Improving internal control and risk management in 2011
- A working group has been set up on introducing an integrated internal control and risk management system in Kubanenergo and it has held its first meetings. This group includes people at the level of Deputy General Director, department heads and staff from the Internal Control and Risk Management Department who understand the main business processes.
- On the basis of recommendations from the Internal Control and Risk Management Department the Board of Directors has approved a Statement on the control environment and the risks of a range of business processes in the Company's work (Commercial Accounting and Electricity Transmission Services, Procurement Management, Technological Connection Services, Operating Activities). In the future it is proposed to draw up a description of risks and control procedures related to other business processes as well.
- Work has been organised to draw up and update a register of risks in the operations of Kubananergo. Each risk is assessed quarterly, and risk logs are drawn up in which the following basic information about the risk is entered:
- a description of possible causes and conditions leading to the evolution and manifestation of the emergency (risk factors);
- a description of unfavourable events or trends;
- the approach to assessing the losses from the risk as well as the measurement of the risk Value at Risk (VaR95%);
- actions to manage the risk;
- the departments and executive officers responsible for managing the risk.
- Value at Risk is a universal method of measuring risk used in the best world practice and adopted at Kubanenergo
- The Value at Risk (VaR) method makes if possible to:
- measure risk in terms of possible losses correlated with the likelihood of them occurring;
- measure risks in various spheres in a universal manner;
- aggregate the risks of various positions in a uniform size of risks for all companies.
- A Value at Risk of 95% means that in the events of the risk happening the damage done will not exceed its VaR size with a certainty of 95%.
- In view of the extreme significance of construction of Olympic facilities quarterly it has been stipulated that reports on the risks involved in the Programme for Construction of Olympic Facilities and the Development of the City of Sochi as a Mountain Resort will be presented quarterly.