175 The accounting mismatch inherent in IFRS is also apparent in the reported sensitivities. A change in interest rates has an immediate  impact on the carrying amount of assets measured at fair value. However, the shock will not have a similar effect on the carrying  amount of the related insurance liabilities that are measured based on locked-in assumptions or on management’s long-term  expectations. Consequently, the different measurement bases for assets and liabilities lead to increased volatility in IFRS net income  and shareholders’ equity. Aegon has classified a significant part of its investment portfolio as “available-for-sale”, which is one of  the main reasons why the economic shocks tested have a different impact on net income than on shareholders’ equity. Unrealized  gains and losses on these assets are not recognized in the income statement but are booked directly to the revaluation reserves in  shareholders’ equity, unless impaired. As a result, economic sensitivities predominantly impact shareholders’ equity but leave net  income unaffected. The effect of movements of the revaluation reserve on capitalization ratios and capital adequacy are minimal.  Aegon's target ratio for the composition of its capital base is based on shareholders' equity excluding the revaluation reserve. The sensitivities do not reflect what the net income for the period would have been if risk variables had been different because the analysis  is based on the exposures in existence at the reporting date rather than on those that actually occurred during the year. Nor are the results  of the sensitivities intended to be an accurate prediction of Aegon’s future shareholders’ equity or earnings. The analysis does not take  into account the impact of future new business, which is an important component of Aegon’s future earnings. It also does not consider all  methods available to management to respond to changes in the financial environment, such as changing investment portfolio allocations  or adjusting premiums and crediting rates. Furthermore, the results of the analyses cannot be extrapolated for wider variations since  effects do not tend to be linear. No risk management process can clearly predict future results. Concentration risk for financial risks are measured and managed at the following levels: Moreover concentration of financial risks are measured in Aegon business planning cycle. As part of business planning, the resilience of  Aegon’s business strategy is tested in several extreme event scenarios. In the Depression and Inflation scenario financial markets are  stressed without assuming diversification across different market factors. As part of the Extreme Event Scenario testing, appropriate  management actions are implemented when management deems this necessary. Concentration risk for insurance risks are measured and managed at the following levels: Risk mitigation/transfer programs are taken for the exposures that are close to or exceed the limit. More generally, Aegon’s processes  for managing insurance risks include risk-based pricing, underwriting and claim process, risk analysis and modeling, and management  actions such as repricing, risk mitigation/transfer, enhancing customer service, etc. As an international group, Aegon is subject to foreign currency translation risk. Foreign currency exposure exists when policies are  denominated in currencies other than the issuer’s functional currency. Currency risk in the investment portfolios backing insurance  and investment liabilities is managed using asset liability matching principles. Assets allocated to equity are kept in local currencies  to the extent shareholders’ equity is required to satisfy regulatory and self-imposed capital requirements. Therefore, currency  exchange rate fluctuations will affect the level of shareholders’ equity as a result of translation of subsidiaries into euro, the Group’s  presentation currency. Aegon holds the remainder of its capital base (perpetual capital securities, subordinated and senior debt) in  various currencies in amounts that are targeted to correspond to the book value of the country units. This balancing mitigates currency  translation impacts on shareholders’ equity and leverage ratios. Aegon does not hedge the income streams from the main non-euro  units and, as a result, earnings may fluctuate due to currency translation. As Aegon has significant business segments in the Americas  and in the United Kingdom, the principal sources of exposure from currency fluctuations are from the differences between the US dollar  and the euro and between the UK pound and the euro. Aegon may experience significant changes in net income and shareholders’  equity because of these fluctuations. Currency exchange rate risk ■ Concentration per risk type: Insurance risks include mortality, longevity, morbidity and policyholder behavior risk. Similar to financial  risks, a risk tolerance framework is in place which sets risk limits per risk type and which promotes diversification across risk types. ■ Concentration per insured life: Mortality risk retention limit per life is set as part of the Underwriting Risk Policy.  ■ Concentration per risk type: Risk exposures are measured per risk type as part of Aegon’s internal economic framework. A risk tolerance framework is in place which sets risk limits per risk type and which promotes diversification across risk types. ■ Concentration per counterparty: Risk exposure are measured and risk limits are in place per counterparty as part of the Counterparty  Name Limit Policy. ■ Concentration per sector, geography and asset class: Aegon’s investment strategy is translated in investment mandates for our  internal and external asset managers. Through these investment mandates limits on sector, geography and asset class are set.  Compliance monitoring of the investment mandates is done by the insurance operating companies.