ROSSETI applies the reasonable precautionary principle. The Company strives to regularly identify hazards, assess the level of risks associated with its activities, and take appropriate risk management measures. ROSSETI’s main risks are analyzed in detail in the Annual Report for 2016. This section contains a detailed description of non-financial risks affecting the Company’s sustainability.
|Risk||Brief Description||Management Measures|
|Tariff risks||A possibility that grid companies’ expenses are only partially recognized for the formation of minimum regulated revenue due to restrictions on the tariff for electricity distribution services||— Documents are submitted to regulators in a timely manner.
— If necessary, applications for pre-trial dispute resolution are filed with the federal executive authority in charge of governmental tariff regulation against regional regulators.
— The Company cooperates with federal executive authorities in improving the principles of tariff regulation.
— Claim-related work is done.
|Risk associated with the decreased volume of electricity distribution services||A possible decrease in electricity consumption and changes in large customers’ external electricity supply||— Work is done on monitoring the demand for electricity and capacity, measures are taken to increase the reliability of forecasting the volume of services for their provision for the purposes of pricing and business planning.
— The Group’s entities implement energy conservation and energy efficiency enhancement programs.
|Risk associated with the failure of customers to pay for provided electricity distribution services||Overdue receivables for electricity distribution services provided by SDCs||— The Group’s entities cooperate with federal governmental authorities in improving legislation on the operation of the retail market.
— Measures are taken to improve the efficiency of the enforced collection of debts, including under an agreement with the Federal Bailiff Service of the Russian Federation to organize electronic document management.
If there are signs of economic crimes, measures are carried out together with law enforcement agencies to hold executives of debtors that avoid debt repayment criminally liable.
|Risk of impaired electricity supply reliability||An outflow of customers and counterparties due to impaired electricity supply reliability||— Measures are taken to raise the level of traceability and manageability in the electric grid sector and reduce the time of remedying emergency situations.
— Measures are carried out to reduce the proportion of equipment with an expired standard operating life.
— Measures are implemented to provide training and advanced training for production personnel and control their activities.
|Country and Regional Risks|
|Risks associated with possible military conflicts and their implications, imposition of the state of emergency, and strikes in the regions||Failure to ensure the uninterrupted operation of the electric grid sector||— Efforts are made to ensure the safety and security of electric grid facilities.|
|Risks associated with the geographical characteristics of the country and regions, including the potential effects of natural disasters, interruptions to transportation due to remoteness and/or inaccessibility, etc.||Natural and climatic emergencies (hurricanes, heavy rains, high water and floods, snow drifts, icing, power outages due to fires, domestic gas explosions, etc.) that can result in interruptions to the region’s electricity supply and transportation||— Emergencies are monitored.
-The Group’s entities interact with the Ministry of Civil Defense, Emergencies and Disaster Relief of the Russian Federation.
|Legal and compliance risks||Changes to legislation and judicial practice relating to the Company’s activities, changes to the balance between the interests of the Company and other electricity sector entities, imposition of legal or regulatory penalties involving substantial financial losses||— The Company conducts preliminary legal review of planned corporate procedures, conducted transactions, and other aspects of financial and economic activities provided for by the applicable laws and/or Articles of Association of the Company.
— The Company updates local regulatory documents with respect to claim-related work.
- Changes to legislation and judicial practice are monitored.
- The Company is committed to the anti-corruption system.
- Employees comply with the provisions and principles of the Anti-Corruption Policy of ROSSETI and Subsidiaries and Dependent Companies of ROSSETI.