GENERAL MEETING DRAFT - Bankier.pl

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>> Consolidated Financial Statements
Part E – Information on risks and related risk management policies
The validation document, together with the opinion of the Holding company and the Internal Audit report,
is submitted to the entity's Board of Directors for approval.
After this, the Group validation document is drawn up which is then submitted to the UniCredit Board of
Directors for approval, together with the Internal Audit report.
Reporting
A reporting system has been developed to inform senior management and relevant control bodies on the
Group operational risk exposure and the risk mitigation actions.
In particular, quarterly updates are provided on operational losses, capital-at-risk estimates, relevant
external events and the main initiatives undertaken to mitigate operational risk in the various business
areas. A summary of the trend of the most important risk indicators is drawn up each month.
The results of the main scenario analyses carried out at Group level and the relevant mitigation actions
undertaken are also submitted to the attention of the Group Operational Risk Committee.
Operational risk management
Operational risk management exploits process reengineering to reduce the risk exposure and insurance
policies management, defining proper deductibles and policies limits.
Regularly tested business continuity plans will also assure operational risk management in case of
interruption of main business services.
The Risk Committee (or other bodies in accordance to local regulations) reviews risks tracked by the
Operational Risk functions of the Legal entities, with the support of functions involved in daily operational
risk control, and monitors the risk mitigation initiatives.
Risk capital measurement and allocation mechanism
UniCredit developed an internal model for measuring the capital requirements. The system for measuring
operational risk is based on internal loss data, external loss data (consortium and public data) scenario
loss data and risk indicators.
Capital at risk is calculated per event type class. For each risk class, severity and frequency of loss data
are separately estimated to obtain the annual loss distribution through simulation, considering also
insurance coverage. The severity distribution is estimated on internal, external and scenario loss data,
while the frequency distribution is determined using only the internal data. An adjustment for key
operational risk indicators is applied to each risk class. Annual loss distributions of each risk class are
aggregated through a copula functions based method. Capital at risk is calculated at a confidence level of
99,9% on the overall loss distribution for regulatory purposes and at a confidence level of 99,97% for
economic capital purposes.
Through an allocation mechanism, the individual legal entities’ capital requirements are identified,
reflecting the Legal Entities’ risk exposure.
The AMA approach has been formally approved by the Supervisory Authority and is expected to be rolled
out in all the relevant Group entities before the end of 2012. The entities not yet authorised to use the
advanced methods contribute to the consolidated capital requirement on the basis of the standard (TSA)
or basic (BIA) model.