Risk Management in Kazatomprom

IAEA Technical Meeting on Risk Management in Nuclear Power Plant Construction

Vienna

7th September, 2016

• Kazatomprom – is a national atomic company that was founded in 1997 by the Decree of President

of Kazakhstan. This is a state owned company – our sole stockholder is National Welfare Fund

«Samruk – Kazyna».

• Kazatomprom is a national operator of import and export of uranium and nuclear fuel for nuclear

power plants. Kazatomprom is one of the world's leading uranium mining companies.

• Kazatomprom concentrates its activity not only on mining uranium mining products, but it is also

actively involved in the field of alternative energy and rare metals.

• Kazatomprom has about 80 subsidiaries employing around 27 000 people.

• Kazatomprom’s enterprises are involved in the whole complex related to manufacturing of the

finished products: from geological exploration, extraction of uranium, and nuclear fuel production

to science, social support, and personnel training.

About Kazatomprom

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Strategic objectives of Kazatomprom are focused:

• on saving the leading positions in the global natural uranium market,

• maximizing company’s activity in production diversification in the front-end of Nuclear Fuel Cycle

(NFC) by participating in foreign assets (in such stages as conversion, enrichment, fuel assemblies

production, construction of nuclear power plants),

• and expansion onto adjacent hi-tech industries, where company’s scientific and technical capabilities

will be developed and utilized.

Thus, Kazatomprom is faced by various types of risks everyday.

Risk management system (RMS) was implemented in 2010 for the purpose of managing and improving

Kazatomprom’s corporate management system.

Risk management is regulated by:

• international standards in the field of risk management and internal control - COSO, ISO;

• approved internal risk management documents;

• regulatory documents of the sole stockholder - “Samruk-Kazyna”.

Risk Management System (RMS)

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Protecting the Company’s Shareholder interests.

Ensuring the strategic and operational sustainability of the Company.

Decreasing the losses of the Company, in a case of unfavorable negative risks

implementation.

The Main Purposes of Risk Management

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Organizational Structure of Risk Management System

The Sole

shareholder

Board of Directors

Management Board

Corporative Secretary Committee of internal

audit

Internal audit Service Risk management

Committee

Chief Risk Officer

Risk management

Division

Unit 1 Unit 2 Unit 3 Unit 4 Unit …

Ris

k o

wner

s

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Role of Participants

Board of Directors

Management Board is in charge for organizing an efficient RMS, which allows to identify and assess potential risks. It

additionally performs the following functions: enforcement of the compliance with risk management policies

and other internal documents related to risk management.

Risk management

Committee

Review and preliminary approval of RMS’ plan of actions;

Review and preliminary approval of risk management documents of the Company.

Risk owners Timely identification and information of significant risks in the scope of their activity;

Execution of approved action plans;

Timely submission of information of all realized risks to Risk management Division.

Risk management

Division

Coordination and improvement of RMS process in the Company;

Preparation of register of risks, setting the limits and risk appetites;

Initiating development of the plan of actions directed to minimization of risks and coordination of activities

related to its implementation.

The Board of Directors plays a key role in RMS supervising and reviewing risk reports. It also approves the

following: risk management Strategy, risk management Policy, register of risks, and risk appetites.

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The main risk management

processes

Register

of risks

Risk

Appetite

Setting

limits KRI Hedge

Register of

risks must

be approved

by Board of

Directors

Risk

appetite

must be

approved by

Board of

Directors

Setting

limits for

countries

and

banking

operations

Setting KRI

for weekly

monitoring

Hedge of

financial

risks

Analyze and

assessment

of risks in

investment

projects

Analyze

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Risk Management Process

Information and communication

Determination:

Aims, risks, factors,

consequences

Risks Assessment

Procedure:

Risk Reduction,

Risk Acceptance,

Risk Deviation,

Risk Transfer.

Monitoring:

KRI, Risks Reports

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Map of Risks

Every year we initiate the formation of the register of risks and

conduct its quarterly update.

The register of risks identifies key risks.

Red risks are risks with high probability of realization and/or they

have significant negative impact on the Company’s activity.

All risks are divided for 5 groups: Strategic, Operational, Finance,

Investment and Legal.

On a regular basis, risk owners together with Risk Management

Division analyze all identified risks within the qualitative and

quantitative risk assessment and determine measures to minimize

their impact and/or probability of their occurrence.

Strategic and

operational

goals, KPI

Interview with

owners of

risks,

questionnaire

Factors KRI Plan of

action

Assessment,

qualitative

&

quantitative

The process of risk management is simple as following:

Monitoring,

reports

1 2 3 4 5

О-10,

Probability

1

О-9,

F-2,

F-6

I-10 О-12

F-3О-3,

О-11

2 F-5

О-2,

О-6,

I-7

О-8,

I-8

О-5,

F-4,

L-1

S-2

Risk Map of group of companies of Kazatomprom

Imp

act

5 I-3

4 I-6

S-1,

О-4,

О-1

I-1, I-2,

3 F-1

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Risk Appetite, Risk Tolerance, Limits

Risk appetite - the amount and type of risk an organization is willing to accept in pursuit of its business objectives. We use practice of definition quantitative and qualitative risk appetite. Risk management carries out quarterly

monitoring practice.

“Designing risk management without defining your risk appetite is like designing a bridge without knowing which river

it needs to span. Your bridge will be too long or too short, too high or too low, and certainly not the best solution to

cross the river in question”. E&Y, Risk appetite. The strategic balancing act.

Risk tolerance: the specific maximum risk that an organization is willing to take regarding each relevant risk.

Setting Limits

The Company has set limits for banks and a list of banks for deposit operations and carries out monthly monitoring.

We used a practice to set a country’s limits and providing monthly monitoring.

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Key Risk Indicators

Key Risk Indicator - is the indicator used by Company for receiving an early signal of increasing

probability of certain risk realization.

We will try to define KRI for each key risks. It helps for the Management Board to monitor all risks every

week and make effective decisions.

KRI are useful tools for

Management

Information about KRI

condition for Management

Board is displayed every

week on electronic screen

Information about KRI

condition for Board of

Directors is submitted by

quarterly reports

№ Code of

risksRisks KRI Unit Formula

Measuring

frequencyStatus

Responsible

unit

1 S-1 Risks #1 KRI #1 $ Formula Every week Unit #1

2 O-2 Risks #2 KRI #2 % Formula Every week Unit #2

3 F-3 Risks #3 KRI #3 tons Formula Every month Unit #3

n L-4 Risks #4 KRI #4 coefficient Formula Quarterly Unit #4

KRI Board

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Risk Reports

Reports Terms Recipient Responsible unit

Reports on KRI Every week Management Board

Risk management

Division

Reports on limits

for banking

operations

Every month Management Board Risk management

Division

Reports on

implementation of

action Plan in the

context of register

of risks

Quarterly Management Board Risk management

Division

Risk management

reports Quarterly Board of Directors

Risk management

Division

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Internal Control

The internal control system provides a management system, which is capable to quickly react to process risks and has

control over the business processes.

Internal control is directed to prevent risks in three key areas of activities:

• formation of financial and management reports,

• compliance with legal requirements and internal documents,

• increase of productivity in processes within operational activities.

Internal control system in Kazatomprom consists of five interdependent components:

• control environment;

• risks assessment;

• control procedures;

• information and its transfer;

• monitoring.

Within an internal control system the Company performs the following actions:

• Carrying out testing of efficiency of design of control procedures of business processes;

• Carrying out diagnostics of development of an internal control system in subsidiaries.

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Thank you for your attention!

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