67 Sustainability Report 2014 Commitments and future challenges Sustainability at PRISA Internal Audit Department, which reports periodically to the Audit Committee on the results of their work.The respective managements of the businesses identify both those responsible for managing each risk as well as all relevant action plans and associated controls. Principal risks that may affect the achievement of business objectives The main risks facing the Group may be grouped into the following categories: ƒƒ Strategic and operational risks affecting the Group’s businesses. ƒƒ Financial risks. Strategic and operational risks affecting the Group’s businesses. Macroeconomic risks The economic situation of Spain and Portugal has shown a significant slowdown and volatility in recent years. Specifically, the main indicators of consumer spending in both countries have undergone significant deterioration that have affected, and may well continue to affect, levels of spending by the Group’s customers on their products and services, including advertisers, Pay TV subscribers and other consumers of PRISA content. Furthermore, PRISA activities and investments in Latin America are exposed to the evolution of the various macroeconomic parameters of each country including a potential decline in consumer spending as a result of a slowdown in the growth rate of these countries over the medium term. Deterioration of advertising market A significant proportion of PRISA revenues is derived from the advertising market, particularly in the press, radio, audiovisual and digital businesses. Spending by advertisers tends to be cyclical and is a reflection of the general economic situation and outlook. A worsening of the macroeconomic situation in Spain and Portugal could have a negative impact on forecast budgets of the Group’s advertisers. Given the high fixed costs associated with businesses with a high component of advertising income (mainly Radio and Press), any fall in advertising revenues directly impacts operating profits and thus the ability to generate cash flow for the Group, forcing different business units to carry out frequent reviews and adjustments to their cost base. Piracy Revenues from the exploitation of content and rights owned by the Group are affected by illicit access to these via the internet or copying, which primarily affects the Pay-TV and book publishing businesses.
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