Sovcomflot Group — Key risks
| Type of risk | Risk factors | Risk mitigation measures |
|---|---|---|
| Economic risks | Changes in freight and hire rates on the international freight market | Draft and approve the Development Strategy of the Group and regularly update the document in connection with changes in market conditions and the external environment; identify the optimal ratio of revenues from long-term and spot contracts |
| Seasonal and regional changes in the supply of and demand for tonnage | Monitor global freight markets to make timely decisions on the optimal distribution of the fleet | |
| Strong competition from other carriers | Leverage the Group’s accumulated experience in the operation of different types of vessels, taking into account customer requirements | |
| Arrival of new cargo transportation, loading, storage and warehousing technologies and resulting changes in technological requirements in the field of maritime transport | Build and commission specialised state-of-the-art vessels; promptly sell obsolete fleet | |
| Quantitative and qualitative changes in global fleet composition | Diversify the Group’s activities and break into new, promising segments | |
| Environmental risks | Accidents having negative environmental impacts | Identify significant environmental aspects of the Group’s activities, plan and implement required environmental measures, monitor and analyse their sufficiency |
| Impact on the atmosphere of polluting emissions, and on the oceans from the dumping of wastewater and different types of garbage | Implement integrated management and control systems based on international safety and quality standards | |
| Regulatory and legal risks | Changes in international legislation and shipping industry regulations, customs and tax laws, licensing, environmental protection, etc. | Monitor changes in shipping industry regulations, be proactive in response to such changes, and maintain a constructive dialogue with regulatory authorities |
| The introduction of stringent requirements on vessels by leading classification societies, as well as international oil and trading companies | Draft and implement best-practice design and technological solutions that meet current and potential future requirements | |
| Seizure of the vessels of Group companies, in respect of which maritime liens or maritime claims may arise | Monitor the likelihood of claims and other legal encumbrances in respect of the Group’s vessels; proactively respond to potential actions in this area | |
| Inadequate insurance coverage of the Group’s vessels | Insure the Group fleet with leading international and Russian companies | |
| Operational risks | Mechanical faults and damage to vessels; maritime casualties | Improve technical management systems and procedures, implement an across-the-board critical analysis of the reasons for breakages and emergencies, increase the professional level of fleet personnel and onshore support |
| Delays and defaults on obligations by main counterparties | Conclude contracts with reputable and highly reliable counterparties | |
| Suspension of activities owing to labour disputes | Promptly consider the legal interests of Group employees and introduce a culture which promotes the joint resolution of issues as they arise | |
| Dependence of the Group on hiring and retaining qualified personnel | Improve HR policies, create a high-performing team united by common goals and valid material and moral incentives | |
| Country risks | Adverse changes in the political and economic situation in countries and regions where the Group operates | Draft anti-crisis action plans if adverse scenarios arise |
| Negative impact of restrictions imposed against Russia by a number of Western countries | Diversify the customer base, project portfolio and areas of activities, and sources of Group financing | |
| Pirate attacks on the Group’s vessels | Organise security for the Group’s vessels in dangerous regions, ramp up cooperation with respective international and national authorities, introduce and adjust the rules to be applied by vessels during crises | |
| Financial risks | Changes in foreign currency exchange rates, which have an adverse impact on the Group’s expenses and income | Use foreign exchange hedging instruments |
| Increased interest payments on current loan obligations | Use interest-rate risk hedging instruments, diversify sources of borrowing | |
| Exceeding of an acceptable debt burden on the Group’s balance sheet | Improve the procedures for ensuring the optimal structure of assets and liabilities, in conjunction with an operational analysis of changes in the financial environment |