Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

1.5 BANKING GROUP – OTHER RISKSQUALITATIVE INFORMATIONAs part of the Internal Capital Adequacy Assessment Process (ICAAP)required by the regulations in force, the Group has identified the following typesof risk as relevant (in addition to those discussed previously, i.e. credit risk,market risk, liquidity and operating risk):— interest rate risk on the banking book, deriving from possible changes ininterest rates;— concentration risk, i.e. risk deriving from a concentration of exposures toindividual counterparties or groups of counterparties (“single nameconcentration risk”) or to counterparties operating in the same economicsector or which operate in the same business or belong to the samegeographical area (geographical/sector concentration risk);— strategic risk, both in the sense of risk deriving from current and futurechanges in profits/margins compared to estimated data, due to volatility involumes or changes in customer behaviour (business risk), and of currentand future risk of reductions in profits or capital deriving from disruption tobusiness as a result of adopting new strategic choices, wrong managementdecisions or inadequate execution of decisions taken (pure strategic risk);— compliance risk, i.e. the risk of incurring legal or administrative penalties,significant financial losses or damages to the Bank’s reputation as a result ofbreaches of external laws and regulations or self-imposed regulations;— reputational risk, i.e. the current and future risk of reductions in profits orcapital deriving from a negative perception of the Bank’s image bycustomers, counterparties, shareholders, investors or regulatory authorities;— residual risk, i.e. the risk that the recognized techniques used by the Bank tomitigate credit risk should prove to be less effective than anticipated.Risks are monitored and managed via the respective internal units (riskmanagement, planning and control, compliance and internal audit units) and byspecific committees (risks and ALM committees).– 217