Risk management

General

• Risk taking and the professional management of the risks associated with the business activities are core functions of every bank. In its capacity as central organisation (CO) of the Association of Credit Institutions under section 30a Austrian Banking Act, which consists of VOLKSBANK WIEN AG (VBW) and the affiliated banks, VBW performs this central task for the Association of Volksbanks. The Association therefore has in place calculation methods as well as management and control mechanisms for the capture, assessment, management and monitoring of risks arising from banking transactions and banking operations as well as of the remuneration strategy and practices (section 39 (2) Austrian Banking Act). The implementation of control within the Association of Volksbanks is effected through General and, if necessary, Individual Directives and corresponding working instructions in the affiliated banks.

Risk policy principles

• The risk policy principles comprise the standards for the management of risks that are applicable within the Association of Volksbanks and are defined by the CO Managing Board together with the risk appetite. A common set of rules for risk management across the Association is the basis for risk awareness and a risk culture within the company. The Association of Volksbanks operates subject to the principle that risks will only be accepted to the extent required to achieve strategic goals. Applying the risk management principles, the associated risks are comprehensively managed by creating an appropriate organisational structure and corresponding business processes.

Organisation of risk management

• The Association of Volksbanks has taken all required organisational measures to meet the requirements of a modern risk management. Accordingly, risk-taking organisational units are functionally separate form organisational units serving the purpose of managing and monitoring risk. A central, independent risk control function has been established. At the Managing Board level, the Chief Risk Officer (CRO) is the head of Risk Control. Within the responsibilities of the CRO, there is a separation between risk control and operational credit risk management. Risk assessment, risk measurement and risk control are carried out according to the dual-control principle. For the purpose of avoiding conflicts of interest, these tasks are performed by different organisational units. The business model requires risks to be identified, assessed, measured, aggregated and controlled effectively. Risks and capital are managed by means of a framework of principles, organisational structures as well as measuring and monitoring processes that are closely aligned with the activities of the departments and divisions. As a prerequisite and basis of solid risk management, the Association’s Risk Appetite Framework (RAF) is permanently enhanced in order to define the risk appetite and the level of risk tolerance that the Association of Volksbanks is prepared to accept to achieve its defined goals.