- In order to manage credit risks, Russian Railways has approved methods for calculating credit limits and regulatory documents that govern work with bank guarantees and sureties, including the unified corporate standard of the Russian Railways Group for work with collateral instruments. Based on the credit limit calculation methods, the Company conducts an assessment of financial institutions and calculates the relevant credit limits to regulate transactions with banks involving deposits and the receipt of bank guarantees depending on the assessment of the condition of the corresponding financial institution.
- When interacting with companies in the real sector, the Company employs a system of management standards that includes standard settlement terms with counterparties, interim measures, treasury control, rate setting of receivables and payables, commitment bank guarantees for the proper performance of obligations (including over warranty periods for supply contracts), repayment of advances and sureties of parent companies in order to ensure that Russian Railways is protected against risks of counterparties failing to execute (improperly executing or late execution) their obligations. Financial institutions that issue bank guarantees and sureties are selected taking into account credit history and the existing credit limits.
Financial risk management
The framework document of the financial risk management system is the Company’s Financial Risk Management Policy.
Framework of the Company’s financial risk management system
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Risk management principles
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Management tools, including hedging
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Management process:
- identification,
- analysis and assessment,
- comparison of the risk magnitude with the risk appetite,
- adoption of decision (selection of risk management strategy),
- actual risk management, including using hedging tools if necessary,
- monitoring of results,
- assessment of effectiveness of financial risk management measures (self-diagnostics).
The centre for decision-making with respect to financial risk management is the Company’s Financial Risk Management Commission — a collective body comprised of representatives from several Departments chaired by the senior vice president for economics and finance.