Annual Report 2007
10. Risk report
1/3 forward
10.1 Risk and opportunity management system
Always a focus on security
Software AG's primary goal is long-term, profitable growth. Based on that, we intend to increase our enterprise value on a sustainable basis. To that end, we combine established, stable business activities with an involvement in promising new market segments and regions. We strive for balance between opportunities and risks and take on risks only if the business activities associated with them have a high probability of enhancing the value of Software AG. It is always a prerequisite that the risks remain manageable and controllable.
Risk and opportunity management system throughout the Group
Through a Group-wide risk and opportunity management system, we identify possible risks at an early stage so as to correctly evaluate them and limit them to the extent possible. By continuously monitoring risks, we can constantly evaluate the presumed overall status systematically and in a timely manner and better assess the effectiveness of appropriate countermeasures. In doing so, we include operational risks as well as financial, economic and market risks. Opportunities are generally congruent to the operational and functional risk structure in all risk areas.
One of our tools for ongoing monitoring of the risk areas identified is a balanced scorecard system. The Executive Board is kept constantly informed of all current and future risks and opportunities as well as the overall risk and opportunity structure via established channels. Software AG updates and monitors the applicable specifications for preventing and reducing threats on an ongoing basis throughout the Group.
Central responsibility for Group-wide processes
Risks and opportunities throughout the Group are managed and controlled at corporate headquarters for both the main offices of Software AG and the other locations. This is where risk and opportunity reports are prepared, further development of the risk management system is initiated, and guidelines for the entire Group that serve to mitigate risk are elaborated. We constantly review the functioning and reliability of the system as well as the reporting.
The internal control system of Software AG has operationalized business risks by way of internal guidelines on business policies and practices. Software AG classifies these policies by field: (general, Professional Services, financial powers and financial markets). The policies defined regulate internal procedures at the global and local levels. They are designed to provide information for management and to monitor the operating business risks of the Software AG Group. In order to enhance transparency, these policies are administered and published centrally.
Another component of risk and opportunity management is the transfer of operating risks to insurance carriers. The General Services department at corporate headquarters coordinates this function globally.
Expansion of Internal Audit
The Internal Audit department of Software AG is an active component of the Company's risk management system. Through a systematic and targeted approach, it ensures that the effectiveness of risk management, the internal control systems and the management and supervision processes are evaluated and continuously improved. It is also geared to the creation of added value for Software AG by optimizing business processes. The Internal Audit department was expanded to include two new employees in June 2007 and now has a staff of four specialists.
