ANNUAL REPORT 2006 - DG Hyp

Management Report
A system for collecting and recording loss data has
already been in place since 2002. Incoming loss reports are
collected systematically in a database arranged according
to predefined categories: they are subsequently used as
indicators for further improving the operating processes,
and hence for reducing operational risks.
In addition, all of DG HYP’s organisational units
have regularly conducted self-assessments since 2004.
Current risks are estimated using a standardised electronic
questionnaire. In addition, Risk Controlling carries out
continuous plausibility and consistency checks.
In order to also be able to identify operational risks in
good time, an early warning system regularly records
various risk indicators (such as system failures, fraud, and
staff fluctuation). The agreed risk indicators and the collated
reports are submitted anonymously within the scope of
group-wide reporting to DZ BANK.
VR Kreditwerk is responsible for credit processing in the
retail business and for the provision of IT services. The
operational risks inherent to DG HYP from these activities
are taken into consideration in the systems of VR Kreditwerk
and of DG HYP. This knowledge is enhanced by
expertise gained in the controlling of outsourced activities.
The emphasis is on business continuity measures
addressing operational risks that arise from the use of the
bank’s property and of the IT system. The key measures for
dealing with such risks are laid down in the emergency
handbook. From an organisational perspective, DG HYP’s
Risk Controlling is responsible for measuring operational
risks. Risk Controlling reports regularly on operational
risk issues to DG HYP’s Management Board, and on the
activities for further developing the quantification
approach, within the scope of the Risk/Return Management
Committee meetings.
V) Strategic risks
Strategic risks include the threat of losses arising from
management decisions regarding DG HYP’s business policy.
Strategic risks can also include long-term success factors
in DG HYP’s environment. These include, for example,
changes to the legal or corporate environment, changes
to the market and competitive conditions, customers or
re-financing parameters. We also include planning and
reputation risks in this risk category.
In order to reduce planning risks, variance analyses are
prepared as a basis for continuously reviewing planning
data and assumptions.
Reputation risk concerns direct or indirect losses
incurred by the erosion of DG HYP’s reputation among
shareholders, staff, customers, business partners and the
general public. All activities and events that can affect the
bank’s reputation are identified in both the Corporate
Communications and Strategy organisational units, and
in the market units concerned. They are evaluated in
close cooperation with the Management Board, in order to
mitigate their impact as early as possible.
DG HYP generally uses, amongst other things, investment
calculations and projections, business plans including
scenario-based simulations, cost/benefit analyses, and risk
analyses as the basis for strategic decisions, in order
to identify and minimise strategic risks. In addition, all
decision proposals submitted that may involve or induce
strategic risks include a statement by the responsible
organisational unit on the risk content, which is taken into
account in the resolution passed.
Given that, as a rule, strategic risks are subject to very
complex and irregular factual connections, they cannot be
included in an integrated system as special risks. They are
therefore specially monitored by the Management Board;
they are also monitored and continuously analysed by
the respective individual organisational units responsible.
The regular review of business unit strategies is also a
core element of the continuous process of business unit
planning and control.
Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2006
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