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DES GB2013 E

DEUTSCHEEUROSHOPANNUALREPORT2013/GROUPMANAGEMENTREPORT 130 Risk report PRINCIPLES GOVERNING THE RISK MANAGEMENT SYSTEM AND GROUP-WIDE INTERNAL CONTROL SYSTEM Deutsche EuroShop’s strategy is geared towards maintaining and sustainably increasing shareholders’ assets and generating sustain- ably 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 a reasonable dividend. The focus of the risk management system is therefore on monitoring com- pliance with this strategy and, building on this, the identification and assessment 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, communicated 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 internal control system is an integral part of the risk man- agement system. Within the framework of their legal mandate for auditing the annual financial statements, the auditor checks whether the early warning system for risks is suitable for detecting at an early stage any risks or developments that might endanger the Company. Risk analysis involves the identification and analysis of factors that may jeopardise the achievement of objectives. The risk analysis pro- cess answers the question of how to deal with risks given ongoing changes in the environment, the legal framework and working condi- tions. The resulting control activities are to be embedded into pro- cesses 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. Existing properties • Trends in accounts receivable • Trends in occupancy rates • Retail sales trends in the shopping centers • Variance against projected income from the properties 2. Centers under construction • Pre-leasing levels • Construction status • Budget status In accordance with IFRS 8.12, segment reporting is presented as a geographical breakdown: domestic and international. Risks are identified by observing issues and changes that deviate from the original plans and budgets. The systematic analysis of eco- nomic data such as consumer confidence and retail sales trends is also incorporated into risk management. The activities of competitors are also monitored continually. 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 guide- lines ensure the conformity of the annual financial statements and the consolidated financial statements. The decentralised preparation of Group-relevant reports by the ser- vice provider is followed by the aggregation and consolidation of the individual 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 employ- ees charged with ensuring the regularity of financial reporting and by the Executive Board. In addition, within the scope of the auditing activ- ities, the auditor of the consolidated financial statements performs process-independent auditing work, also with respect to financial reporting.

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