Metalloinvest
Annual Report 2019

Risk management system

The Company performs risk management at main enterprises (companies), shares of which are owned by Holding Company Metalloinvest.

The Company adopts a policy of zero tolerance towards all manifestations of risk related to corruption, fraud, or harm to human health and the environment.

In accordance with the Articles of Association of Management Company Metalloinvest, the Board of Directors determines the principles and approaches to the risk management system. The effectiveness of the risk management process is under the constant supervision of the Board of Directors, which strives to foster the continuous development of the Company’s risk management system in accordance with international best practices.

The Company is guided by the following international risk management standards and practices:

  • ISO 31000:2018 Risk management – Principles and Guidelines.
  • COSO Enterprise Risk Management– Integrated Framework.
  • ISO 9001:2008 and ISO 9001:2015 Quality Management System.

The development priorities of the risk management system in the medium term include making the system an effective management decision-making tool, including in relation to the following aspects:

  • The further integration of the system with key business processes: budgeting, project management, production assets management, goal setting, and strategic planning.
  • Enhancing the quality of risk identification, risk evaluation, and the information content of risk reporting, as well as the monitoring of risk management measures.
  • Improving the approach to integrating risk appetite in management decisionmaking.
  • Updating and elaborating regulatory risk management documents.
  • Developing the risk culture.
  • Developing risk management competencies for managers at various levels of the management company and controlled companies, including through special risk management workshops for individual functions and creating an online risk management course on the internal corporate website.
  • Disclosure of risks on the official corporate website.
  • Widening the scope of the risk management system.

RISK MANAGEMENT

As the Company’s business is associated with various risks, an effective risk management system forms one of the fundamental elements of the Company’s business and development strategy. A highly efficient risk management system provides management with high-quality risk-related information that is pertinent for decision-making at all management levels. Making informed decisions facilitates the attainment of the Company’s strategic goals and key performance indicators.

Risk management is based on detailed analyses of current circumstances – the internal and external environment in which the Company operates, the economic situation in metals and mining industries on domestic and foreign markets, and other factors impacting the Company’s business.

The Board of Directors and the executive management of the Company analyse corporate risks with reference to various goals, including sustainable development, as well as the Company’s main business lines, to establish a comprehensive profile of risks the company faces when achieving its goals. Strategic and operational risks include geopolitical factors and the price situation, environmental risks, corruption risks, personnel management risks, production risks, and sustainable development risks.

The Board revises and monitors key corporate risks when making decisions. Managed and non-managed factors are identified for each key corporate risk, depending on whether the Company can have an objective influence on such factors.

The Board determines an annual level of risk appetite in relation to managed risk factors, which sets a financial limit on all-important decisions. KPIs for non-exceeding losses from risks that materialised in the reporting period and the level of risk appetite determined is included as an operational KPI of the Company and management. The Board of Directors Audit Committee considers risks that have materialised on a quarterly basis.

In 2019 the Company considered the following as being material risks: external environment risks and risks of changes in prices for manufactured products and purchased raw materials due to changes in the exchange rate. Based on the results of the reporting period, these risks emerged to some extent.

Most of the indicated events were outside the Company’s control. Managed risks (including production, investment, and credit risks) had a smaller effect and were retained in the risk appetite.

Analysis of key corporate risks 2019
Top key risks with an assessment of their influence on financial goals:
  • 1 Market dynamics
  • 2 Currency risk
  • 3 Political risks
  • 4 Reduced margins due to changes in the cost of manufactured products
  • 5 Production risks
  • 6 Investment risks
  • 7 Cross defaults
  • 8 Credit risks
  • 9 Information security risks
  • 10 Contractors’ action risks
Top risks with an assessment of their influence on non-financial goals:
 
  • 11 Environmental and climate risks
  • 12 OHS risks
  • 13 HR risks
  • 14 Corruption risks