Sustainability risk management

The company has in place an Integrated Risk-Management Framework (IRMF), which determines a consistent approach to the risk management process and incorporates standardised tools and methods for the analysis of risks, including HSE and social risks.

Gazprom Neft risk-management goals and principles are stipulated in the Risk Management Policy.

The Gazprom Neft risk management framework is based on the integration of risk management tools into all key corporate processes, which enables the company to determine areas of responsibility for risk management, and to monitor risks at all levels of the company’s governance.

Principal sustainability risks facing Gazprom Neft include risks associated with health, safety and environment, as well as risks associated with the availability of skilled personnel. The company takes the relevant preventive measures to avoid the risks materialising and to protect people, the environment, equipment and production processes.

When managing HSE risks, the company is guided by the precautionary principleThe precautionary principle is stated in international documents as follows: 'Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.' (Rio Declaration on Environment and Development, 14 June 1992).

The IRMF process in the Gazprom Neft Group

Social and environmental risk management

Health, safety and environment (HSE) risks

Risk description

Risks associated with non-compliance with environmental, health and safety legislation (including the laws on fire safety) that may result in a temporary shutdown of facilities or licence revocation, as well as risks of accidents (fatalities and workplace injuries, fires/explosions/emergencies, environmental disasters on a national scale.

Risk management measures

In the sphere of HSE, the company strives to achieve the strategic 'Target Zero': zero harm to people, the environment, or property in our operations.

The main focus areas outlined in the corporate HSE Policy Statement include:

  • safe production based on risk analysis, management and mitigation;
  • reducing workplace injury and occupational disease rates, the accident rate and the environmental impact;
  • consistently implementing the best global HSE practices.

The HSE risk management philosophy is based on a risk-focused approach and the principle of integrating HSE risks into all key business processes of the company. As part of the risk-focused approach, the company is focusing on the following solutions:

Fundamental barrier

Setting up barriers to prevent prioritised risks across company assets, and ensuring their reliability.

Competency barrier

Ensuring that only competent employees are authorised to perform operations.

Digital barrier management

Preventing human error, where practicable.

The company is fully aware of its social responsibility to protect the environment. Gazprom Neft monitors its operations in order to comply with the relevant environmental requirements and standards, and implements environmental protection programmes.

The company HSE initiatives are designed to ensure compliance with Russian environmental regulations by investing in environmental protection, including technology that minimises its environmental footprint. These efforts have resulted in a significantly lower probability of environmental risks.

HR risks

Risk description

Highly qualified personnel is key to effective operation of the company business. A lack of qualified employees, especially engineering and technology experts, can result in risks associated with personnel shortages. The company’s success largely depends on the efforts and expertise of key employees, including qualified engineering personnel, and on the company’s ability to attract and retain such personnel. Competition for the best talent in Russia and worldwide may intensify due to a shortage of qualified specialists in the labour market. Failure to attract qualified employees and/or retain the existing talent pool may have an adverse effect on the company’s attractiveness as an employer. Demand for qualified personnel and associated costs are expected to continue to grow, given the significant need for such employees in other industries and public projects.

Risk management measures

The company offers a safe work environment and competitive salaries, opportunities to participate in large-scale projects and exciting challenges, and provides training for employees under specially designed programmes.

In addition, the company is improving its recruitment procedures and taking measures to reduce staff turnover and encourage self-development among employees.

Risks associated with the impact on local communities

Risk description

Company operations entail a risk of a negative impact on the environment and the health of the local population.

A potential negative impact on local communities can be caused by the company abandoning or streamlining its production projects and, consequently, downsizing or transferring employees to other regions.

Risk management measures

To minimise the risk of a negative impact on the environment and the health of the local population, the company is taking measures to ensure industrial and environmental safety.

To minimise risks associated with industrial relations and employment of local residents, the company is implementing job placement and development programmes for employees working at its production facilities.

For more details, see:

Performance assessment of the risk management system

The Board of Directors considered information on the company’s risk-management system, the outcomes of risk assessment review, and updates on the main risks for 2019 at a series of face-to-face meetings throughout 2019. Overall, the company’s risk-management and internal-control system was judged to be effective.

The procedure for updating information on the company risks is aligned with the requirements set out in regulations and guidelines regulating the functioning of the IRMF. It is based on a bottom-up approach, starting from the company subsidiaries, and involving all the key managers and experts in subsidiaries and Divisions, and the Gazprom Neft Management Board. The updated Gazprom Neft key-risk register was approved by the Management Board in 2019.

To improve the quality of information on risks, the company implemented initiatives in 2019 to develop and introduce risk analysis and risk management tools and methods (including quantitative risk assessment, simulation modelling, and the bow-tie and decision-tree methodologies).

Internal control and audit

The internal control system is designed to identify and assess risks, develop and implement control procedures, report control weaknesses to the relevant governance bodies and propose remedial measures, enable the company to adapt to changes promptly in the internal and external environment, improve the IT component of the control system, and settle conflicts of interest in a timely manner.

Internal control units in Gazprom Neft include the Board of Directors, the Audit Committee, the company executive bodies and senior management, heads of business units, the Audit Commission, and the Internal Audit Department, which forms part of the Internal Audit and Risk Management Directorate.

Gazprom Neft has developed an Internal Control Policy, which determines the principles underlying the organisation and functioning of the company’s internal-control system.

To conduct systematic independent assessment of the reliability and efficiency of the risk-management and internal-control system, and the corporate-governance framework, the company performs an internal audit.

In 2019, the Internal Audit Department completed all audit projects scheduled for the reporting period in the field of corporate governance, IT and investment activities, and across Gazprom Neft core operations. An audit of financial statements (accounts) was conducted as part of the work of audit commissions.