Risk management

DTEK employs an integrated risk management system. Its aim is to detect, forecast, evaluate and minimise potentially adverse events that could have a negative effect on the Company’s ability to achieve its goals. 

Risk-management processes function at all levels of management and in all areas of DTEK’s business. Key decisions relating to acceptable levels of risk and measures to minimise them are taken by the Executive Board based on recommendations by the Risk Committee, created in 2009.

DTEK has implemented procedures for identifying and mitigating each group of risks, notably:

  • Creating working groups with experts participating from all core business areas
  • Identifying risks on the basis of established goals and existing processes
  • Evaluating risk exposure
  • Weighting risks based on their evaluation
  • Developing points and methods for internal oversight for preventing negative events as well as measures for reducing risk exposure
  • Selecting and implementing the most effective methods
  • Monitoring effective measures and the Company’s general risk profile
Current, operational and process risks

DTEK devotes particular attention to risks associated with achieving annual planned key indicators, with operational processes in various areas of its business, with the security of its assets, and with business processes.

A process has been introduced to identify, evaluate, manage and monitor risks as part of annual planning and an according system of reporting. Programmes are being implemented to reduce operating costs, increase the efficiency of production processes, and develop plans for dealing with accidents at the Company’s enterprises.  Work is being carried out jointly by the Risk Management and Internal Control functions as well as the Internal Audit and Security departments to improve the risk management system. DTEK makes widespread use of insurance to reduce its exposure to this group of risks.

Market risks

DTEK is exposed to changes in prices of coal and electricity supplied to the wholesale market. Market risks are being reduced by changing the breakdown of sales and expanding into the coal and electricity markets.

Strategic risks

The Company has introduced a process to identify, evaluate and manage strategic risks, including:

Financial risks

The most significant in this group are liquidity risk, currency risks and investment-project risks. Several initiatives are being implemented in their regard.

The existing policy for creating and observing limits on counterparties allows the Company to minimise risks linked to non-payment. Measures are being undertaken to reduce exchange-rate exposure: part funding, maximising the number of fixed-price contracts, and others.

In addition, DTEK currently manages non-payment risks for each enterprise by creating reserves for depreciation, centrally manages the process of obtaining loans and its debt portfolio, and conducts work to diversify the sources and currency of incoming payments by entering international markets.

The Company has introduced a process to identify and evaluate the risks of the most important investment projects. This includes gathering expert opinion and statistics on the exposure and history of realised risks and mathematically evaluating the risks of any particular project.

Regulatory risks

Since price on the markets for coal and electricity in Ukraine are regulated by the state, DTEK is exposed to risks linked to changes in legislation and regulatory policy. The Company has created a working group at the senior management level, has established a reaction process, and monitors exposure to these types of risks.

Compliance risks

This group is closely linked to regulatory risks and DTEK has developed a plan for identifying its exposure to compliance risks. Systems are being developed for monitoring and reporting in each area where the Company needs to comply with legislative requirements. A separate compliance department has been created to organise and support the compliance process.

Ecological risks

One of DTEK’s most important strategic goals is managing environmental risks and compliance with all requirements and recommendations of legislation in this area. A special working group has been created to introduce a systematic approach to identifying and evaluating DTEK’s environmental risks. At present, the most significant risks for this group have been identified and evaluated and there is a process under way to develop measures to reduce exposure to them.

IT risks

The Company is building a centralised system to manage IT infrastructure and services. While carrying out this project, a methodology has been developed for calculating the value of losses from interruptions in IT services. IT risks are monitored and controlled on the level of both management procedures and technology.

Reputational risks

This group of risks is monitored by an existing working group at the senior management level. The Company is implementing initiatives for internal and external PR as well as managing information security. The adoption of a Code of Corporate Ethics in 2009 has helped to reduce reputational risks.