Annual Corporate Governance Report 2017

38 REPUTATIONAL: The Atresmedia Group has high public exposure by reason of its wide range of corporate brands and the programmes it produces. The Group, as a media operator, reaches millions of people every day. Hence reputational risk is vital, and is closely followed and controlled by Group officers. We continuously monitor any news or information that might affect the reputation of the Atresmedia Group, any Group business and/or entity or any programme and/or presenter on such programme, so as to assess the materialisation of any reputational risk that might impair the Group image. The Atresmedia Group has a Code of Conduct approved by the Board. The Code lends visibility to the overall conduct framework within Atresmedia, thus enabling oversight. It also specifies and guides conduct and the personal and collective commitment of all Atresmedia employees, external partners, executives and directors. The Code is mandatory for all persons within the Atresmedia Group and/or its suppliers and service providers. INFORMATION: Atresmedia has mechanisms in place to measure the key indicators and magnitudes of the business to support agile and efficient decision-making on business processes and the quantifiable aspects of strategy, structure and financial capability. E.4 Indicate whether or not the company operates a risk tolerance threshold (encompassing tax risk). Atresmedia has defined a risk tolerance level within the Risk Management and Control System in each business, based on two main criteria:  process potentially affected by the risk;  level of affected operations/performance. The system regularly assesses the extent to which specified processes and organisations are exposed to identified risks. Risks are assessed on the following basis:  Inherent risk: the risk that exists in the absence of any action to modify its probability or impact.  Residual risk: the risk that remains even after adoption and implementation of a response to that risk. We then assess all risks on the basis of estimated impact probability, having regard to two criteria:  Impact: categorised on the basis of the adverse impact that materialisation of the risk would have on business performance or continuity.  Probability: we assess the likelihood that the risk will materialise independently of whether or not controls are adequate and reduce the risk to acceptable levels. Based on our regularly reviewed risk assessment criteria, risks are classified using risk matrices. E.5 Disclose any risks (including tax risks) that have materialised in the year. 1) Changes in the advertising market: A material effect arose in the advertising market as a result of the loss of correlation between its behaviour and the performance of the domestic economy as a whole. This development – which is Europe-wide – has led to difficulty when framing our commercial policy. The conventional advertising market has grown significantly less than the wider economy. This factor has prompted us to review our commercial policy and our approach to capturing expenditure from operators. Based on its information systems and its advertising market research, the Atresmedia Group has mitigated the effects of this low visibility by adapting the targets and parameters of its commercial policy. In addition, investment in a new company, SMARTCLIP LATAM, which operates in the online advertising market, is enabling us to become more familiar with advertising patterns online. 2) Rising competition and changes in linear television consumption: The past year has seen a material increase in the availability of subscription television in Spain from telecommunications operators that have enhanced and modernised their content offering and worldwide over the top subscription operators who have invested heavily in rolling out their market offer, considerably increasing their subscriber volume in Spain. The Atresmedia Group has mitigated these effects by means of agreements and alliances with these subscription TV operators so as to be able to offer its range of content, with a competitive edge in quality and local uptake. In addition, the Atresmedia Group has enhanced its content offer in line with