Improvement of the corporate system of internal control and risk management
The Company implemented a set of key initiatives listed below to improve its corporate system of internal control and risk management.
- In 2018, the Company reorganized its internal control and risk management unit. As a result, the unit successfully managed a transition to a new organizational structure and the Company approved new internal regulations governing the activities of the structural units within the internal control and risk management unit.
- In 2018, the Company started drafting internal regulations governing the operation of the corporate system of internal control and risk management at the Group level along with the methodology for supporting the internal control and risk management process.
- RusHydro’s subsidiaries were assessed and prioritized by risk level and progress in implementing risk management processes with a view to developing a risk-based approach to building the 2018 internal control action plan and assess the efficiency and form of control activities.
- The implementation of improvements in internal control over RusHydro’s key business processes is monitored on a systemic basis, with more proposals developed for introducing new or strengthening the existing business process controls.
- The subsidiaries’ risk mitigation plans for 2018–2019 are being developed subject to regular reviews and approvals, and progress against the risk mitigation plans is monitored on a an ongoing basis.
There are no significant changes about key risks in the reporting year compared to the previous year.
Risk management report for 2018
Risks and opportunities are prioritized according to their impact on key financial, environmental and social aspects of the Company’s operations, with the strategic targets, development priorities and the Company’s mission factored in. 
In 2018, RusHydro Group’s register consisted of 15 risks, with no changes taking place throughout the year. [102-15]
During 2018, the risk management activities centered around the critical risks associated with key construction projects, including:
- delayed commissioning of new facilities at Zaramagskiye HPP (346 MW, under capacity sale agreements for new NPPs/HPPs); Sakhalinskaya GRES-2 (120 MW);
- cost overruns for investment projects at Verkhnebalkarskaya SHPP, Zagorskaya PSPP-2 (first stage of switchgear construction), GTP-CHPP at the central steam and water boiler site in Vladivostok.
Delays in commissioning and project cost overruns were caused by the need to specify and amend the design and cost estimate documents, coupled with low financial stability and qualification of contractors, as well as contractors’ errors during the pre-commissioning stage.
In 2018, measures were taken to mitigate these risks to an acceptable level.