Nornickel’s risks are all inherent to its strategic and operational development and business continuity goals. Key risks have a varying degree of effect on Nornickel’s objectives.
Price risk
Potential decrease in sales revenues due to lower prices for Nornickel metals is subject to actual or potential changes in demand and supply in certain metals markets, global macroeconomic trends, and the financial community’s appetite for speculative/investment transactions in the commodity markets.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Lower demand for metals produced by Nornickel
A slowdown in the global economy in general and in the economies consuming Nornickel metals in particular
Supply and demand imbalance in metals markets
Replacement of metals produced by the Company with alternative materials
Unfavourable monetary policy
Upgrade of the existing and construction of new facilities to ramp up our output of key metals and maintain financial stability
Effect on objectives: high
Risk source: external
Year‑on‑year change in risk: stable
Nornickel is consciously accepting the existing price risk. To manage this risk, Nornickel:
continuously monitors and forecasts supply and demand dynamics for core metals
secures feedstock supplies for key consumers through long‑term contracts to deliver metals in fixed volumes
as a member of the Nickel Institute and the International Platinum Group Metals Association, works with other nickel and PGM producers to maintain and expand the demand for these metals
searches for new applications and uses for palladium.
Market risk
Lower competitiveness of Nornickel products in the market may result in their lower liquidity, discounts to the market price, and a decrease in Nornickel’s income.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Foreign regulators imposing new foreign trade restrictions that impact the Company’s activities
Competition from producers of cheaper nickel
More aggressive transport electrification programmes, requirements on metals and their forms
Stricter market requirements for product quality and ESG compliance
Upgrade of the existing and construction of new facilities to ramp up our output of key metals and maintain financial stability
Effect on objectives: high
Risk source: mixed
Year‑on‑year change in risk: stable
To manage this risk, Nornickel:
monitors and analyses changes in market requirements for product quality and forms and for ESG compliance
stimulates the demand for its key metals
monitors changes in the vehicle fleet mix by engine type and requirements for metals used
diversifies its metal product sales across industries and geographies
improves and diversifies its product range
cooperates with industry institutions to maintain access to relevant sales markets for its metals
cooperates with Russian ministries and agencies to prevent/mitigate negative impacts of local or international regulation
implements an ESG roadmap
seeks partnership opportunities with key producers of cathodes for lithium‑ion batteries
fosters strategic partnerships with key representatives of its consuming industries
engages in joint projects to drive nickel demand in Russia
works on building and enhancing alternative PGM supply/trading platforms.
Financial risks
This group includes FX, interest rate, and liquidity risks as well as other risks related to the financial security of the Company’s operations and investments.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Increased debt financing costs
Deteriorating market conditions
Sharp rouble exchange rate fluctuations
Inability to raise debt financing due to deterioration in financial markets
Lack of access to key segments of global financial markets (debt and derivatives), limited access to the foreign currency debt market
Unexpected major expenses
Counterparty credit risk
Foreign regulators imposing restrictions that affect Nornickel’s operations as well as its key business and infrastructure partners
A debt portfolio with a well‑balanced profile in terms of maturity, currency composition, and sources of financing
Maintaining a strong investment case
Effect on objectives: high
Risk source: mixed
Year‑on‑year change in risk: stable
To manage this risk, Nornickel:
maintains a balanced debt portfolio
raises additional rouble‑denominated debt to prevent a liquidity shortfall
holds liquidity reserves on the Group’s balance sheet to ensure timely payments
monitors its account balances and existing cash gaps as well as the availability of liquidity reserves on its balance sheet
regularly evaluates key potential risk events through scenario modelling and develops prevention and response plans
constantly seeks new potential partners among borrowing and financial institutions, expanding and diversifying its financial infrastructure
uses different financial models for various purposes, expands the array of financial risk assessment tools (stress testing and reverse stress testing of all financial risks and risk factors considering their combinations, interrelations, and changes over time).
