General

The persistently tough economic climate is posing significant risks to CA Immo and its business activities. The main risks to the Group derive from the market-linked danger of rising vacancy rates, tenant insolvency, the difficult environment for real estate transactions created by the restrictive lending policy of banks, associated increase in yields and the decline in property values. The risk categories outlined below were re-evaluated following a risk assessment carried out in 2011; the major risks facing the Group have not changed significantly from the previous year.

Systematic risk management is a key element of the CA Immo Group’s internal controlling process with a direct bearing on strategic and operational decision-making within the company. Therefore, the objective of risk management is to identify at an early stage and continually monitor potentially hazardous developments as well as opportunities so that suitable measures can be implemented as necessary. To be able to evaluate the company’s risk position at all times, CA Immo is constantly evaluating the level of risk by means of quarterly reporting that takes account of the current situation of the company and the market. In these reports, risks are documented in relation to specific properties and projects but also to (sub-)portfolio level. Other aspects of risk reporting involve simulations and depictions of scenarios as regards the value trend for the portfolio as well as exit strategies and liquidity planning. In addition, specific risk types are assessed at regular intervals, with external advisors consulted. CA Immo assesses risk according to substance, effect and the likelihood of occurrence. On that basis, risk management is implemented at every level of the company and is therefore binding on all organisational divisions. From a strategic viewpoint, risk management includes the compilation of compulsory guidelines on investment policy.

Operational risk management is concerned with countering property-specific and general business risks. The company circumvents unexpected risk by means of early warning indicators such as rent forecasts and vacancy analyses as well as the continual monitoring of lease agreement periods and the possibility of terminations. The Management Board is involved in all risk-relevant decisions and bears overall responsibility for such decisions. At all process levels, decisions are subject to the dual verification principle. Clear internal guidelines and strategies, business and investment plans and the continuous reporting systems have made it possible to monitor and control the economic risks associated with everyday business activity. Measures are applied to all Group subsidiaries. Investment plans are also subject to scrutiny by the Supervisory Board or its investment committee. The Controlling department supports the realisation of risk management by providing structured information and data; individual matters are also spot-checked by the Internal Auditing division.

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