TVEL 2013. Annual Report

Risk Management

Strategic Tasks and Goals of Corporate Risk Management System (hereinafter — “the CRMS”) of TVEL JSC:

promotion of implementation of corporate strategy of the ROSATOM State Corporation by performance of corporate-wide risk management process;
securing the continuity (stability) of all business processes through identification, assessment and minimization of threats capable of influencing the results of activities of TVEL FC, as well as development and introduction of risk monitoring and reporting procedures;
integration of risk management process in the administrative decision-making processes.

Table 8. Participants of TVEL FC Risk Management Processes and their Roles

Participants of CRMS of TVEL JSC	Role of CRMS Participants in the Risk Management Process
President of TVEL JSC	Approval of TVEL FC risk management policy, regulations and guidelines
Risk holders	Promotion of implementation of risk management processes
Risk Management Officers	Implementation of risk management processes
TVEL JSC Risk Officer	Methodological support of risk management processes, monitoring of implementation and control of the results
Managers of programs and projects implemented within TVEL FC	Implementation of risk management processes, programs and projects

Corporate ownership structure of TVEL JSC
(at the level of subsidiaries and affiliates)
as of December 31, 2013.

Fig. 7. Organizational Structure of TVEL JSC as of December 31, 2013

Corporate ownership structure of TVEL JSC (at the level of subsidiaries and affiliates) as of December 31, 2013.

TVEL FC Risk Management is based on continuous monitoring of the external and internal environment, comprehensive study of threats and opportunities that affect the achievement of economic and social goals.

TVEL FC Key Risks Management

In addition, in order to minimize financial losses and to optimize benefits under the impact of market factors, TVEL JSC approved “Financial Risks Management Procedures and Guidelines for TVEL JSC and Companies comprising the Fuel Company”.

The intention is to implement key risks management arrangements, thereby neutralizing (minimizing) the impact of any such key risks on TVEL FC on its path to strategic goals, and to reach target values of core activities within permissible variations set by the ROSATOM State Corporation for the period of 2014-2017.

Risks management processes are closely tied with management processes applicable to businesses conducted by TVEL FC. For details about the results of key risks management see relevant sections of the Report (Charter «OUTCOMES»).

Table 9. TVEL FC Key Risks Management

Risk	Risk	Risk management procedure
Slump in demand for products and services of FE NFC (including reduction of the estimated volume of nuclear fuel supplies and steady volume of work on the conversion and enrichment)	Emergency at the NPP — early decommissioning of power units Delays in construction and commissioning of power units Transition to the production of nuclear fuel with increased resource propertie Transition of the foreign enrichment market competitors to centrifuge technology and tightening of quotas Development of new enrichment facilities in China Shale gas boom	Development and promotion of Russian nuclear fuel for NPPs with PWR — the TVS-KVADRAT Project Establishment of TVS-KVADRAT production. Increased production and sales of products for general industrial use
Loss of technological advantages in uranium enrichment technology	Lagging in the technology development behind the competitors	Development and improvement the design of gas centrifuges (GC) of the 9th and 10th generation Development of structural materials and GC of the 11th generation
Exchange risk	Gaps in the claim volume and liabilities denominated in the same currency Volatility of world currencies	Hedging (including natural)
Credit risk	Counterparty’s failure to perform its obligations in full and in a timely manner due to: deteriorating financial stability of suppliers/customers, increased advances to suppliers/customers, increased volumes/timing of accounts receivable, etc.	Insurance Reduced share of advance payments in settlements with external suppliers
Increase in the cost of services for fabrication, enrichment and conversion, GC production	External risk factors: disruption in global/Russian monetary system; revision of rates applicable to public utilities, transportation companies, etc.; increase of the minimum wages, etc. Internal risk factors: faults in organization of production processes; reduced utilization of equipment; depreciation of production technology and equipment, malfunctions, etc.	Development and improvement of the design of GC of the 9th and 10th generation Development of structural materials and GC of the 11th generation Creation of a new conversion production at JSC SGChE Development of new models of accessories for separation plants Implementation of energy efficiency and power saving programs
Property risk	Theft, damage, negligent personnel Failures of technical, technological, information, etc. systems	Insurance
Commodity risk	Market dynamics	Fixed price on products when entering into contracts with suppliers
Reduction of the real supply of non-nuclear products compared to the planned ones	Overrated demand for non-nuclear products Absence of explicit advantages in conditions of high competition on prospective markets Deficient competencies and human resources for successful development of non-nuclear businesses	Optimization of process analysis, development and implementation of investment projects aimed at the creation of the production of non-nuclear products Financial and organizational support for the production of innovative products at the times of local deteriorating market conditions Human resources building-up, more efficient use of human resources, attraction of highly skilled personnel made redundant during the restructuring of the enterprises of TVEL FC, involvement of students and young professionals in the process of production and development of new products
Major accidents/incidents involving the SA	Failure of systems vital for safety Insufficient coordination of safety management Insufficient resources for implementation of safety arrangements Insufficient qualification of the staff engaged in the sphere of safety Defaulting on mandatory safety requirements	Introduction of modern means of protection and production technologies to ensure protection of workers, population and environment from negative effects and threats Modernization and technical re-equipment of dangerous facilities Neutralization (liquidation) of the sources of hazard Personnel development
Social risk	Social changes in the regions of presence that influence the activity of TVEL FC. These changes are caused by non-alternative (in terms of competitiveness) production optimization and reconfiguration of the facilities of TVEL FC	PR and GR events Provision of support to new business units formed in the course of restructuring Initiation of a series of projects to create innovative production lines at the vacated sites of TVEL FC enterprises
Reputation risk	Publication of materials containing false/intentionally distorted facts that are aimed at discrediting the Company and its products in the media Implementation of any key risks	Rebutment (including in the court) of false information damaging the reputation of the Fuel Company. Organization of PR-campaign to communicate reliable information to a wider audience of stakeholders and to mitigate the possible reputational damage Taking measures for key risk management