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Allianz Annual Report 2012

Annual Report 2012    Allianz Group Board 1 as applicable. As stakeholder perceptions differ be- tween markets, operating entities complement the Group guidelines with locally-sensitive business areas and guide- lines, which take into account specifics such as product portfolios and the cultural environment. All affected Group and operating entity functions, such as the business, communications, compliance and risk de- partments, closely cooperate in the identification of repu- tational risk. A uniform qualitative rating approach is used in all operating entities for the assessment of the reputa- tional risk. Single reputational risk management decisions are integrated in the overall risk management framework in the following way: Reputational risk identification and assessment is an important part of the quarterly “Top Risk Assessment”, in which senior management decides about a proposed risk strategy and related actions. In addition, reputational risk is managed on a case-by-case basis. Single cases which might endanger the reputation of other oper- ating entities or the ­Allianz Group have to be reported to ­Allianz SE for pre-approval. Risk governance Risk Management Framework As a provider of financial services, we consider risk man- agement to be one of our core competencies. It is therefore an integral part of our business process. The key elements of our risk management framework are: −− Promotion of a strong risk management culture sup- ported by a robust risk governance structure. −− Consistent application of an integrated risk capital framework across the Group to protect our capital base and to support effective capital management. −− Integration of risk considerations and capital needs into management and decision-making processes through the attribution of risk and allocation of capital to the various segments. This comprehensive framework ensures that risks are iden- tified, analyzed and assessed in a consistent manner across the Group (“Top Risk Assessment”). The Group’s risk 1 The ­Allianz ESG Board is constituted as an advisor to the Board of Management of ­Allianz SE and will further elevate environmental, social and governance aspects in corporate gover- nance and decision-making processes of ­Allianz Group. appetite is defined by a clear risk strategy and limit struc- ture. Close risk monitoring and reporting allows us to de- tect potential deviations from our risk tolerance at an early stage at both the Group and operating entity levels. For the benefit of shareholders and policyholders alike, our risk management framework adds value to ­Allianz SE and its operating entities through the following four primary components: Risk underwriting and identification:  A sound risk under- writing and identification framework forms the foundation for adequate risk taking and management decisions such as individual transaction approvals, new product approvals and strategic or tactical asset allocations. The framework includes risk assessments, risk standards, valuation meth- ods and clear minimum standards for underwriting. Risk reporting and monitoring:  Our comprehensive quali- tative and quantitative risk reporting and monitoring framework provides senior management with the trans- parency and risk indicators to help them decide our overall risk profile and whether it falls within delegated limits and authorities. For example, risk dashboards, internal risk capital allocation and limit consumption reports are regu- larly prepared, communicated and monitored. Risk strategy and risk appetite:  Our risk strategy clearly de- fines our risk appetite. It ensures that rewards are appropri- ate for the risks taken and that the delegated authorities are in line with our overall risk-bearing capacity. The risk- return profile is improved through the integration of risk considerations and capital needs into decision-making processes. This also keeps risk strategy and business objec- tives consistent with each other and allows us to take op- portunities within our risk tolerance.2 Communication and transparency:  Finally, transparent and robust risk disclosure provides the basis for communi- cating this strategy to our internal and external stakehold- ers, ensuring a sustainable positive impact on valuation and financing. 2 For additional information regarding opportunities, please refer to the chapter Outlook 2013 and 2014 from page 154 onwards. 210