Internal Control and Risk Management

Internal Control System

The Company’s internal control system is an integral element of the Company’s governing system, focused to ensure reasonable guarantees that the goals below are achieved:

  • Company’s efficiency and performance, including achievement of financial and operational indicators, soundness of  assets;
  • Company’s compliance with applicable laws and Company’s enactments, incl. Company’s operations and accounting;
  • Provision of integrity and timeliness of financial and other reporting.

The internal control system is risk-oriented, its control procedures were shaped by risks and set in a way to ensure reasonable guarantee of an efficient and timely response to risks. The ICS covers all lines of Company’s operations, with all processes regularly controlled at all management levels, under the “three lines of defense” model. The first line of defense is management bodies (sole and collegiate executive bodies) and units in charge of control procedures due to their duties. The second line of defense is the Company's control units. The third line of defense is internal audit units.

Risk Management System

With a view to secure sustainable faultless operations and evolution of the Company we have implemented the risk management system that identifies, evaluates and effectively manages risks threatening Company’s reputation and operations, health of employees, environment and ownership interests of stockholders and investors. To develop the risk management system the Company’s Board of Directors has adopted the Risk Management Policy.

The following entities participate in the risk management:

Board of Directors

  1. Adoption of Company’s bylaws stipulating arrangement and functioning of the risk management system.
  2. Adoption of the risk management policy.
  3. Examination of reports of the Company’s executive bodies with regard to roll-out, functioning and efficiency of the risk management system, evaluation of its performance and preparation of recommendations to improve the system.
  4. Examination of outcomes of external independent evaluation of the risk management system efficiency.

Board of Directors’ Strategy and Development Committee

  1. Oversight of the efficiency of procedures related to risk management and evaluation of the efficiency of activities related to risk management and RMS improvement.
  2. Evaluation of the efficiency of activities related to risk management and RMS improvement.
  3. Preliminary examination of reports of Company’s executive bodies with regard to the roll-out and functioning of the risk management system prior to filing with the Board of Directors.
  4. Analysis of proposals related to improvement of the risk management system, covering risk identification and risk parameters revision.
  5. Preliminary examination, prior to filing with the Board of Directors, of Company’s bylaws regulating roll-out and functioning of the risk management system, Risk Management Policies and their revisions.
  6. Preliminary examination, prior to filing with the Board of Directors, of an annual report section and preparation of an opinion with regard to it.

Executive Bodies (Executive Board, General Director)

  1. Enforcement of build-up and maintenance of the efficient risk management system, based on common approaches and standards, developed and adopted for the PAO Rosseti Group.
  2. Guarantee of execution of Board of Directors resolutions with regard to the roll-out and functioning of the risk management system.
  3. Setting of requirements to the format and adequacy of Company’s risks disclosures.
  4. Build-up of plans for the RMS development and improvement.
  5. Analysis of the risk portfolio and development of measures related to risk response strategy and resource reallocation.
  6. Preparation of an annual progress report with regard to the roll-out, functioning and efficiency of the Company’s risk management system and proposals related to the RMS development and improvement to be filed with the Board of Directors for examination.
  7. Examination of the progress report of the risk management unit with regard to risk management and evaluation of the RMS efficiency at least twice a year.
  8. Examination of the outcomes of an internal evaluation of the RMS efficiency, preparation of measures to develop and improve the RMS.
  9. Enforcement of the efficient risk management in day-to-day operations.
  10. Adoption of the Company’s regulatory and methodological instruments related to the roll-out and functioning of the risk management system, with the exception of bylaws falling under the Board of Directors purview.
  11. Filing of an annual progress report with regard to the roll-out, functioning and efficiency of the Company’s risk management system and proposals related to the RMS development and improvement with the Board of Directors for examination.

Risk owners (Deputy General Directors, directors with a direct reporting line to the General Director)

  1. Responsibility for timely exposure and evaluation of risks, selection of risk responses, timely generation and conduct of risk management activities, regular risk monitoring.
  2. Guarantee of timely distribution of information on the progress related to risk management among the Company’s executive bodies.
  3. Enforcement of efficient cooperation with the risk management unit on documentation and reporting, generated in the course of the risk management activities.

Performers of the risk management activities

Responsibility for timely exposure and/or minimization of risks, timely and duly execution of activities focusing on risk management.

Internal control and risk management section

General coordination of risk management processes.

Internal Audit unit

Conduct of internal independent evaluation of the risk management system efficiency and preparation of recommendations related to the enhancement of RMS efficiency and performance.

Key risk factors

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