The risk management system (RMS) is a set of risk management components (culture, competences, methodology, practices, resources), methods, and processes integrated into the Group companies’ strategic planning and operational management and designed to achieve its goals. The RMS relies on international and national risk management standards.
Today’s companies require dynamic and flexible risk management to promptly respond to external and internal changes. 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.
We keep improving our risk management system to timely respond to changes, maintain strong performance, and increase efficiency amid risks and uncertainty.
In 2023, RMS was developing in line with the approved plan to 2023. The following measures were adopted as part of the plan:
establishment of the Risk Management Department, a unit responsible for the Group's risk management
identification and initial assessment of FESCO's strategic risks
regular monitoring of key sanctions risks, including the development of plans for their management
creation of a list of risk indicators (quantitative or qualitative indicators reflecting the current risk level at varying time horizons)
regular updates about key FESCO risks and their changes submitted to the Company’s management
Risk management at FESCO
Risk mitigation initiatives
Corporate map of material risks
As part of the RMS, a list of key risks and risk owners were identified, risks were assessed, and risk management initiatives were developed and implemented.
Comprehensive risk management efforts made it possible to largely offset negative factors affecting the Group's goals.
Detailed description
Assessment of impact / 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 2023, the impact of risk materialisation was assessed as insignificant.
The risk remains in 2024
The Group 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 and shipment structure 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 FESCO, its customers and the industries where they operate, as well as FESCO's customers and suppliers exiting the market
High/medium
In 2023, the impact of risk materialisation was assessed as insignificant.
In 2024, the risk probability is expected to increase
FESCO operates in strict compliance with the Russian and international laws and constantly keeps track of all regulatory changes affecting its operations. The Company regularly monitors the sanctions pressure, analyses the possibility of new sanctions, and promptly adjusts its activities, where necessary
Operational risks
Given the Group’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 2023, the impact of risk materialisation was assessed as insignificant.
The risk remains in 2024
As part of its risk mitigation initiatives, FESCO repairs and upgrades its assets, invests in new equipment, refines its control over the quality of asset management and protection
Financial risks
The most material financial risk for FESCO is liquidity risk
High/low
The risk did not materialise in 2023.
In 2024, the risk consequences are expected to increase
The cash flow budget, including short‑ and medium‑term planning tools, is the key instrument for managing liquidity risks
Objectives for 2024 and the medium term
Among the priority areas of RMS progress and improvement are the following tasks stipulated in the FESCO’s plan to develop its risk management system in 2024:
2024
updating internal methodological documents and reporting forms as regards risk management
integrating the risk management process into FESCO's key activities and business processes
improving the RMS performance and risk awareness by unifying, standardising, and automating risk management processes
increasing involvement of the Group's management in the risk management process