Technical and production risks
Technical, production, or natural phenomena which, once materialised, could have a negative impact on the implementation of the production programme and cause equipment breakdown or result in the need to compensate damage to third parties.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Harsh natural and climatic conditions, including low temperatures, storm winds, and snow load
Unscheduled stoppages of core equipment caused by fixed assets’ wear and tear
Release of explosive gases and flooding of mines
Collapse of buildings or structures
Infrastructure breakdowns
Effective delivery of finished products (metals) in line with the production programme
Effect on objectives: high
Risk source: mixed
Year‑on‑year change in risk: decreased
To manage this risk, Nornickel:
ensures proper and safe operation of its assets in line with the requirements of technical documentation as well as technical rules and regulations as prescribed by local laws across Nornickel’s footprint
develops ranking criteria and criticality assessment for the Group’s key industrial assets
ensures timely replacement of fixed assets to consistently achieve production reliability targets
continuously monitors the ongoing condition of Nornickel’s buildings and structures via an information system for conducting geotechnical surveys
uses satellite technology to monitor Nornickel’s assets and further analyse the data
implements automated systems to control equipment process flows, uses state‑of‑the‑art engineering controls
improves its maintenance and repair system
trains and educates its employees both locally on‑site and centrally through its corporate training centres
systematically identifies, assesses, and monitors technical and production risks, implements a programme of organisational and technical measures to mitigate relevant risks
continuously monitors the industrial asset management system
ensures risk review by collective bodies at all management levels of the Company
develops its technical and production risk management system, including by engaging independent experts to assess the system’s performance and completeness of risk data
develops and tests business continuity plans, which outline the steps that need to be taken by Nornickel’s personnel and internal contractors in case of technical and production risks causing maximum damage. These plans ensure that Nornickel resumes its production operations as soon as possible after any disruption
engages, on a regular basis, independent surveyors to analyse Nornickel’s exposure to disruptions in the production chain and make assessments of related risks.
Investment project risks
Risk related to time and budget overruns as well as to failure to meet performance targets of Nornickel’s major investment projects.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Changes in forecasts of ore volumes, grades, and properties resulting from follow‑up exploration
Changes in investment project timelines
Further changes to budgets of investment projects
Amendments to project performance targets in the course of implementation
Strategic goal: growth driven by Tier 1 assets
Developing Nornickel’s mining, concentration, and metallurgical assets
Developing the Company’s mineral resource base and upgrading core production processes at Nornickel’s Tier 1 assets
Effect on objectives: high
Risk source: mixed
Year‑on‑year change in risk: stable
To manage this risk, Nornickel:
carries out accelerated exploration and updates project performance targets and the mining plan (a long‑term production plan) based on the progress of its major investment projects developing the mineral resource base
conducts resource, geomechanical, and hydrogeological modelling
holds external audits of geological data
develops an in‑house geological and mining information system
models mining options in geological and mining information systems
as part of the project assurance process, conducts internal (cross‑functional) audits of major investment projects at each stage in their life cycle
improves incentives to drive project delivery and build skills and capabilities (including staff certification, identification of improvement areas, and provision of tailored training)
promotes the use of pilot units across all technically challenging and unique processing stages
redesigns projects and substitutes supply routes to source materials/services from friendly countries
implements a transformation programme for a research institute to improve the quality and reduce the timelines of R&D projects and survey and engineering activities
enhances project management competences of project teams and ensures regular best practice sharing.
