In a rapidly changing economic environment, companies feel compelled to manage uncertainties swiftly and effectively. Identification and control of risk emerge at the forefront of attaining the goals. In order to address this exigency, a Corporate Risk Department was established within the Company.

Management of financial risk is under the authority and responsibility of the Head of the Financial Affairs Group and monitored under the supervision of Financial Affairs, Financing, Budget and Corporate Risk Departments. The Audit Committee and the Corporate Governance Committee also advise the Board of Directors about issues concerning risk management and the internal control mechanism, along with their proposed solutions as and when required.

The Company took on the current crisis in the most effective, efficient and robust manner owing to already prepared reports. Compiled to facilitate rapid adoption of necessary measures, the reports included briefings and proposals ranging from routing investments only to areas with a fast rate of return, to curtailing all kinds of expenses, from employing available resources in an efficient and maximized way, to draw short and medium-term contingency planning, thereby enabling the Company to take quick action.

The Corporate Risk Department ensures that all kinds of risk (Financial, Operational, Strategic and Compliance) that might pose a threat to the Company is kept up-to-date on a risk radar; the Company is safeguarded from adverse effects, turning risk into benefits and advantages.

The Corporate Risk Department is designed as a unit identifying critical risk, measuring the impact, balancing the strategies and business processes of the organization and generating solutions.

The Financial Risks the Company is Subject to

Interest rate risk: Hürriyet and its subsidiaries are subject to interest rate risk due to their interest-sensitive assets and liabilities. This risk is managed through the balancing of interest rate-sensitive assets and liabilities.  

Funding risk: Existing and forward-looking borrowing requirements are performed by securing sufficient funding commitments from lending companies with high funding capability and quality.

Credit risk: Financial asset ownership comes with counterparty risk. This risk is managed by limiting credit exposure to each recipient. The Company’s credit risk is dispersed to a great extent thanks to the large number of recipients and that they operate in diverse business lines.

Exchange rate risk: Hürriyet and its subsidiaries are subject to exchange rate risk due to the changes of the exchange rate used in converting their foreign currency-denominated debt to the Turkish lira. This risk is monitored through foreign currency position analysis.

Operational Risks

Receivables risk: During the current financial global crisis, a collections risk emerged. A package of necessary measures was drawn up to avert this risk.

Compliance risk: Concerning the risk arising from contracts drawn up for the purchase of goods and services, the Company is supplied with relevant legal provisions to vindicate its rights. Measures are taken to ensure that the contracts are kept up-to-date and regularly monitored.

Tax Risk: Hürriyet Gazetecilik ve Matbaacılık A.Ş. was subjected to tax inspection during 2004, 2005, 2006 and 2008 resulting in the preparation of nine tax inspection reports in 2009. According to these reports, the Company had to pay TL 12,292,166 of taxes and TL 18,438,250 of tax loss fine; the Company has demanded a compromise prior to assessment; however, no compromise was reached during the talks. Consequently, lawsuits were filed against all the said reports on December 9, 2009 and the Company spared TL 15,554,695 of reserves (including default interest) after consulting with certified public accountants and lawyers. The Company abided by the relevant legal process and all developments have been closely monitored by the Department of Legal Affairs.

In Turkey, internal control activities are now a legal obligation; with the new Turkish Commerce Code, the duties and responsibilities of Board of Directors and top management have increased considerably. In this regard, the Company’s Internal Control Department provides independent and objective consultancy to the management, in line with the new control perspective.

The Department aims to enhance and provide added value to the Company’s activities and analyzes cost/benefit balance, productivity and efficiency of the Company’s activities. Systematic analyses have resulted in an active control over expenditures, expense reducing activities and economization measures. In this regard, the Department has adopted a risk-focused internal control perspective, thereby periodically analyzing financial tables, effectuating risk analysis studies and aiming to minimize risk and preventing present risk with the minimum cost, in coordination with all departments. As a result of joint efforts with the Risk Management Department, various reports have been prepared and rapid actions have been taken, thereby allowing the Company to assume an efficient, productive and robust position in today’s risk environment.

In 2009, the Company’s operations were expanded on a regional basis and control was broadened. Periodic reports have allowed for the administrative, managerial and financial control of regional representative offices and printing facilities and the establishment of coordination between the center and the regions. The Department’s ultimate goal is to create added value; therefore it has enacted control of processes with systematic controls and through procedures and regulations prepared and its process focused control perspective has allowed for all necessary actions to be taken timely.

In 2009, the operations of the Internal Control Department consolidated managerial accountability and its new perspective resulted in a risk-focused and preventive control approach.