Corporate Risk Management Framework
Integrated in Nornickel’s business processes, its corporate risk management framework allows for risk-oriented decision-making at various levels to achieve strategic and operational goals.
Nornickel has the following risk management objectives:
- increase the likelihood of achieving the Company's goals;
- make resource allocation more efficient;
- boost the Company's investment case and shareholder value.
The risk management framework is based on the principles and requirements of applicable laws and professional standards and guidelines, including the Corporate Governance Code recommended by the Bank of Russia, GOST R ISO 31000-2019 (Risk Management. Principles and Guidelines), and COSO ERM Guidance (Enterprise Risk Management – Integrating with Strategy and Performance). It also relies on recommendations on risk management, internal controls, internal audit and the work of the Board of Directors’ (Supervisory Board's) audit committee in public joint-stock companies (appendix to the Bank of Russia's Information Letter No. IN-06-28/143 dated 1 October 2020).
To manage production and infrastructure risks, the Company develops, approves, updates and tests business continuity plans designed to maintain and restore current operations.
Nornickel’s key documents that set out the core principles and approaches in risk management are the Risk Management Policy, Risk Management Regulations, and Procedure for Managing Technical and Production Risks and Environmental Risks of MMC Norilsk Nickel.
For more details on the key process participants and allocation of responsibilities in risk management, please see MMC Norilsk Nickel’s 2022 Annual Report (page 219) and 2022 Sustainability Report (page 235).
To assess climate-related risks and opportunities, Nornickel uses TCFD recommendations, which identifies two key risk categories.
Physical risks
Their impact may manifest in the form of weather anomalies (acute risks) or irreversible changes of climatic conditions (chronic risks). Physical risk for the Company may result in permafrost thawing, change of water levels in water bodies, precipitation volumes and patterns and other climate risk factors that may have a material adverse impact on the Group’s operations.
Transition risks and opportunities
They are associated with the transition to a low-carbon economy. For the Company, these risks mainly include policy and legal, technology, market, and reputation risks, which may cause considerable shifts in demand for the Company’s products.
The Company’s assets are located in regions that have now long been under the impact of climate change, a trend that is reflected in existing technical and production risks as well as environmental risks. The Company continues to integrate management of climate-related risks and risk factors into its business processes in line with TCFD and COSO recommendations. The ongoing integration of physical risks means bringing more structure into the procedure and rules of handling current risks as well as longer-term risks. Transition risks under the TCFD classification can be both standalone risks and risk factors for other risks. The Company has identified a list of relevant transition risks and carried out their pilot assessment.
Improved approaches to climate-related risk management and their integration within the corporate risk management framework were reflected in the updated Risk Management Regulations, which were amended in late 2022. Going forward, amendments are also expected to be introduced as needed to other internal guidelines and regulations of Nornickel.