Health and safety risks
Failure to comply with Nornickel’s health and safety (H&S) rules may result in threats to health and life or temporary suspension of operations, or cause property damage.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Suboptimal methods of work organisation
Process flow disruptions
Exposure to hazards
Health and safety
Effect on objectives: high
Risk source: internal
Year‑on‑year change in risk: stable
Pursuant to the Occupational Health and Safety Policy approved by the Board of Directors, Nornickel:
continuously monitors compliance with H&S requirements
improves the working conditions for its employees and contractors deployed at Nornickel’s production facilities, including by implementing new technologies and labour‑saving solutions as well as through enhancing industrial safety at production facilities
provides employees with certified state‑of‑the‑art personal protective equipment
improves the system of stationary gas analysers, provides employees with portable gas analysers
carries out preventive and therapeutic interventions and enforces hygiene protocols to reduce the potential impact of work‑related hazards
provides regular training and briefings to employees on health and safety, assesses their health and safety performance, and conducts corporate workshops, including by deploying special simulator units
enhances methodological support for H&S functions, including through the development and implementation of corporate standards
improves the risk assessment and management framework across Group enterprises as part of the Risk Control project
reviews the competencies of line managers across Nornickel’s production enterprises, develops H&S training programmes, and arranges relevant trainings
holds H&S competitions
communicates the circumstances and causes of accidents to all Nornickel employees, conducts ad hoc safety briefings
introduces frameworks to manage technical, technological, organisational, and HR changes.
Compliance risks
The risk of legal liability, significant financial losses, suspension of production, revocation/suspension of a licence, loss of reputation, or other adverse effects arising from Nornickel’s non‑compliance with applicable laws, regulations, instructions, rules, standards, codes of conduct, or from the imposition of sanctions and/or other corrective measures by external supervisory bodies.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Discrepancies in rules and regulations
Considerable powers and a high degree of discretion exercised by supervisory bodies
Regulatory instability
Market practices driven by business customs and specific to the country
Compliance by the Group with applicable laws, regulatory requirements, corporate standards, and business codes
Effect on objectives: medium
Risk source: mixed
Year‑on‑year change in risk: stable
To manage this risk, Nornickel:
ensures the development and update of key procedural documents on compliance
applies best practices to further improve the compliance system
takes measures to ensure its compliance with applicable laws
protects its interests during regulatory inspections and administrative proceedings
ensures that agreements signed by Nornickel contain clauses safeguarding its interests
ensures pre‑contractual due diligence of counterparties, partners, and suppliers
takes measures to prevent and mitigate compliance risks at the Group
consistently keeps employees up to date on the Company’s requirements and measures to mitigate compliance risks
ensures that the Corporate Trust Line receives and handles reports of corruption, fraud, embezzlement, or other wrongdoing, either planned or committed
maintains and enhances an antitrust compliance system
ensures performance evaluation of compliance controls at the Group
incorporates compliance metrics in relevant officers’ key performance indicators.
Information security risks
This group includes risks such as potential cybercrimes, a potential unauthorised transfer, modification, or destruction of data assets, disruption or reduced efficiency of Nornickel’s IT services as well as business, technological, or production processes.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Growing external threats
Unfair competition
Rapid development of Nornickel’s IT infrastructure and automation of technological and business processes
Unlawful acts by Nornickel employees and/or third parties
Working from home / hybrid work schedule and hiring remote employees outside Nornickel’s regions of operation
Mitigation of the information security risk and risk of cyberattacks on Nornickel’s information systems and automated process control systems
Effect on objectives: medium
Risk source: mixed
Year‑on‑year change in risk: stable
To manage this risk, Nornickel:
ensures compliance with applicable laws and regulations with respect to the protection of personal data, trade secrets, insider information, and critical information infrastructure
implements MMC Norilsk Nickel’s Information Security Policy
categorises data assets and makes information security risk assessments
embeds and monitors compliance with corporate information security standards within information systems and automated process control systems
raises information security awareness among its employees
uses technical means to ensure information security of assets and manage access to data assets
monitors threats to information security and the use of technical protection means, including vulnerability analysis, penetration testing, cryptographic protection of communication channels, controlled access to removable media, protection against confidential data leaks, and mobile device management
develops information security regulations
sets up and certifies the Company’s information security management system
implements measures to ensure safe remote access.
