Descripción de factores extrínsecos e intrínsecos

45annual report2004 Market risk

Market risk derives from possible changes in interest rates and the prices of securities and derivatives.

Binck has a trading portfolio and an investment portfolio. For its trading activities Binck has a trading portfolio in equities, bonds and derivatives. Changes in interest rates and the prices of securities and derivatives have a direct effect on the value of the trading portfolio and, with that, on Binck’s capital and results. In order to control market risks of the trading portfolio, Binck has instituted an internal limit system, monitored by the Risk Management department. By means of a frequent meeting of the Risk Committee, the limit system, the risks of the existing positions and limits and proposals for new trading strategies are discussed and adopted. If the set limits are exceeded, direct action is taken by Risk Management, after which a report is immediately sent to the responsible member of the Board.

Furthermore, Binck is - in its role as liquidity provider and market maker - sometimes committed to buy or sell securities under its trading activities.

BinckBank has an investment portfolio consisting of fixed-interest stock. The contents of the investment portfolio are determined by the management. The investment portfolio is subject to fluctuations in val-ue through changes in the interest rates and the creditworthiness of the institution issuing those bonds. Binck invests only in fixed-interest instru-ments with a minimum rating of Single A according to Standard & Poor’s credit rating. The expected pos-sible change in value of the investment portfolio by the end of 2004 comes to about€ 850,000 per one percentage point of absolute rise in the relevant interest rate.

Interest risk

Interest risk derives from the possibility that changes in interest rates might exert a negative influence on future profitability.

Binck manages this risk insofar as it concerns the banking activities of BinckBank through bringing the interest periods of assets and liabilities within set

limits and matching them. The investment portfolio is therefore spread over different durations and con-sists amongst others of bonds with floating interest rates.

Liquidity risk

Liquidity risk relates to the existing and future threat to Binck’s capital and results in the possibility that Binck might at any moment not be in a position to fulfill its short-term liabilities without this incurring exorbitant costs and/or losses.

At the end of 2004 Binck had an ample liquidity position. In addition, Binck has a credit facility with banks. Because of its business activities there is a risk of liquidity shortage, deriving from such things as maximum trading positions, incorrect settlement of securities transactions for wholesale clients, high level lending to retail clients and reduction in the entrusted funds from retail clients.

The liquidity risk is monitored by a daily determina-tion of the liquidity posidetermina-tion, whereby all business activities are taken into consideration.

Foreign exchange risk

Foreign exchange risk is the risk of fluctuations in the value of items in foreign currency as the result of changes in exchange rates.

In this respect Binck has a translation risk arising from activities of subsidiaries outside the Euro zone.

If there is a fluctuation in foreign currency, the value of the revenues and capital in Euros changes in Binck’s Profit & Loss Account and balance-sheet respectively. Binck operates a policy whereby these risks are not hedged.

Foreign exchange risks arising from trading activities and brokerage activities are hedged immediately, based on internal guidelines, unless a currency position is taken on the basis of a trading strategy approved by the Risk Committee. The currency position is monitored on a daily basis to ensure that it stays within set limits.

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Operational risk

This concerns the risk of losses that arise as the result of inadequate systems, processes and proce-dures. We use the term ‘operational risk’ to indicate general operational risks, IT risks, risks arising from outsourcing of business processes and integrity risks.

An operational risk is generally the result of:

• Inadequate action in the daily processing of trans-actions with clients or other interested parties, the settlement of those transactions and inade-quate procedures and measures for the timely detection of defects.

• Quantitative and qualitative shortcomings or limi-tations as a consequence of human intervention.

• Defective decision-making as the result of inade-quate management information.

• The failure to correctly apply internal control pro-cedures.

Operational risk is managed by the structure of the organisation, in which various internal monitoring measures are incorporated. Some of the components of this are:

• Transaction and position reconciliation, including management reporting.

• Automated confirmation and execution of trans-actions with related audit trails.

• Procedures for engaging staff and assisting staff, job segregation and description for all staff mem-bers and departments.

• Clear reporting lines, registration of required management information and periodic internal meetings.

* Internal monitoring and auditing inspection, job segregation, compulsory ‘four-eye’ principle for power of attorney and contractual binding of the company and reporting structures.

