Sustainability risks in the risk management system
The Company’s management team pays significant attention to risk management in order to ensure a reasonable guarantee of attaining strategic goals against a backdrop of uncertainty and negative factors.
PJSC LUKOIL regularly determines, describes, assesses, and monitors potential events that could negatively impact the Company's activities, and elaborates measures to prevent their manifestation or to mitigate their adverse impacts as much as possible should they materialize.
Risk management is carried out at all levels: in LUKOIL Group entities and PJSC LUKOIL and at the level of the Board of Directors. Information about the risk profile of LUKOIL Group entities is included in the annual reports, which are reviewed by the Board of Directors of PJSC LUKOIL and the Audit Committee of the Board of Directors of PJSC LUKOIL.
Sixteen groups of the most material risks affecting the business activities of LUKOIL Group entities were determined, and these undergo annual qualitative and quantitative assessments based on the likelihood of the risk arising and the extent of the consequences. For each material risk, an acceptability level and measures to mitigate or eliminate its negative impacts are developed. Employees from the Risk Management Department and dedicated units monitor the implementation of these measures and their effectiveness.
Given the uncertain nature of risks, as well as their external nature in relation to the Company, PJSC LUKOIL cannot guarantee that risk management measures will fully eliminate the negative impacts of risks. By reporting on identified risks, we inform stakeholders about the existence of certain circumstances that could worsen the Company's performance indicators.
Furthermore, PJSC LUKOIL invests considerable efforts in mitigating risks associated with its production operations in the regions where the Company operates.
|Description of risk category||Risk management and mitigation measures|
|The Company's facilities are exposed to risks associated with process interruptions, emissions of hazardous products, environmental damage, and accidents, fres, and accidents, which in turn may lead to a shutdown of the Company's production.|| To mitigate these risks, an integrated HSE management system has been created and is successfully operating. The following activities are implemented: |
|Risks associated with climate change|
|The toughening of carbon regulation rules in various countries, together with changes in the investment strategies of financial market participants, could have negative impacts on the activity of PJSC LUKOIL as a large producer of fossil fuels and an emitter of greenhouse gases, in the form of increased costs and a decrease in efficiency. In addition, PJSC LUKOIL operates in regions where the potential physical impact of climate change is rather unpredictable and can cause significant negative impacts.|| To mitigate these risks, the Company: |
|Risk of insufficiently qualified staff|
|Insufficiently competent or qualified employees can have a negative impact on the Company's performance results.|| In order to reduce the negative impacts of this risk, the Company pays key attention to the integrated development of human resources: |
|Risk of loss of goodwill (reputational risk)|
|PJSC LUKOIL encounters various factors that could result in reputational risk, including violations of legislation, defaulting on contractual obligations, the quality of finished products, and negative perceptions surrounding the financial stability and position of the Company.|| In order to manage this risk the Company implements measures aimed at: |
|The risk management system also comprises the following categories, which include risks and measures for their mitigation: strategic, country, competition, macroeconomic, financial, legal, and industry specific risks, and risks related to acts of terrorism and illegal actions by third parties.|