Risk Management

Risk management is one of the essential components of sustainability management. The Company has a Risk Management Policy that defines risk management goals, objectives and principles to improve the Company's guarantee of reliability over the short and long terms.

Risk management aims and objectives

The Company's goal is to improve management decisions by analysing the risks associated with such decisions and ensuring maximum efficiency of risk management activities when implementing these decisions.

Risk management challenges:
  • promoting a culture of risk management at the Company so that managers and employees can achieve a common understanding of the basic principles and approaches to risk management
  • creating and implementing a systematic approach to the identification and assessment of risks that are inherent to the Company's operations as a whole, as well as to individual business areas
  • fostering the exchange of information about risks between the Company's structural units and the joint development of risk management measures
  • providing systematic information about risks to the Company's management bodies

Risk management system

The Company has developed and implemented a uniform approach to the risk management process, which is fully set out in the Integrated Risk Management System (IRMS) corporate standard. Gazprom Neft’s IRMS is a continuous and systematic process for identifying, assessing, and managing risk. As of the end of 2014, the IRMS covered all of Gazprom Neft’s significant assets. A further expansion of the system is planned as new projects are launched or  For further information regarding compliance with the Corporate Code of Conduct, refer to Gazprom Neft’s Annual Report 2014.operating assets are acquired..

During the reporting year, the Company's risk assessment process was integrated with business planning and project management. The Company's business plans for 2013–2015 reassessed existing assessments and descriptions of risk factors at the subsidiary level in view of changing conditions and new plans. Information about the most significant risks at subsidiaries and affiliates and measures to mitigate them were included in the relevant business plans. In addition, during the reporting year, the Company implemented a methodology for the analysis of project risks that was developed in 2013. At the same time, risk sessions aimed at identifying risks associated with the management of large Company projects were held. As a result, it is now possible to create project plans that strike a balance between goals set and degrees of uncertainty (risk).

The risk management system encompasses social and environmental risks in addition to financial and operational risks. It also includes risks associated with human resources and industrial and environmental safety.

Levels of financial risk and distribution of authority and responsibility within the IRMS
Schematic diagram of the IRMS process at Gazprom Neft Group

1 Depending on the severity of the risks.

The Company attaches great importance to maintaining a high level of business ethics and conscientious business practices. In 2014, Gazprom Neft adopted an Anti-Fraud and Corruption Policy, which establishes standards of conduct for all Company employees when dealing with officials and all other private individuals. As part of this Policy, the Company is planning to assess the role of corruption risk in the Company's risk management system, design a corporate policy, devise a communications strategy, and provide the required staff training.

Risk management seminar for Arctic shelf projects

During the reporting year, Gazprom Neft, in conjunction with Det Norske Veritas, one of the leading technical consultancy firms in the oil and gas industry, organized a risk management seminar for Arctic shelf projects. The seminar was one in a series of training sessions for employees involving leading Russian and international specialists. Participants reviewed the risks and problematic aspects of drilling in Arctic waters, as well as issues concerning compliance with occupational safety, security, and environmental protection regulations.

Managing social and environmental risks
Risk description Risk management measures
Risks related to human resources
The Group's business depends on essential, highly qualified staff. A lack of qualified personnel, particularly in engineering and technology, may increase the risks associated with staff shortages. The Group's success largely depends on the efforts and abilities of essential employees, including qualified technical personnel, as well as on the Group's ability to attract and retain such staff. Competition for staff in Russia and abroad may be exacerbated by the limited number of qualified professionals on the labour market. An inability to attract new qualified personnel and/or maintain current staffing levels could have an adverse effect on the Group's appeal as an employer. The demand for qualified staff and the costs associated with employing such staff are expected to continue to grow, reflecting the strong interest in these employees from other industries and public projects.

The Group offers competitive remuneration, including a salary, performance-based bonuses, and a social benefits package.

The Company is developing and operating a talent pool and employee training and development programmes aimed at meeting the Company’s needs for qualified staff both now and in the future.

The Group is improving its recruitment procedures and taking measures to reduce staff turnover and encourage staff to realize their potential.

Risks related to industrial safety
The Group is exposed to risks relating to the safety of its employees and their operations. The Group's main business could be adversely affected by many factors, including equipment damage and failure, labour disputes, natural disasters, political disputes, and terrorist attacks. Any of these risks could have a materially adverse effect on the Group's business, financial situation, and operating results. As part of risk prevention, the Group strives to provide a safe working environment for its employees, seeking to avoid injury or death, as well as actions brought against the Group or damage to its business reputation. The Company constantly monitors safety threats, and pays particular attention to complying with safety equipment regulations.
Environmental risks
Gazprom Neft’s operations carry an inherent risk of environmental damage or pollution, which may lead to civil liability and require action to mitigate such damage. The Company is fully aware of its responsibility to the public for creating safe working conditions and protecting the natural environment. Gazprom Neft constantly monitors its operations to ensure compliance with applicable environmental standards, and implements environmental protection programmes. In the future, the costs associated with environmental compliance and obligations may increase. Gazprom Neft’s environmental protection policy is aimed at ensuring compliance with applicable environmental legislation by investing significant funds in environmental measures, including the use of technologies that minimize environmental impact. As a result, there has been a significant reduction in the likelihood of risks associated with environmental pollution. The Group also monitors changes in environmental legislation in the various countries in which it operates.