Risk management

Risk management system

The risk management system (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 relies 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.

Organisational structure for risk management

Corporate level
Board of Directors
  • Defining principles and approaches to risk management system organisation
  • Approving the general policy on risk management, risk appetite, Corporate Risk Map, and key risk management plans
Audit Committee

Preliminary consideration and preparation of recommendations on matters to be reviewed by the Board of Directors

Operational level
President / Executive Board

Ensuring efficient risk management for the Group

Risk manager
  • General coordination of RMS implementation and functioning
  • Development of the RMS methodology
  • Consolidation of information and reporting
Risk exper
  • Drafting risk profiles
  • Work in 1C: Risk Management
  • Methodological RMS-related support to Group employees
Process (risk) owner
  • Identification, evaluation, and description of risks
  • Development of risk management measures and action tracking
  • FESCO employees

    Risk identification as part of their duties

    Internal audit
    Internal Audit Department

    Evaluation of the risk management system efficiency

    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.

    Key stages of the risk management system

    Development of risk management system

    We keep improving our risk management system to timely respond to changes, both external and internal, maintain strong performance and increase efficiency amid risks and uncertainty.

    The RMS is developing in line with an approved plan to 2023.

    The following steps were taken in 2022 to improve the efficiency of risk management and introduce a comprehensive risk-based approach to decision-making:

    • we developed new risk reporting formats, including a risk register, risk profiles, risk matrix, etc.
    • we updated local regulations on risk management;
    • we selected and trained risk experts from among our employees;
    • we defined risk appetite for 2023;
    • we continued to identify and assess new risks and maintained a company-wide risk database relying on 1C: Risk Management.

    Priority areas for the strengthening of risk management include:

    • integrating risk management into key processes, such as investment planning, budgeting, and risk management in operating and financial activities;
    • improving risk data quality by unifying, standardising and automating risk management processes;
    • making information exchange more effective.

    Corporate map of material risks

    Detailed description Impact assessment / probability Comment Risk management
    Commercial risks
    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 2022, the impact of risk materialisation was assessed as insignificant.
    The risk remains in 2023
    FESCO mitigates commercial risks through a balanced pricing policy. 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, EU and other countries building up their sanctions pressure, including potential sanctions against the Company, its customers and the industries where they operate, as well as the Company's customers and suppliers exiting the market Medium/low In 2022, the impact of risk materialisation was assessed as insignificant.
    In 2023, 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 (railcars, containers, vessels, terminals), the management of operational risks is one of the key priorities due to their sheer number Medium/medium In 2022, the impact of risk materialisation was assessed as insignificant.
    The risk remains in 2023
    As part of its risk mitigation initiatives, FESCO repairs and upgrades its assets, invests in new equipment, streamlines shipment structure and refines its control over the quality of asset management and protection