Control and Audit
Risk management and internal control system
The risk management and internal control system in the Company is a set of internal documents and activities to identify, assess risks, develop and implement risk management measures, as well as monitor and control their level.
The goal of risk management is to guarantee that the Company’s business objectives, as outlined in its strategy, are achieved by creating and maintaining an organisational structure, processes, and resources to detect, assess, manage, and monitor risks.
The risk management and internal control system in the Company is governed by the following documents:
- Risk Management Policy (approved on 4 May 2022)
- Regulations on internal control (approved on 14 August 2013)
- Foreign Exchange Risk Hedging Policy (adopted on 3 November 2015)
In 2023, management intends to update and review internal policies regulating the risk management and internal control bodies.
Participants in the risk management and internal control system and their role
|Board of Directors|| |
|Audit Committee of the Board of Directors|| |
|Chief Executive Officer|| |
|Heads of structural units|| |
|Risk manager|| |
|Other workers|| |
|Possible risk factors||Mitigation methods|
|BIOLOGICAL RISKS – RISKS RELATED TO THE SPECIAL FEATURES OF FISH REARING AND HEALTH|
| || |
|PATHOGEN RISKS – RISKS ASSOCIATED WITH EPIZOOTIC OUTBREAKS|
|Epizootic outbreaks|| |
|NATURAL AND CLIMATIC RISKS – RISKS OF ABNORMAL WEATHER EVENTS|
| ||Risk occurrence is very low. The existing changes in climatic conditions and oceanic currents present no threat. In case of significant changes in water temperature and routes of undercurrents, the existence of not only the Company’s farm but of the whole fishery industry of the region will be unlikely|
|REGULATORY AND GRGovernment Relations. RISKS – RISKS ASSOCIATED WITH THE LEGAL PECULIARITIES AND LEGAL ENVIRONMENT OF THE COMPANY|
|Changes in legislation (including changes in tax rates, increases in various fees and charges)|| |
|HR RISKS – HR-RELATED RISKS|
| || |
|OPERATIONAL RISKS – RISKS RELATED TO THE SPECIFICS OF FARMING AND PRODUCTION TECHNOLOGY|
| || |
FINANCIAL AND MARKET RISKS – RISKS RELATED TO THE FINANCIAL POSITION,
| || |
COMMERCIAL RISKS – RISKS ASSOCIATED WITH THE FAILURE OF SUPPLIERS
|Breach of or default ob obligations by suppliers of raw materials and supplies|| |
The Company’s Risk Map is put together by conducting polling surveys and/or one-on-one interviews with each risk owner. It includes a description of all potential risks, an evaluation of their severity and likelihood of occurrence, management strategies, and identification of who is in charge of mitigating the risk and/or its consequences. The risk map is updated regularly to reflect changing operations and external factors.
The Audit Committee of the Board regularly reviews the Company’s existing risk map and conducts interviews with key risk owners.
The members of the Audit Committee of the Board of Directors were quite complimentary of the risk governance work done by the Company’s management at their most recent meeting in 2022.
Plans to improve the risk management and internal control system
- To analyse the Company’s current internal documents regulating the financial and economic activities of the Company in accordance with the Internal Control Regulations.
- To draft proposals for improving and updating these documents.
- To monitor the implementation of internal control procedures.
Promotion of risk management culture within the Company
The Company is taking steps to improve workers’ risk management capabilities in order to promote the internal risk management culture, including:
- Workshops and information sessions for employees, covering information on the status and results of risk management in the Company, the main elements and tools of risk management, and the responsibilities of employees
- Provision of information materials (memos) on risk management to newly hired employees of the Company
The General Meeting of Shareholders approves independent auditing companies with no property interests in the Company or its shareholders in order to carry out an annual audit of the Company’s RAS accounting (financial) statements and INARCTICA Group’s IFRS consolidated financial statements.
BST JSC (OGRN 1027700425444) was approved as the auditor of the Company’s 2022 consolidated financial statements.
BST JSC has been the independent auditor of the INARCTICA Group since 2011.
By decision of the annual General Meeting of Shareholders dated 23 June 2022 (Minutes No. 69 dated 23 June 2022), Atlas Audit LLC (OGRN 5147746074251) was approved as the auditor of the Russian accounting records of the Company for 2022.
How independent auditors are selected
The Company makes sure that an independent auditor is a company with impeccable professional reputation, experienced and qualified staff and high-quality services.
Steps in the selection process for candidates among auditing organisations:
- Collection of commercial proposals from auditing organisations
- Preliminary review of the received proposals by the Audit Committee of the Board of Directors
- Audit Committee’s proposal to the Board of Directors to recommend to the General Meeting of Shareholders the selected audit companies to serve as the Company’s auditors and the fees payable for their services
- Decision of the Board of Directors to nominate the Company’s auditor (auditing organisation) for approval by the General Meeting of Shareholders
- Approval of auditor nominees by the General Meeting of Shareholders of the Company
During regular in-person meetings, the Audit Committee of the Board of Directors reviews reports from the audit organisation on the results of its audits of the Company’s IFRS financial statements.
This procedure helps the Audit Committee of the Board of Directors to form an opinion onthequality of the auditors’ work.
|Company||Amount of remuneration (excluding VAT), RUB|
|Atlas Audit LLC||240,000|
The Internal Audit Service is a structural subdivision of the Executive Office of INARCTICA PJSC.
Its activity is regulated by the legislation of the Russian Federation, the Company’s Charter, decisions of the General Meeting of Shareholders, the Board of Directors, the Audit Committee of the Board of Directors, the Regulations on the Internal Audit Service, as well as orders, instructions and other local regulations of INARCTICA PJSC.