‘IT risk’ is referred to as the actual or future threat to the capital and results of Binck as a consequence of shortcomings in the functionalities applied.

Binck is to a large extent dependent on IT.

Shortcomings in the IT area can lead to a significant threat to the capital and results of Binck. The setup

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of the IT organisation, including various internal monitoring measures, manage that risk. This deals with such things as IT policy, security policy, incident management, change management and availability and performance management. In addition, BinckBank has a business recovery site in case of a disaster. This is not available for all of Binck’s activi-ties.

Risks arising from the outsourcing of automated business processes include the actual or future threat to the capital and results of Binck because of the structural provision by third parties of services that are part of Binck’s business processes.

Binck has not outsourced any other business processes externally. However, various subsidiaries do take services from each other. Internal service lev-el agreements have been entered into for this pur-pose.

The integrity risk includes harm to the company’s reputation as well as the actual or future threat to the capital and results of Binck as a consequence of inadequate adherence to the applicable legal rules and regulations and internal standards, instructions or rules of conduct.

In order to control this risk, Binck operates internal standards and rules of conduct that are clearly com-municated. Binck has appointed a compliance officer, who acts on the basis of clear reporting lines and escalation procedure. Binck also has a ‘whistle-blow-ing’ code.

Strategic risk

The strategic risk concerns the actual or future threat to the capital and results of Binck as a conse-quence of shortcomings arising from inadequate business decisions, poor execution of such decisions or insufficient response to changes in the business climate in general and the markets relevant to Binck in particular.

47annual report2004 International economic conditions have an impact

on stock markets throughout the world and thus the results of Binck’s business activities. Among other things, falling trading volumes can result in lower income from financial transactions, interest and commission income. BinckBank is active in a highly competitive environment in which competitors, often very large financial institutions, have well established brand and ample financial resources.

BinckBank makes great efforts and substantial investments to keep existing clients and to attract new ones.

In 2004, Binck developed a new long-term strategy and is permanently testing all of its business units against criteria with regard to strategic fit, profitabil-ity and synergic benefits. This is an ongoing process in a radically changing environment.

General

In 2004 Binck commenced setting up an extensive risk analysis to manage risks arising particularly form its trading activities. In addition there is an internal audit department which is responsible for carrying out risk analysis and internal inspection into the functioning of the control measures instituted and the configuration of the organisation. The inter-nal audit department is currently still occupied with setting up the risk analysis and has not yet started on the aforementioned internal controls. In addition, Binck installed an Audit Committee during 2004.

BinckBank has had an internal audit department for some time now, which is actively involved in risk analysis and carries out internal inspections. Every year a number of inspections of the control of identi-fied risks are carried out on the basis of a plan dis-cussed with the Audit Committee. These inspections provided a satisfactory assessment in 2004 of the internal control measures and the organisation with regard to the inspected risk areas within BinckBank.

These assessments are also discussed with the man-agement, the Audit Committee and the Supervisory Board.

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The following companies were dissolved in order to further simplify the structure:

• One Two Invest Holding B.V. (on 14 October 2004)

• Stichting Administratiekantoor Effectenbank Binck (on 1 September 2004)

• Subholding Hoekman B.V. (on 14 October 2004)

• AOT Nederland IV BV (on 1 July 2004)

• AOT Nederland VII BV (on 1 July 2004)

• AOT Nederland VIII BV (on 1 July 2004)

• AOT Nederland IX BV (on 1 July 2004)

• AOT Belgium II NV (on 29 October 2004)

• Castelijn en Castelijn Beheer B.V.

(on 31 December 2004)

In addition, the 5.25% minority holding in Paerel Trading Partners B.V. was sold to a third party on 23 December 2004. The activities of AOT Nederland B.V.

Paris Branch and HIT Securities Ltd. were also termi-nated in 2004. The dissolution of the aforemen-tioned branch and legal entity has yet to be pursued and is dependent on the final settlement of all the outstanding commitments.

In 2004 discussions have started with the minority shareholders of AOT België NV on the purchase of the minority holding. An agreement was reached on this after the balance-sheet date.

The organisation structure is currently as follows:

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