Risk management

Risk management system

The risk management system (RMS) forms an integral part of FESCO Group corporate governance, encompassing all activities, management levels, and activity types.

The RMS is a set of risk management components (culture, competencies, methodology, practices, resources), methods, and processes integrated into the Group companies’ strategic planning and operational management. It aims to identify and analyse risks that might affect the Group’s long‑term goals and operational activities in a timely manner. The RMS relies on international and national risk management standards.

FESCO continuously identifies, describes, and assesses risks and develops measures to manage them. Risk monitoring is a vital RMS element which includes the analysis and evaluation of realised risks and effectiveness of risk management measures. Regular Group aggregate risk assessments are conducted, with significant risk information included in Board‑reviewed reports.

We keep improving our risk management system to timely respond to changes (both external and internal), maintain strong performance, and increase efficiency amid risks and uncertainty.

The following RMS improvement measures were implemented in 2024.

Measures to improve the RMS
Area Measure
Development and improvement of the RMS methodology

Developed and approved:

  • Risk Management Policy of FESCO and its controlled entities;
  • Regulations on Risk Management at FESCO Group
Risk culture development
  • Developed face‑to‑face training on risk management fundamentals for Group employees.
  • Conducted training for managers and key employees across Group companies.
  • Incorporated risk management course into Group training programmes
Integration into planning and decision‑making processes

Risk management elements implemented in:

  • key decision‑making processes;
  • budget planning process;
  • investment project development process
Improvement of RMS processes
  • Implemented new approaches to risk identification, analysis, and assessment. Designated risk sessions as the primary Group risk identification tool.
  • Conducted maturity assessment of FESCO’s RMS
Risk management at FESCO
RMS functioning principles
Organisational structure for risk management

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.

In 2024, the impact of risk materialisation was assessed as insignificant. Comprehensive risk management efforts made it possible to largely offset negative factors affecting the Group’s goals.

Description of risks and approaches to risk management
Risk Description Management approaches
Financial risks The most material financial risks for FESCO are currency risk (unfavourable exchange rate changes) and credit risk (counterparties failing to fulfil obligations fully and on time)

The key approaches to minimising financial risks are:

  • for credit risk:

    • preliminary counterparty verification;
    • using sureties, guarantees, and restrictions on advance payments to external counterparties;
    • regular monitoring of accounts receivable and counterparty financial condition;

  • for currency risk:

    • maintaining balanced currency‑denominated receivables and payables (natural hedging);
    • constant exchange rate monitoring to enable timely currency risk mitigation decisions;
    • transitioning to settlements with counterparties in friendly jurisdiction currencies;
    • exploring settlement possibilities with counterparties through friendly jurisdiction banks
Commercial risks Risks of losses arising from external (demand, competition, market changes, etc.) and internal (quality and price of services provided, etc.) volatility

To minimise commercial risks, the Group:

  • implements a balanced pricing policy;
  • builds long‑term partnerships with counterparties;
  • develops existing and opens new transportation routes and services;
  • optimises internal business processes and shipment structure in order to respond more effectively to market changes
Operational risks Given FESCO’s significant transport assets (railcars, containers, vessels, terminals), the management of operational risks is one of the key priorities due to their sheer number

To minimise operational risks, the Group:

  • repairs and upgrades existing assets;
  • invests in new asset acquisition;
  • improves asset quality management and protection
Asset damage and loss risks Asset loss and/or damage may result from external factors (emergencies, adverse weather, third‑party illegal actions, etc.) and internal (equipment failure, operational errors, management deficiencies, personnel actions/omissions, etc.) factors

To minimise asset damage and loss risks, the Group:

  • conducts regular monitoring of assets’ technical condition;
  • provides personnel training and development;
  • develops emergency response plans;
  • insures property risks
Geopolitical risks Geopolitical risks stem from the US, EU and other countries building up their sanctions pressure, including potential sanctions against Group companies, its customers, and the industries where they operate, as well as customers and suppliers exiting the market The Company 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

ESG risks

FESCO recognises the critical importance and impact of sustainable development risks, including climate change, social sphere, and corporate governance risks.

FESCO’s ESG risk management system is integrated into corporate risk management and follows national and international legislative requirements.

In 2025, FESCO initiated development of a unified ESG risk management approach for key Group companies, conducting comprehensive assessment and analysing ESG risk management efficiency and effectiveness. Risk sessions and ESG risk management training seminars for managers and key employees of Group companies are planned.

Objectives for 2025 and the medium term

FESCO has identified the following key areas to focus on improving its risk management system:
  • implementation of risk culture development measures;
  • integration of risk management tools into Group business processes;
  • updating of the quantitative risk assessment approach;
  • introduction of new risk identification sources;
  • automation of risk management processes.