As stipulated in the Risk Control and Management Policy approved in February 2015, the Company approaches risk management as a continuous and dynamic process encompassing the identification, assessment, prioritisation and management of risks effectively and efficiently, factoring in the organisation’s specific circumstances and the economic and regulatory environments prevailing in its operating markets.

The integrated enterprise risk management (ERM) system of Lar España and its subsidiaries, implemented at the highest level of the corporation, has been designed to mitigate the risks (including tax risks) to which the organisation is exposed by virtue of its business activities.

The system’s overriding goal is to guarantee reasonable assurance that it will be able to achieve its strategic, operating, reporting and compliance objectives. Accordingly, the ERM system is aligned with the key guidelines established in the “Enterprise Risk Management - Integrated Framework. Committee of Sponsoring Organizations of the Treadway Commission (COSO)” report (hereinafter, COSO).

Lar España has identified the risks that could jeopardise its ability to achieve its objectives and successfully execute its strategies. In order to identify these risks, management’s experience in the real estate sector and the Company’s specific circumstances were factored in, as were the medium-term strategic initiatives contemplated by the firm.

Lar España has an updated risk map depicting the universe of risks that could affect the organisation. The risks listed below are the risks that have been prioritised by Lar España in the wake of this risk mapping exercise, updated annually; in 2015, it managed and monitored these risks adequately, a process which will be ongoing in the years to come:

Main risks

The risk map is the tool used by Lar España to identify and assess its risks. All the risks contemplated, including tax risks, are evaluated considering various indicators of impact and likelihood.

The organisation’s most significant risks have been duly identified:

• Management of REIT regime-related requirements

• Investment planning

• Accounting and financial reporting

• Investment project monitoring

• Real estate asset sale-purchases

• Property values

• Property maintenance

• Data collection (quality of information key for decision- making)

• Dependence on the Asset/Investment Manager

• Financing (including financial planning))

• Investor and media relations

• Board functioning

• Impact of socio-political changes

Response and monitoring plans

The specific characteristics of Lar España, coupled with those of the business sector in which it operates, make it of tantamount importance to correctly monitor and update the various risks to which the organisation is exposed, including tax risks.

The level and frequency with which it monitors the risks identified varies as a function of the perceived importance or criticality of these risk factors and the level of effectiveness of the controls currently in place. Accordingly, Lar España has defined different scenarios for managing its risks:

Exhaustive analysis
Risks deemed highly critical
Assesment and surveillance
Risks assessed to be of medium importance
Rationalisation and optimisation
Less critical risks