Annual Financial Statements 2011 of Bank Austria

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Management Report of UniCredit Bank Austria AG A personnel-intensive service company seeking to increase efficiency needs to make investments in the buildings it uses. With the realisation of the Bank Austria Campus project, the head office functions currently performed in various locations will be concentrated within a single headquarters complex. Bank Austria will develop, build and utilise a new business location with workplaces for about 4,000 employees of the bank by 2016. Planning permission will probably be granted by the authorities in 2012. Since 2011, UniCredit Bank Austria AG has been building an innovative basic and ongoing training centre at Kaiserwasser in Vienna. The training centre – with Turin, UniCredit Group’s second international centre for management development – will include sports and leisure facilities, and facilities for events. After completion, scheduled for the end of 2012, it is envisaged that about 4,000 employees from all the regions covered by the Group’s operations will participate in training courses at the centre each year. 3. Events after the balance sheet date The guarantee assumed in April 2010 for a second loss position of a synthetic securitisation issued by the Ukrainian banking subsidiary ("Ukrsotsbank") expired and was renewed by UniCredit Bank Austria AG at the end of December 2011. The Ukrainian central bank gave its approval as at 31 January 2012. At the end of 2011 the transaction amounted to USD 1,125.3 m (guarantee amount). 4. Report on key features of the internal control and risk management systems in relation to the financial reporting process The Management Board is responsible for establishing and designing internal control and risk management systems which meet the company’s requirements in relation to the financial reporting process. The purpose of this report is to provide an overview of how internal controls are organised in relation to the financial reporting process. The objective of the internal control system is to assist management in assuring internal controls in relation to financial reporting which are effective and are improved on an ongoing basis. The system is geared to complying with rules and regulations and creating conditions which are conducive to performing specific controls in key accounting processes. Following the integration of the Bank Austria Group in UniCredit Group, the Italian Savings Law, Section 262 (process description for minimising risk in preparing financial statements) in particular, must be complied with in addition to the existing internal control system. Pursuant to the “262 Savings Law”, the CEO and the CFO delegated by UniCredit S.p.A. are liable, under civil and criminal law, for any violation of the legal provisions. They are also responsible for every subsidiary within the group of consolidated companies which is covered by financial reporting because the “262 Savings Law” deals with consolidated financial statements. Internal Audit performs independent and regular reviews of compliance with internal rules also in the area of accounting. The Head of Internal Audit reports directly to the Management Board and provides the Chairman of the Supervisory Board with quarterly reports. Control environment The basic aspect of the control environment is the corporate culture in which management and all employees operate. UniCredit S.p.A., the parent company of UniCredit Bank Austria AG, works to maintain effective communication and convey the corporate values defined in the Integrity Charter. The Integrity Charter embodies the UniCredit Group’s identity and is based on the following shared values: fairness, transparency, respect, reciprocity, freedom to act, and trust. The implementation of the internal control system in relation to the financial reporting process is also set out in the internal rules and regulations: All accounting entries are made within the guidelines established in the Accounting Policy, and release follows defined instruction and control criteria. For each general ledger account there is a responsible person who reconciles the general ledger accounts in accordance with existing rules. This internal reconciliation process is interrogated by Financial Accounting and reviewed by Internal Audit. Risk assessment In the course of the “262 Savings Law” project, the persons having process responsibility identified risks in relation to the financial reporting process; these risks are monitored on an ongoing basis. The focus is on those risks which are typically considered to be material. To meet the “262 Savings Law” requirements, controls pursuant to the methodology used by UniCredit S.p.A. are required to be performed at least on a half-yearly basis (for full-year and half-year reporting). Controls All controls are applied in the current business process to ensure that potential errors or deviations in financial reporting are prevented or detected and corrected. Controls range from a management review of results for the various periods to specific reconciliation of accounts and the analysis of continuous accounting processes. The levels of hierarchy are designed so that an activity and the control of that activity is not performed by the same person (foureyes principle). In the course of the preparation of financial reports, the general ledger accounts are reconciled with business and frontend systems. IT security controls are a cornerstone of the internal control system. IT access authorisation is handled on a very restrictive basis. The operation of the financial reporting system is also assured through automated IT controls included in the system. Bank Austria – Annual Financial Statements 2011 208
Management Report of UniCredit Bank Austria AG Information and communication Management regularly updates rules and regulations for financial reporting and communicates them to all employees concerned. Moreover, regular discussions on financial reporting and on the rules and regulations applicable in this context take place in various bodies and are repeatedly communicated to UniCredit Bank Austria AG. Employees in Financial Accounting receive regular training in new methods of international financial reporting in order to identify risks of unintended misreporting at an early stage. To perform monitoring and control functions with a view to proper financial accounting and reporting, extensive financial information is made available at key levels of the bank. Relevant information is not only provided to the Supervisory Board and the Management Board, middle management levels also receive detailed reports. Vienna, 12 March 2012 Monitoring Willbald Cernko Gianni Franco Papa (Chairman) (Deputy Chairman) Massimiliano Fossati Francesco Giordano Rainer Hauser Dieter Hengl Doris Tomanek Robert Zadrazil As part of the implementation of the internal control system pursuant to the “262 Savings Law”, instruments were introduced to monitor the effectiveness of controls. In connection with the compulsory half-yearly certification process for the preparation of the management report, the persons having process responsibility are required to carry out effectiveness tests to check the effectiveness of controls. It must be ascertained whether the controls work according to their design and whether the persons who perform controls have the competence/authority and qualifications required to perform the controls effectively. All persons having process responsibility confirm by means of certification that their processes are adequately documented, risks have been identified and controls have been evaluated with a view to deriving measures to minimise risk. The results of these monitoring activities are contained in a management report which is based on the certifications provided to the respective chief financial officer by all persons having process responsibility and issued on a half-yearly basis. The Chief Financial Officer of UniCredit Bank Austria AG receives the certifications by the chief financial officers of the subsidiaries covered by the process in accordance with the group of consolidated companies, and provides the Holding Company and the public with confirmation of the reliability and effectiveness of the internal control system in the context of the financial statements for the first six months and the annual financial statements. Bank Austria – Annual Financial Statements 2011 209
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