Page 44-45 - MMK annual report 2011

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ANNUAL REPORT
44
45
Risk Management
MMK was among the first Russian ferrous metals companies to develop and launch a comprehensive
risk management system that meets international standards. MMK has a risk management division, an
approved risk management policy and a corporate standard for risk management.
By managing risk appropriately, MMK aims to ensure strategic and operational sustainability and to
develop its business.
The goals of MMK’s risk management policy are:
Identifying and assessing risk;
Provision of information about risks to MMK’s shareholders, governing bodies and employees;
Development and implementation of actions to mitigate risks;
Risk monitoring;
Establishment of risk management procedures;
Control of compliance with approved risk management procedures;
Making risk management processes an integral part of MMK’s strategic and operating management.
MMK keeps its risk management system updated and makes improvements on a rolling basis. In 2011,
the Company implemented the following measures:
Development and subsequent approval by the Board of Directors of a new version of the MMK Risk
Management Policy;
Identification and evaluation of the principal risks faced by MMK Group companies (work on
consolidating the risks facing MMK Group companies and drafting of a Risk Map is planned for
2014);
Completion of the introduction of a Comprehensive Risk Management System at MMK’s production
sub-divisions;
Introduction of a multi-faceted approach to evaluating risks of building and structural failure;
Improvement of risk management procedures regarding non-fulfilment of payment obligations for
steel products;
To mitigate the risk of production stoppages, the CEO approved the list of plants considered
production bottlenecks. A reserve stock of spare parts has been established for these plants.
The main risks faced by MMK are the following:
1.
Low actual demand and prices for steel products
2.
Higher prices for iron ore raw materials, coal, metallic scrap and non-ferrous metals
3.
Failure by contractors to meet obligations
4.
Non-compliance with financial and economic parameters specified in investment and
integration projects
5.
Claims for loan prepayments
6.
Corporate fraud
7.
Currency risk
8.
Claims for recovery under guarantees issued to third parties
9.
Accidents
10.
Industrial emergencies and incidents
11.
Interest risk
12.
Environmental risk
A senior manager has been appointed to manage each risk identified, and appropriate risk mitigation
measures have been developed based on a risk evaluation
MMK’s Board of Directors assesses the performance of the Company’s Comprehensive Risk Management
System annually based on the results of each year.
Distribution of duties among main participants in risk management process
The Audit Committee
of the Board
of Directors
The Board of Directors
The General Director
of MMK
Top managers
responsible
for risk management
Sub-divisions
of OJSC MMK
Risk management group
of the Internal Audit
and Risk Management
Department
Approval
of Risk Map
Appointment
of persons responsible
for risk management
Development
of Risk Map
Development
of risk mitigation
activities
Development
of risk mitigation
activities
Drawing up of Panels
and Risk Maps
for sub-divisions
Review
of Risks Report
Approval
of Risks Report,
Risk Management Policy,
evaluation of efficiency
of risk management
Approval
of risk mitigation
activities
Preparation
of Risks Report