Environmental risks
This risk group includes events that result in environmental pollution, are not provided for in approved process flows and Russian laws, and affect the achievement of the Company’s environmental goals.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Failure to comply with the requirements of environmental laws when operating the Company’s facilities
Poor internal management and control
Delay in implementing environmental programmes and measures
Natural and climate phenomena
Compliance of business with applicable environmental laws, regulations, corporate standards, and business codes related to environmental protection
Effect on objectives: medium
Risk source: mixed
Year‑on‑year change in risk: decreased
To manage these risks, Nornickel:
develops, implements, and improves environmentally sustainable business processes and introduces advanced practices and approaches
has in place an incentive system and promotes environmental competencies of its employees
implements its Environmental and Climate Change Strategy
implements environmental initiatives across the Group
oversees environmental compliance and the implementation of environmental programmes and measures.
Social risk
Tensions may escalate among the workforce due to the deterioration of social and economic conditions in Nornickel’s regions of operation.
Key risk factors
Effect on Nornickel’s development goals and strategy
Rejection of Nornickel’s values by individual employees and/or third parties
Limited ability to perform annual wage indexation
Social responsibility:
Partnering with regional and local authorities to develop a social infrastructure that supports a safe and comfortable living environment for local communities
Effect on objectives: medium
Risk source: mixed
Year‑on‑year change in risk: stable
To manage this risk, Nornickel:
strictly adheres to the terms and conditions of collective bargaining agreements between Group companies and employees (the Group has signed a total of 22 collective bargaining agreements)
interacts with regional authorities, municipalities, and civil society institutions
fulfils its social obligations under public‑private partnership agreements
runs corporate social responsibility programmes and the World of New Opportunities charity programme aimed at supporting and promoting regional community initiatives, including by indigenous peoples of Taimyr, and the Plant of Goodness employee volunteering programme
Dissemination of false and inaccurate information about Nornickel’s plans and operations among Group employees
Reallocation of funds originally intended for social programmes and charity
Facilitating the employees’ professional and cultural development and building up talent pools across Nornickel’s regions of operation
Running wide‑ranging charity programmes and projects
implements infrastructure projects to support the accelerated development of the service economy and improved living standards across Nornickel’s regions of operation through the Norilsk Development Agency, the Second School centre for community initiatives in the Pechengsky District, and the Monchegorsk Development Agency
carries out regular sociological monitoring across its operations
surveys Norilsk residents on living standards, employment, migration trends, and general social sentiment to identify major issues
runs social projects and programmes aimed at supporting employees and their families as well as Nornickel’s former employees
maintains dialogues with stakeholders and conducts stakeholder questionnaire surveys when preparing the Group’s public sustainability reports
provides a range of social support measures to redundant staff under the Kola operations’ social programmes and designs the Social and Economic Development Strategy of the Pechengsky District.
Supply chain risks
Supply chain interruption/disruption within the existing transport and logistics system.
Key risk factors
Effect on Nornickel’s development goals and strategy
Risk assessment
Key mitigants
Challenging natural and climatic conditions in the regions of operation
Limitations of the transport and logistics system
Growing inflation, FX rates, pricing pressure from suppliers, poor planning, and other factors
Breach of contracts by contractors
Foreign regulators imposing restrictions that affect Nornickel’s operations and its key business partners
Effective delivery of finished products in line with the production programme
Timely supply of products to consumers
Effect on objectives: medium
Risk source: mixed
Year‑on‑year change in risk: stable
To manage this risk, Nornickel:
actively engages Russian manufacturers to expand competition
uses long‑term agreements / contracts / price lists with fixed optimal prices for materials, equipment, and spare parts on terms that are most beneficial for the Company
drafts lists of critical manufacturers of equipment and materials, works to prevent supply disruptions, and monitors the suppliers’ performance
implements its Logistics Infrastructure Development Programme
implements its Procurement Performance Enhancement Programme.