The Group has an Enterprise Risk Management Framework and Internal Control Framework (ERMIC) covering the main assets, key business processes, businesses and management levels of the Group.
Goals and objectives of the enterprise risk management framework and internal control framework
The ERMIC are essential aspects of the concept of corporate governance that make it possible to detect and assess risks, develop and conduct risk management actions, including control procedures.
Objectives of ERMIC:
- To assure the Board of Directors and executive bodies that strategic and operational targets will be achieved;
- To ensure the efficiency of financial and economic activities, as well as the use of resources;
- To ensure the integrity of assets;
- To monitor compliance with legislation and internal policies and procedures;
- To ensure reporting is carried out fully and in a reliable manner.
The objectives, basic principles, approaches, and participants of the risk management and internal control procedures in PJSC Inter RAO are stipulated in the Corporate Risk Management Policy and Internal Control Policy of PJSC Inter RAO.
Participants of risk management and internal control frameworks
The Group's management ensures efficient interaction between ERMIC, which are integrated into the Group's key business processes and activities.
Coordination, implementation, and improvement of ERMIC processes are included into the area of responsibility of the Risk Management and Operational Controlling Department. The Head of the Department reports directly to the Chairman of the Management Board, which ensures an independent identification and risk assessment, as well as control of risk management actions, including control procedures.
Flow chart of responsibility and accountability of INTER RAO Group ERMIC participants
Сritical risk map
The Group’s critical risk map, approved by the Company’s Board of Directors, represents the results of the critical risk quantitative assessment with a list of the critical risks. Critical risk maps of controlled entities and the Group are formulated and updated within the annual ERM cycle.
Critical Risk
This risk is characterized by a potential deviation from the Group’s target level that requires a prioritized management and control to maintain it at permissible level.
Critical* risk map of the group for the beginning of 2017 and the dynamics in 2017
* Critical risks for the Group are shown; their influence is higher than the set materiality threshold (as defined by the approved Group’s methodology
** For public disclosure the values and probabilities are not given. The illustration of the risk map demonstrates relative positions of risks to each other.
| Risk | Possibility | Value |
|---|---|---|
| Credit risk of counterparty banks | ||
| Currency risk | ||
| DAM price reduction risk in the result of approval of changes, connected with order of price bids transformation for volume of production planing | ||
| DAM price risk | ||
| Risk of reduced guaranteed return on investments under the capacity delivery contracts (CDA) and the share of costs of a CDA object compensated at the expense of capacity fees | ||
| Risk of increased penal coefficients applied to the respective deltas for the nonpreparedness of generation equipment for electricity production | ||
| Credit risk of debt receivable of buyers of electricity/network organizations | ||
| Recognition of the antimonopoly regulation activities of the Company assets as nonconforming to the Russian laws | ||
| Credit risk of debt receivable of buyers in WECM | ||
| Interest risk | ||
| Credit risk of debt receivable of buyers of electricity | ||
| Risk of failure to meet the commissioning deadlines (failure to meet the capacity supply schedules under capacity supply agreements) |