on a quarterly basis for each shopping center, with medium-term corporate plans submitted annually. The Executive Board regularly reviews and analyses these reports, using the following information in particular to assess the level of risk: 1. Portfolio properties • Trend in amounts outstanding • Trend in occupancy rates • Retail sales trend in the shopping centers • Variance against projected income from the properties 2. Centers under construction • Pre-leasing levels • Construction status • Budget status Risks are identified by observing issues and changes that deviate from the original plans and budgets. The systematic analysis of economic data such as consumer confidence and retail sales trends is also in- corporated into risk management. The activities of competitors are also monitored continually, as well. ANNUAL FINANCIAL STATEMENT PREPARATION PROCESS Preparation of the financial statements is a further important part of the internal control system and is monitored and controlled at the level of the Group holding company. Internal regulations and guidelines ensure the conformity of the annual financial statements and the con- solidated financial statements. The decentralised preparation of Group-relevant reports by the service provider is followed by the aggregation and consolidation of the individ- ual annual financial statements and the preparation of the information for reporting in the notes and Management Report in the accounting department of the holding company with the aid of the consolidation software Conmezzo. This is accompanied by manual process controls such as the principle of dual control by the employees charged with en- suring the regularity of financial reporting and by the Executive Board. In addition, within the scope of its auditing activities, the auditor of the consolidated financial statements performs process-independent auditing work, including with respect to financial reporting. ADVICE ON LIMITATIONS By virtue of the organisational, control and monitoring measures laid down in the Group, the internal control and risk management system enables the full recording, processing and evaluation of Company- related facts as well as their proper presentation in Group financial reporting. Decisions based on personal judgement, flawed controls, criminal acts or other circumstances cannot be entirely ruled out, however, and may limit the effectiveness and reliability of the internal control and risk management system that is in use such that the application of the sys- tems used cannot guarantee absolute certainty in respect of the correct, complete and timely recording of facts in Group financial reporting. MANAGEMENT REPORT 129

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