Risk Management System

Risk management is carried out at the MTS Group within the accepted conceptual risk management frameworks¹. The integrated risk management process is functioning efficiently in accordance with the needs of the Group and international standards. Risk management policy aims to minimize unexpected losses from risks and to maximize capitalization, taking into account the relation between risk and return on investments acceptable to the shareholders and the management of the MTS Group.

¹ “Enterprise Risk Management. Integrated Model” of the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The Risk Management Department of the Corporate Center (RMD CC) assesses the most significant risks on the basis of long-term financial model and regularly conducts simulations for obtaining key financial indicators considering the risk and probability distributions of these indicators. RMD CC applies econometric techniques for the analysis of individual risks.

A report on the status of the MTS Group risks is reviewed regularly by the Risk Committee, which discusses the key company risks and makes collective decision on the elaboration of measures for their mitigation. The Chairman of the Risk Committee is the MTS President. The committee includes Management Board members, Vice Presidents, and other managers.  The competences and responsibilities of the committee include consideration and approval of the following: objectives for development of the process of integrated MTS risk management; risk-management methodology; MTS risk portfolio and priority of actions to manage risks with account of the feasibility of their costs and restriction of resources; MTS risk-portfolio management strategy, etc.

Notification of the MTS Group management is carried out taking into account the whole risk spectrum to ensure the completeness, quality and comparability of the information provided for each level of decision-making.

Based on the results of evaluating the effectiveness of MTS Group’s internal control systems in 2021, the risk management process was deemed effective.

Risk management activity is distributed among the functional units of the Company.

• RMD CC is responsible for developing a risk assessment methodology, regular collection of information and reporting the results of this assessment to the Risk Committee and the company executives. The Department also carries out operational control of the process and provides cross-functional interaction between units within the integrated risk management at the Company. Cross-functional interaction with the risk owners at subsidiaries is provided by the risk coordinators at such subsidiaries.
• The risk owners are the heads of functional units, whose achievement of goals is affected by the risks. The owners are responsible for the analysis, evaluation, implementation of risk management measures and reporting on the activity within the process of integrated risk management.
• The Risk Committee makes collective decisions in the field of integrated risk management.
• The efficiency of the risk management process is estimated by the Internal Control Block, this information is also presented to the Audit Committee for consideration.
• The Audit Committee monitors the risk management efficiency, as well as the assessment of procedures used by MTS Group to identify the principal risks and evaluation of appropriate control procedures (including the procedures for loss control and risk insurance) in order to determine their adequacy and efficiency.
• The Board of Directors operates directly or through its committees within its competences and resolves the issues of assessing the political, financial and other risks affecting the Company’s operation. The MTS Board of Directors delegates monitoring of risk management efficiency to the MTS Audit Committee, and also reviews the Audit Committee’s reports.

Integration of risk management into decision-making processes

Risk management is an integral part of all processes of the Company: policy development, strategic, business, budget and investment planning, change management, and procurement procedures.

Strategic planning

• Identification of risks related to various conditions of environment.
• Analysis and accounting of key risks within the framework of the selected macro scenario.
• Definition of substantial risks influencing strategic objectives, but not resulting in their revision, and development of actions to manage such risks

Business planning and budgeting

• Analysis and accounting of risks related to failure to achieve the main financial KPIs.

Investment planning

• Analysis and accounting of project risks related to failure to achieve NPV and other parameters of projects.

Procurement procedures

• Analysis and accounting of risks in choice of suppliers.

The risk management process passed all stages of implementation, automation and integration into the company’s business processes (into strategic and investment planning, as well as into the cross-functional projects and the preparation of external reporting), which now makes it possible to identify and consider the risks when making key decisions for the guaranteed achievement of goals and strengthening of business leadership..

2021 Key Activities

Risk Committees of the MTS, MGTS and RTK CCs were held based on the results of risk monitoring in each quarter of 2021. Risk reports for the first half of 2021 and for 2021 were also submitted for consideration by the Audit Committee and the Board of Directors.

CC RMD assessed the main risks in the framework of the MTS Group’s strategic session, including assessing the impact of risks on the MTS Group’s financial figures over a five-year period. The results were reviewed by the MTS PJSC Board of Directors

Large-scale training of employees was completed to increase the risk-oriented thinking in part of detection, assessment, management and mitigation of the risks influencing the objectives of the divisions.

Plans for 2022

In 2022, there are plans to update the risk section for external reporting (20-F for the New York Stock Exchange, reports of the issuer for the Central Bank of the Russian Federation) and regularly hold Risk Committee meetings. Continuous monitoring of the situation related to the geopolitical situation is also planned to identify, assess and further mitigate the risks.

Key risk factors

The most significant risk factors that may potentially influence MTS PJSC business results are provided in PDF-file.

Details on these and other risks see in the section “Item 3 – Key Information – D. Risk Factors” of the Annual Report according to the form 20-F, and in reports of MTS PJSC.