pdf, 1996K - WestLB

oversees the Issuer's subsidiaries and WestLB Group companies. Both units monitor and steer the risks relating to these
commitments, with particular attention paid to companies that are exposed to entrepreneurial risks.
In accordance with MaK organisational and process requirements, CRM provides the market-independent second vote
for all equity investments proposed by the Corporate Finance and Bank Holdings front office units.
Liquidity Risks
Liquidity risk is defined as the risk that a bank may not be able to meet its current and future payment obligations in full
or on time, that in the case of a liquidity crisis refinancing may only be raised at higher market rates (funding risk), or
that assets may only be liquidated at a discount to the market rates (market liquidity risk).
The objective of liquidity management is to avoid a concentration of financing requirements with very short-term
maturities, to keep enough liquid assets on hand for unexpected liquidity needs and, at the same time, to optimise the
Issuer's structural liquidity with the help of a medium and long-term-oriented funding programme.
Operational Risks
Operational risk refers to the risk of losses resulting from inadequate or failed internal processes, people and systems or
from external events.
Operational Risk Management (ORM) defines the framework for managing operational risk. ORM ensures that
operational risk management activities are consistent throughout the Issuer, provides an opinion on operational and
reputational risk and advises the Issuer's business units.
The collection of internal and external loss data, Risk Self Assessments (RSA), Risk Indicators and Scenario Analysis
represent important instruments of operational risk management. In future, the regulatory capital charge for operational
risk will be calculated using a recently developed quantification method that will also be deployed for internal steering.
The objective is to have the method satisfy the requirements for the Advanced Measurement Approach (AMA)
following Basle II as soon as possible.
Factors which Are Material for the Purpose of Assessing the Market Risks Associated with Instruments Issued
under the Programme
The Instruments May not Be a Suitable Investment for Investors
Each potential investor in the Instruments must determine the suitability of that investment in light of its own
circumstances. In particular, each potential investor should:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Instruments, the merits and
risks of investing in the Instruments and the information contained or incorporated by reference in this DIP
Prospectus or any applicable supplement thereto;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular
financial situation and the investment(s) it is considering, an investment in the Instruments and the impact the
Instruments will have on its overall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Instruments,
including Instruments with principal or interest payable in one or more currencies, or where the currency for
principal or interest payments is different from the potential investor's currency;
(iv) understand thoroughly the terms of the Instruments and be familiar with the behaviour of any relevant indices
and financial markets; and
(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic,
interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
Some Instruments are complex financial instruments. Sophisticated institutional investors generally do not purchase
complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to
reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A
potential investor should not invest in Instruments which are complex financial instruments unless it has the expertise
(either alone or with a financial adviser) to evaluate how the Instruments will perform under changing conditions, the
resulting effects on the value of the Instruments and the impact this investment will have on the potential investor's
overall investment portfolio.
30