cial year under review, risk strategies as well as the bank`s business strategy were adapted to the changed environment, and the new strategies adopted by the Management Board and the Supervisory Board. 1.3 Risk-bearing capacity and risk limits The bank`s ability to carry and sustain risk ­ which is defined by the amount of aggregate risk cover ­ is a core determining factor governing the structure of its risk management system. Aggregate risk cover is defined as Tier 1 capital plus the budgeted net income before taxes. The calculation does not include additional funds such as supple- mentary and subordinated capital. The aggregate risk cover is updated at least once a year, and additionally in the event of significant changes occurring (such as a capital increase, or a change in earnings projections). We have thus implemented a system based upon limits defined in a conservative manner, and differentiated according to the type of risk. The aggregation of individual limits is based on the assumption that no risk-mitigating correlation effects exist amongst different types of risk. We also maintain a significant part of our aggregate risk cover (around 23 % as at 31 December 2008 ­ 31 December 2007: approx. 25 %) as a risk cushion, which is not applied to risk limits, and is thus available for risk types that cannot be quanti- fied (for example, reputational or strategic risks). Overall, limits are set in a way so as to ensure Aareal Bank`s ability to bear risk at any time. even against the background of market distortions as a result of the financial markets crisis during the financial year under review. The diagrams shown left illustrate the allocation or aggregate risk cover across individual types of risk as at 31 December 2007 and 31 December 2008, respectively. Concerning liquidity risk, aggregate risk cover is not an appropriate measure to assess risk-bearing capacity. Therefore, we have defined special tools for managing this type of risk. These tools are described in detail in the section "Liquidity risk". 2. Organisational structure and workflows 2.1 Credit business 2.1.1 Division of functions and voting Aareal Bank Group`s structural organisation and business processes are consistently geared to- wards effective and professional risk management. This includes the extensive implementation of regulatory requirements regarding the structural organisation and workflows in the credit business. Allocation of aggregate risk cover 31 December 2008 Credit risks 57 % Risk cushion 23 % Market price risks 13 % Operational risks 4 % Investment risks 3 % Allocation of aggregate risk cover 31 December 2007 Credit risks 53 % Risk cushion 25 % Market price risks 14 % Operational risks 4 % Investment risks 4 % 80 Aareal Bank Group ­ Annual Report 2008 | Group Management Report