Compliance risks

Violations of terms for connection and for requesting the amount of connection fee from a regulator are factors of risks related to bringing to responsibility for violating antimonopoly legislation with regard to connection. To minimize the risks all our branches use software enabling to control terms of execution of connection requests and local regulating documents determining activities performed during the arrangement of connection procedure.

Breaks and failures of head-end and network equipment, information system, data transmission channels are IT-related risk factors. To minimize the risks we perform scheduled-preventive maintenance, create reserve channels, upgrade computing capacities, network and technological equipment.

Key factors for risks related to corporate governance are non-transparency of ownership structure, conflicts between various shareholder groups, relations between shareholders and management, conflict of interests between management and shareholders, low corporate culture. Main activities focused on the risk mitigation are close-cut distribution of authority and responsibility between the BoD and executive bodies, determination of the strategy and tasks of the Company, observation of shareholder interests, control of the Audit Commission, subdivision responsible for internal audit and risk management and external auditor.

Untimely registration (re-registration) of land plots and title of ownership, untimely changes of real boundaries of the plots, low-quality contractor operations are factors of risks related to property management. Permanent monitoring of contractor operations, timely submission of documents to local authorities, control over title document custody are main measures taken by IDGC of Urals on risk reduction.

Tax risks are generic for IDGC of Urals and any other company operating in Russia. Primarily, tax risks are caused by the specificity of the current legislation, its changes, equivocating interpretation of regulatory documents, contradictory court sentences on similar cases. Nevertheless, these risk factors are not significant for IDGC of Urals, OAO. Permanent monitoring of changes in legislation and court practice enables us to plan our financial and economic operations with regard to changes. Accounting and legal departments work hand in hand over methodology of tax base calculation and control their compliance with the current legislation. There is also a preliminary legal expertise of corporate procedures, operations and transactions of the Company.