SOFTWARE AG | ANNUAL REPORT 2012 142 PRESENTATION OF KEY INDIVIDUAL RISKS We explore key risk areas and individual risks discerned from the totality of risks identified through the risk and opportu- nity management system. Environment and sector risks Market risks Among other things, market risks are related to the different economic developments in individual countries or regions. The technological evolution of the individual sectors of the IT industry can adversely impact the business potential of the individual business lines. However, the balanced revenue mix at Software AG reduces dependence on a single geo- graphical or professional IT submarket. Software AG markets technologies that are not specific to certain industries, ruling out a concentration on individual customers. Thanks to our technological innovations and growing range of integration products, including the integration of mainframe-based applications, we facilitate the flexibility of existing IT infra- structures and thus significantly lower costs. This, in turn, secures our broad customer base over the long term. Our customers’ return-on-investment times are typically 12 to 24 months and thus extremely short. Hence, our new prod- ucts are a logical way to cope with market-related cost pres- sures even in weak economic periods. The overwhelming majority of our customers use our software for business- critical applications that are difficult to be replaced. There- fore, our revenue flow is stable, especially from mainte- nance services. Innovative products and new technology trends in our product portfolio will ensure further growth. The Company expects to see additional product revenue growth in the future on the basis of the opportunities dis- cussed here. Strategic risk management (RCM) The strategic risk management system is composed of a central, interdisciplinary Group team that reports to the CFO and the employees responsible for risk (risk advisors). A manager from the relevant field of expertise serves as risk advisor and is responsible for monitoring and managing identified strategic risks. Risks are evaluated according to a uniform valuation system. The system takes into account the expected value of risk effects to Group EBIT. The possible amount of effects to EBIT is applied for the next three years. The resulting risk matrix consists of nine valuation levels. All strategic risks are assigned points based on this uniform valuation. All Group managers are responsible for reporting newly identified strategic risks to the central corporate team. The team then informs the Management Board for advice on possible strategies for handling them. The corporate team reports to the Management Board regularly about the ongo- ing development of the identified risks. Ensuring the effectiveness of the risk management system and internal control system Internal Audit regularly reviews the effectiveness of the risk management system and the internal control system. If necessary, suggestions for improvement are developed, which are then introduced centrally or their introduction is monitored centrally. Corporate Finance and Corporate Con- trolling regularly conduct an internal review of accounting- relevant control processes and modifies them for new devel- opments.