In order to prevent unforeseen losses possibly incurred in operations, Mechel Group systematically works on risk management.
A united systematic approach to risk management enables the company to expose and appraise possible risks in all operational spheres and on all management levels of the group (enterprises, divisions, Mechel PAO) in advance, and make prompt decisions on ways to react to the revealed dangers.
Brief Overview of the Integrated Risk Management System Used in the Group
The risk management system’s chief goal is to reduce internal and external factors’ impact on the group’s operations.
The risk management system is an instrument for attaining goals set by shareholders before the group.
Chief stages of risk management
1. Defining risks
Based on the goals set before an enterprise (by an agency, a structural department, or a project), we define risks, which is to say possible events that may hamper us in reaching those goals. At this stage not only a possible risk, but also its reasons and possible consequences are also defined.
2. Appraising risks
Risks are evaluated, defining the possibility of the risk event occurring and the amount of losses to be incurred.
3. Defining measures to react to the risks
We work out measures (programs, series of measures) that must be undertaken to minimize or eliminate risks.
4. Analyzing risks
Risks and countermeasures are analyzed, as well as the effect their implementation will have in order to decide whether to implement or correct this or other measure.
5. Planning, controlling and analyzing countermeasures
Based on risk analysis, we make the decision on implementing the most efficient countermeasures. Those measures are then included in an enterprise’s work plan.
Based on the results of a reporting period, information on the risks revealed and implementation of the planned countermeasures are compared with losses from those risks that occurred and used to analyze the efficiency of an enterprise’s management.
Administrating the Group’s Risk Management System
In order to ensure a common methodological approach to risk management in the Group, give methodical aid to the Group’s enterprises in dealing with risk management issues, as well as administer the united risk management process, Mechel set up the Efficiency and Risk Management Department (director T.A. Karaseva).
Purpose of Systematic Risk Management Efforts
1. Reducing losses at the Group’s enterprises and the Group as a whole incurred by risk events.
2. Efficient distribution of financial resources for key risk management.
3. Improved management abilities and responsibility for the results of enterprises’ operations.