Risk management
Risk management system
The RMS is a set of risk management components (culture, competences, methodology, practices, resources), methods, and processes integrated into the Company’s strategic planning and operational management and designed to achieve its strategic and operational objectives.
The RMS is based on the following international and national standards:
- COSO ERM 2017 Conceptual Framework for Enterprise Risk Management: Integrating with Strategy and Performance;
- ISO 31000:2018 Risk Management;
- GOST R ISO 31000-2019 Risk Management.
The Company identifies and monitors risks on an ongoing basis, assessing the effectiveness of its risk management measures and using, among other things, the Company’s emerging opportunities for business development and value growth.
Key RMS functioning principles:
- alignment with targets;
- continuity;
- integration and transparency;
- RMS participants’ awareness;
- reasonable degree of formalisation and documenting;
- continuous adaptation and development;
- reasonable distribution of responsibilities and powers;
- relevance and expediency;
- training and incentives;
- common methodological procedures.
Development of risk management system
The following steps were taken in 2021 to improve the efficiency of risk management and introduce a comprehensive risk-based approach to decision-making:
- a plan was put together for the development of the Company’s RMS in 2022, defining the key RMS development areas, including risk unification and systematisation, focus on risk occurrence reasons, prompt identification of and response to risks;
- a working group was established for the development of the Company’s RMS;
- an automated RMS based on 1C:Risk Management was put into commercial operation.
In 2022, to further improve the RMS, it is planned to conduct an in-depth study of ESG risks and any environmental, social, and corporate governance factors affecting them.
Corporate map of material risks
| DESCRIPTION | IMPACT ASSESSMENT / PROBABILITY | COMMENT | RISK MANAGEMENT |
|---|---|---|---|
| COMMERCIAL RISKS | |||
| FESCO’s commercial risks are risks of losses arising from external (demand, competition, market changes, etc.) and internal (quality and price of services provided, etc.) volatility | High/medium | In 2021, the impact of risk materialisation was assessed as insignificant. The risk remains in 2022 | FESCO mitigates commercial risks through a balanced pricing policy with discounts and preferences to reliable counterparties. The management of commercial risks is based on long-term partnerships with counterparties designed to increase the Company’s financial stability in the hostile economic environment. Another tool is optimisation of internal business processes in order to respond efficiently to market changes |
| GEOPOLITICAL RISKS | |||
| Geopolitical risks stem from the US and the EU building up their sanctions pressure as well as from the destabilisation of domestic political and social situation in Russia | Medium/low | In 2021, the impact of risk materialisation was assessed as insignificant. In 2022, the risk consequences and probability are estimated to increase | FESCO operates in strict compliance with the Russian and international laws and constantly keeps track of all regulatory changes affecting its operations. FESCO is capable of promptly adjusting its operations |
| OPERATIONAL RISKS | |||
| Given FESCO’s significant transport assets (rail cars, containers, ships), the management of operational risks was one of the key priorities in 2021 due to their sheer number | Medium/medium | In 2021, the impact of risk materialisation was assessed as insignificant. The risk remains in 2022 | As part of its risk mitigation initiatives, FESCO upgrades container terminals, invests in repairs and new equipment, streamlines shipment structure and refines its management and control quality system |
| FINANCIAL RISKS | |||
| The most material financial risks for FESCO are liquidity and credit risks | High/low | The risk did not materialise in 2021. The risk remains in 2022 | The cash flow budget, including short- and medium-term planning tools, is the key instrument for managing liquidity risks |