Internal Control and Risk Management

Provision of efficiency and constant perfection of the system of internal control and risk management is one of the Company's priorities. The development of internal control and risk management is primarily aimed at the provision of rational assurance in reaching strategic goals by the most efficient way, asset preservation and investment attractiveness as well as at the maintenance of governance efficiency and at the provision of trouble-free energy supply and energy efficiency.

Our principles of functioning, processes and procedures of internal control and risk management system (hereinafter referred to as the ICRMS) are regulated by the following internal documents:

- The Regulations on the Internal Control Procedures in IDGC of Urals, OAO (approved by a BoD resolution, Protocol #49 dd. 26.12.2008).

- The Risk Management Policy in IDGC of Urals, OAO (approved by a BoD resolution, Protocol #70 dd. 04.06.2010)

- The Internal Control Policy in IDGC of Urals, OAO (approved by a BoD resolution, Protocol #70 dd. 04.06.2010).

- The Regulations on the Arrangement of Inspections held by Internal Control and Audit Department in IDGC of Urals, OAO (approved by IDGCU's Decree #388 dd. 26.10.2009).

ICRMS participants and partition of power

According to the approved local regulatory documents on ICRMS perfection, directors and specialists on all management levels (both in our branches and HQ) are involved into risk management and internal control processes. The Board of Directors determines required levels and directions for ICRMS development. The Audit Committee evaluates ICRMS efficiency, including messages and reports of Internal Control and Audit Department, analyses financial (accounting) statements and contributes to the preparation of recommendations on significant financial and operating issues. The General Director arranges efficient ICRMS functioning, ensures internal control procedure implementation and bears responsibility for their completion. Internal Control and Risk Management Department directly evaluates the adequacy, sufficiency and efficiency of internal control procedures, coordinates risk management processes, arranges the implementation of internal control system in business processes and evaluates the compliance of accomplished financial operations to the current legislation and shareholder interests. Structural divisions, within their competence, reveal and evaluate risks, monitor, elaborate and implement measures taken to minimize the risks as well as accomplish control procedures.

ICRMS improvement

To improve ICRMS processes in 2010 we have taken measures on ICMS development aimed at the standardization of control environment and risks of our key business processes as well as improvement of risk management processes. The key direction for ICRMS development was the transition from exclusively revisory (revealing) nature of control procedures to the combination of 3 types of control: revisory (subsequent), current and preventive (preliminary) control. After that we elaborated the Regulations on control environment and risks of the key business processes as well as the key risk register. In future we plan to continue ICRMS improvement (transition from a standardized maturity level to an optimized one) and the automation of control procedures and risk management processes.

Key risks and measures taken to minimize the risks

Strategic Risks

Regulatory Risks

Financial Risks

Operating and Technological Risks

Legal Risks