The Internal Audit Service reports functionally to the Board of Directors of the Company and administratively to the Chief Executive Officer of the Company. The Internal Audit Service’s operations are overseen by the Head of the Internal Audit Service.
The purpose of internal audit is to provide independent and objective assurance to the Board of Directors / Audit Committee of the Board of Directors and the executive bodies of the Company that the Company has adequate internal control, risk management and corporate governance systems inplace to ensure that:
- Operations are efficient, cost-effective and productive
- Requirements of the legislation of the Russian Federation, as well as the decisions of the governing bodies and organisational and administrative documents of the Company are complied with
- Misconduct by Company employees andthird parties in relation to Company assets canbe prevented
- Statements of any kind are accurate, complete and timely prepared
Functions of the Internal Audit Service
Within the parameters of its responsibilities, the Internal Audit Service performs the following primary duties:
- Planning, organising and conducting internal audits of business processes (lines of business), business functions, projects, plans, programmes, structural and separate units and other security-related audits of the Company
- Checking compliance with legislation, industry regulations, internal guidelines, standards and other internal documents, and contractual obligations
- Reviewing the efficiency, cost-effectiveness and productivity of the Company’s operations
- Checking the accuracy and reliability of the accounting (financial) and management accounts
- Monitoring safety of the Company’s assets
- Conducting audits, completing other assignments as instructed by the Board of Directors (Audit Committee) and/or the executive bodies of the Company on matters within the purview of internal audit
- Communicating the results of audits to the Board of Directors (Audit Committee) and the Company’s executive bodies, giving recommendations to eliminate violations and shortcomings identified during audits and proposals to upgrade the efficiency and effectiveness of internal control, risk management and corporate governance systems, as well as to improve the Company’s operations
- Monitoring the progress of corrective action plans to remedy breaches and deficiencies identified during audits and the application ofrecommendations and proposals to improve the Company’s operations
- Assessing whether the risk management andinternal control system is effective
- Assessing the quality of corporate governance in the Company
The Internal Audit Service follows the following guidelines while conducting internal audits in compliance with INARCTICA’s internal audit policy:
- Fairness of presentation
- Professional competence
The Company had an Auditing Commission until June 2022, which consisted of three members: Mariya Galkova, Natalya Grigoryeva and Mariya Klimova.
By decision of the annual General Meeting of Shareholders dated 23 June 2022 (Minutes No. 69 dated 23 June 2022), amendments No.4 to the Company’s Charter were adopted, which removed the provisions on the Auditing Commission of the Company from the Charter.
The Company places a high priority on preventing the wrongful use of insider information.
These Regulations stipulate that insider information includes information that the Company determines independently as such based on the provisions of Federal Law No. 224-FZ on Combating Insider Information Misuse and Market Manipulation and on Amending Certain Legislative Acts of the Russian Federation dated 27 July 2010 and regulatory acts of the Bank of Russia with due regard for the specifics of the Company’s operations, as well as regulate the rules for compiling lists of insiders, control measures for compliance with the insider information legislation, rules for handling insider information, insiders’ transactions with the Company’s financial instruments, and liability for the misuse of insider information.
The Company’s Legal Department is the unit responsible for control over compliance with the requirements of Russian Federation legislation on combating misuse of insider information and market manipulation.
The responsibility of the Company’s Legal Department in dealing with insider information covers:
- Maintaining the list of insiders, amending it, submitting it to trade organisers, the Bank of Russia and other entities at their request
- Recording and storing notices of an entity’s inclusion/exclusion from the insider list
- Conducting internal control over compliance with the requirements of Federal Law No. 224-FZ and other by-laws in relation to the handling of insider information
- Setting up processes aimed at identifying, analysing, assessing and monitoring regulatory risk and the risk of the Company incurring costs (losses) and/or other adverse consequences as a result of breaching the requirements of Federal Law No. 224-FZ
- Keeping records of regulatory risk events
- Supervising compliance with the procedure of access to insider information, the procedure and terms of disclosure of insider information, the rules for protecting its confidentiality
- Making proposals to update the Company’s list of insider information
In accordance with the requests received from the trade organiser (Moscow Exchange), the Company sends it a list of its insiders on a monthly basis. In order to provide the trade organiser with the most up-to-date information on insiders, the Company regularly monitors changes that have occurred to persons/entities who have access to the Company’s insider information.
The Company is committed to the principle of zero tolerance of corruption in all its forms and manifestations (including bribery, influence peddling and any other form of fraud).
This principle means that all associates of Group companies are fully and unconditionally prohibited from engaging in corrupt activities, including intermediation, directly or through third parties, regardless of prevailing business practices in any given country.
On 23 December 2022, the Board of Directors approved the Anti-Corruption Policy (Minutes No. 391 dated 26 December 2022) which aims to ensure that the Company operates in line with the requirements of anti-corruption legislation and high business standards, to build a uniform rejection of corruption in all forms and manifestations, to minimise the risks of involving Company employees in corruption activities and to identify and prevent cases of involvement of Company employees in such activities.
For anti-corruption purposes, the Company periodically does due diligence on its employees and counterparties as well as on individual projects, work, services, transactions and relationships.
A series of procedures are also put in place by the Company to avoid conflicts of interest. When a conflict of interest comes to light, management should decide on a precise course of action as soon as possible.
For more information on the anti-corruption efforts, see the Company’s ESG Report 2022.
During the reporting period, the Company set up an anti-corruption hotline. Any interested party may, in good faith, report any information or reasonable suspicion of an associate’s involvement or attempted involvement in corrupt activities to the anti-corruption hotline. All calls to the anti-corruption hotline are guaranteed to be completely anonymous and confidential.
Within three working days of receipt, all incoming calls are investigated and confirmed by the Company’s Security Service.
The following channels can be used to access the anti-corruption hotline: