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Annual Report & Accounts 2012

Risk management

As with any major company, NLMK is exposed to a number of different risks. It is the goal of independent risk management and effective internal controls to permit the management decision making process to be more transparent and reliable, thereby enabling the Company to become more effective in achieving its strategic goals.

Benedict Sciortino

Chairman of the Audit Committee, Independent Director

The main goal of risk management for the Group is to minimize the possible negative effects on the business of changes to the external environment and to internal processes.

Risk management policy

The risk management policy is intended to protect the interests of shareholders, interested parties and society in general by means of a system of effective risk management. Risk management is a necessary component of the shareholder value creation process and is instrumental in achieving the Group’s strategic goals.

Risk management process

In 2008–2009, in conjunction with Marsh, a large risk management consulting firm, we evaluated the effectiveness of our existing risk management system, developed recommendations to improve it and drafted a set of internal documents to regulate the Company’s risk management procedures. Since 2010, the Group has implemented its risk management procedures independently.

Risk management is a continuous, integral and transparent process that involves all employees at various stages.

Assignment of responsibility

As part of an integrated approach to risk management, the responsibilities of the main participants are assigned as follows:

Business units

Vice President (CFO)

Vice President, Division Heads (risk owners)

Management Board

Board of Directors

Identify risks, define and implement risk management practices

Control risk management system performance, develop common risk reporting, develop initiatives

Identify division-specific risks and implement risk management actions

Monitor effectiveness of the risk management system and internal auditing

Assure shareholders that the Company has identified key risks and is successfully managing them