Risk management

The business of the AWD Group is subject to a large number of risks that are always inherent in entrepreneurial activities. The best possible monitoring and management of these risks is very important with a view to maintaining the Group's the long-term security and operating success. The AWD Group has therefore installed risk management systems in all of its companies participating actively in the market. The design of these systems is based on fundamental guidelines issued by AWD Holding AG. It is a matter for the local management to adapt these guidelines to the specific circumstances of the individual markets.

An integral component of risk management at the AWD Group is the system for the early recognition of risks. This system collects data on the most important risks and allows a fundamental assessment of their probability of occurrence and possible extent of damage. Risks are identified, recorded, assessed and documented systematically. The AWD Group's early-recognition system includes 450 individual risks for all of the companies of the Group in five different categories: strategic, sales induced, financial, other risks and risks from general business operations. The AWD Group makes use of four risk classes to quantify the actual risks: low risk, medium risk, high risk or existence-threatening risk.

Each of the 450 individual risks is allocated to a person responsible for that risk. Risk are monitored and managed by means of standardised processes such as regular reviews, information loops and activities. A system of risk inventory cards, predefined limits and reporting procedures is used to ensure that any serious or existence-threatening risks are recognised at an early stage, allocated to the responsible persons, and dealt with by taking appropriate measures. Up-to date information on defined core risks such as adviser fluctuation, the quality of the brokered business, rising cost of sales in relation to sales, or possible liability risks is included in the monthly reports to the Board of Management.

The risk management system at the AWD Group is based on binding Group-wide corporate guidelines. The actual risk management systems in operation are comprehensively documented in the individual markets and companies. Intensive controlling activities ensure adherence to regulatory requirements relating to risk management. The Corporate Internal Auditing department regularly reviews the functionality, effectiveness and efficiency of risk management as well as adherence to the requirements of applicable law. The risk-management system is also embedded in the Group's planning and control system. The close links between risk management and corporate controlling reinforce the required early-warning function and are used specifically for the continuous further development of both systems.