Audit and control

According to the legislation of the Russian Federation, the Group’s General Shareholders’ Meeting selects auditors on an annual basis. The Audit Committee advances candidates for Group auditor who are recognized independent auditors with strong professional reputation for consideration by the Board of Directors.

The Audit Committee is guided by the following core principles when making its recommendations:

• The competence of the audit organization;
  
• The quality of its services;
  
• Its compliance with  auditor independence requirements.
  

AO PricewaterhouseCoopers Audit was selected at the Annual General Shareholders’ Meeting held in April 2020, to conduct an audit of the Company’s Russian Accounting Standards (RAS) and International Financial Reporting Standards (IFRS) financial statements. Address: 125047, 10 Butyrsky Val, Moscow, Russia.

Internal auditing is performed in order to provide members of the Board of Directors (Audit Committee), the President (Chairman of the Management Board) with independent and objective guarantees and consultation aimed at improving NLMK Group’s performance, through a systematic and consistent approach to assessing and increasing the efficiency of risk management, control and corporate governance processes.

Goal: To maintain or increase the value of the Company through a set of objective internal audits based on a risk-oriented approach, recommendations and exchange of knowledge.

Key functions:

• Assess efficiency of the internal control system;
  
• Assess efficiency of the risk management system;
  
• Assess efficiency of corporate governance;
  
• Consulting.
  

Key principles:

• Independence and impartiality;
  
• Systematic and balanced approach;
  
• Efficient use of resources;
  
• Professional competence and integrity;
  
• Quality assurance programme.
  

Main duties:

• Drafting and submitting reports on the results of the Internal Audit Department’s activities to the Board of Directors (the Audit Committee) and executive bodies;
  
• Providing support to the executive bodies and employees of NLMK Group in developing and monitoring the implementation of procedures and initiatives aimed at improving NLMK Group’s risk management and internal control system and corporate governance practices;
  
• Coordinating activities with consultants on risk management, internal control and corporate governance;
  
• Internal audits at controlled companies;
  
• Ensuring compliance of members of the executive bodies of NLMK Group companies and their employees with the law and NLMK Group corporate policies related to insider information; anti-corruption initiatives; as well as NLMK Group’s Code of Ethics.
  

The main goal of risk management for the Group is to minimize the possible negative impact of changes in the external environment and internal processes on the Company’s business.

The risk management policy is aimed at protecting the interests of shareholders, stakeholders and the Company in general through an efficient risk management system. Risk mitigation is a key element in creating shareholder value and achieving the strategic goals of the Group.

Risk management process

In 2008–2009, together with Marsh, a risk management consultant, we evaluated the effectiveness of our existing risk management system, developed recommendations to improve it and drafted internal documents regulating the Company’s risk management procedures. Since 2010, the risk management process is implemented independently.

Risk management is a continuous, integral and transparent process that involves all employees of the Group at various stages:

• Identification and continuous monitoring of risks;
  
• Evaluation of potential impact of risks on the Group’s business;
  
• Assignment of responsibility to risk owners;
  
• Development of risk management measures;
  
• Control over critical risks.