IKB Deutsche Industriebank Aktiengesellschaft IKB FINANCE B.V.

Reputational risk concerns direct or indirect losses incurred as a result of damage to the IKB AG’s
reputation amongst shareholders, customers, employees, business partners and the general public.
Detailed information on Risk and IKB AG’s Risk Management is contained in the Risk Report as part of
the respective “Management Report and Group Management Report” of the Annual Report 2004/
2005.
Risk Factors regarding IKB FINANCE
The following is a disclosure of risk factors that may affect IKB FINANCE’s ability to fulfil its obligations
under the Notes. Prospective investors should consider these risk factors before deciding to
purchase the Notes issued under the Programme.
Prospective investors should consider all information provided in this Prospectus and consult with
their own professional advisers if they consider it necessary. In addition, investors should be aware
that the risks described may combine and thus modify one another.
1. Due to the fact that payments of IKB FINANCE are guaranteed by IKB AG the following risks of IKB
AG are also risks of IKB FINANCE:
a) Counterparty and credit risk
Credit risk defines the risk that a loan cannot be repaid at all, or can only be partially repaid (in line
with contractual agreement), in the case of default by a contractual partner.
Counterparty risk is a risk as a consequence of potential replacement risks related to interest rate
and currency derivatives, which may be incurred in the event of counterparty default.
b) Market and liquidity risks
Market risks are defined as the interest rate, currency and price risks to which equities and other
assets are exposed.
There are two types of liquidity risk: the risk that current or future payment obligations cannot be
met on time, or in full; and the risk that required funding can only be obtained at unfavourable
market conditions.
c) Country risk
The country rating is the key concept employed to assess and manage country risk. IKB AG’s
country risk exposure is managed by using limits.
d) Operational risks
As defined by the Basel Committee on Banking Supervision, operational risk is the threat of loss
resulting from inadequate or failed internal processes or systems, from human error, or from
external events or disasters.
Operational risk also includes legal risk; this is defined as the risk of loss incurred through new
legal regulations, changes to existing legal regulations as well as interpretations of new or existing
legal regulations that are disadvantageous to IKB AG.
ITrisks focus on the measures required to develop our business continuity planning, as well as on
the security of the IKB AG’s IT systems and of its data inventory.
e) General business risk
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General business risk is defined as unexpected negative changes in profitability as a result of a
deteriorating market environment, changes in the IKB AG’s competitive position or client behaviour,
or of changes to the legal framework.