Risk management

GRI 2‑25

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 2025.

Area

Measure

Integration of risk management tools into business processes

  • Implemented the practice of calculating counterparty credit risk, and developed a scoring model
  • Integrated risk mapping into budget planning and variance analysis of key budget performance indicators
  • Incorporated project risk management tools into the investment management process
  • Established and launched the Risk Committee under the sole executive body

Risk identification and analysis

  • Conducted risk sessions for key business processes and areas of activity
  • Introduced the practice of risk mapping for investment projects

Business continuity management

  • Drafted pilot business continuity plans

Risk culture development

  • Developed and recorded an online training course on risk management fundamentals
  • Risk management module is included in training programmes implemented across the Group

Improvement of RMS processes

  • Improved the risk map format (including the introduction of risk scoring)
  • Refined and automated quantitative risk assessment using mathematical modelling
  • Conducted a maturity assessment of FESCO’s RMS
Risk management process 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.

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;
    • assessing counterparty credit risk;
    • 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

To minimise geopolitical risks, the Group:

  • operates in strict compliance with Russian and international laws and constantly keeps track of all regulatory changes affecting its operations;
  • regularly monitors the sanctions pressure, analyses the possibility of new sanctions, and promptly adjusts its activities, where necessary;
  • conducts compliance checks of counterparties, cargo, correspondent banks, agents, and other transaction elements

ESG risks

The ESG risk management system is integrated into the corporate risk management system and follows the requirements of national and international legislation in the realm of risk management and sustainable development.

In 2025, the Company initiated the development of a unified ESG risk management approach, encompassing the identification of key risks and an assessment of their potential impact on operations. Based on the analysis findings, three groups of risks were identified:

  • Environmental risks
  • Social risks
  • Corporate governance risks

To follow up on the endeavour, a sustainable development risk register was created. Each risk is documented with its type, event, and underlying factors, alongside a detailed description and the opportunities arising from mitigation efforts. For all identified risks, the Group has designated responsible units, established standard mitigation measures, and defined metrics to evaluate risk management performance.

Simultaneously, a qualitative assessment of physical climate risks was conducted, accounting for their specific characteristicsFor more details, see the Environment and Energy Efficiency section.. Looking ahead, the Group will continue to refine its assessment methodology and evaluate the efficiency and effectiveness of the ESG risk management system.

Objectives for 2026 and the medium term

FESCO has identified the following key areas to focus on improving its risk management system:

  • conducting risk sessions on key business processes and activities;
  • developing and testing business continuity plans;
  • implementing the practice of monitoring risk indicator values and developing risk management measures when they exceed their thresholds;
  • continuing the integration of risk management tools into Group business processes.
Objectives for 2026