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Risk Management and Risk Factors
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RISK MANAGEMENT Management of financial risk is under the authority and responsibility of the Head of the Finance Group and monitored under the supervision of Financial Affairs, Financing, Budget and Corporate Risk Departments. Identification and reporting of financial risks, as well as operational risks of the Company's subsidiaries are performed by the Internal Audit Department under the authority and responsibility of the CEO. When needed, the Audit Committee and the Corporate Governance Committee inform the Board of Directors of problems with risk management and the internal control mechanism, as well as the proposed solutions. Financial risk the Company is subject to includes; Interest rate risk: Hürriyet and its subsidiaries are subject to interest rate risk due to their interest-sensitive assets and liabilities. These risks are 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. These risks are managed by limiting credit exposure to each recipient. The Company's credit risk is diversified to a great extent thanks to the large number of recipient 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 in the exchange rate used to convert their foreign currency-denominated debt to the Turkish Lira. This risk is monitored through foreign currency position analysis. (Note 29 in “Notes to Consolidated Financial Statements for 2007") The Company created an internal Corporate Risk Department that defines critical risks, calculates their impact, balances the strategies and business processes of the Company and generates solutions. The Corporate Risk Department strives to limit the impacts of any adverse development on Hürriyet and its subsidiaries and to switch financial, operational and strategic risks that threaten the future of the Group in an increasingly uncertain (exchange rate fluctuations, crisis, recession, abuse, etc.) environment to the Company's benefit and advantage. INTERNAL CONTROL Primary duties of the Internal Audit Department are to produce independent reports on the effectiveness and efficiency of operations, on the reliability of the accounting records, reports and financial statements and on the compliance with regulations and directions approved by the management; to audit the existing internal control structures; to create an effective internal control structure and to inform the management. In 2007, the Company's existing internal audit practices were reviewed and efforts were made to determine points of internal control. The control and reliability of monthly financial statements were tested; end-of-period physical inventory counts were carried out and the results were reported. Doğan Yayın Holding Internal Audit Department performed an audit covering all regional offices and printing facilities of the Company and an action plan was prepared on the basis of the resulting audit report. Changes in legislation were monitored and agreements binding the Company were reviewed in an attempt to reduce risk. DECLARATION OF THE BOARD OF DIRECTORS REGARDING THE PROPER FUNCTIONING OF THE INTERNAL CONTROL SYSTEM Resolution No. 2008/18 of the Board of Directors, dated April 25, 2008; Based on the work performed and reports prepared in 2007 by the Internal Audit Unit, which was established to assess the effectiveness and efficiency of the internal control systems in light of the Principles and Standards of Corporate Governance, we observe that the organization is being managed in accordance with Company objectives and that operations are performed in conformity with the financial statements and applicable legislation. Consequently; The Board of Directors has unanimously decided to declare that the Company has in place an effective and properly-functioning internal control system, considering that, in 2007, the main risks were identified, continuously monitored and minimized and that the existing internal control activities were frequently and continuously evaluated, in line with the objectives we have determined. |
