NSD’s risk management system aims to promote sustainable development of the Russian financial market in accordance with international standards and is focused on effective risk management for both the company and participants of the financial market infrastructure.
The main purpose of risk management at NSD is to ensure operational reliability and steady development of the company’s key areas of business and to guarantee that the company meets its obligations to its shareholders, clients, regulator, and other stakeholders. Risk management processes are based on the Integrated Enterprise Risk Management Framework (COSO ERM) and constitute an integral part of NSD’s operations.
Effective risk management contributes both to optimal decision-making in the context of uncertainty and related risks, and the use of available opportunities.
Detailed information on the risk management system, its organizational structure, and key principles of risk management is available on NSD’s web site in the Risk Management section.
The risk management system is designed to manage all types of financial and nonfinancial risks in NSD’s business, namely: credit risk, market risk, liquidity risk, operational risk, legal risk, regulatory risk, strategic risk, reputational risk, business risk, and systemic risk.
The risk management process involves measures aimed at identifying, assessing, responding to, monitoring, and controlling NSD’s risks.
Risk | Risk Factors / Sources |
Credit Risk |
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Market Risk |
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Liquidity Risk |
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Operational Risk |
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Legal Risk |
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Regulatory Risk |
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Reputational Risk |
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Strategic Risk |
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Business Risk |
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Systemic Risk |
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The key tools designed to manage risks include:
1) Collection and analysis of information on risk events.
2) Identification, assessment, and reduction of risks in NSD’s current business processes, projects, and products.
3) Setting limits and other restrictions with respect to the risks taken.
4) Monitoring of compliance with the applicable risk appetite parameters.
5) Managing the assets and liabilities portfolio for the purpose of its optimization in terms of maturity and structure.
6) Setting aside reserves to cover potential losses.
7) Monitoring of NSD’s risk level and the impact of changes in the external environment on the company’s risk profile.
In addition, to ensure the company’s financial strength, various processes have been implemented to plan and maintain NSD’s capital at the level adequate to cover risks pertaining to the company’s operations, including in stress conditions. Compliance with the capital requirements is monitored on a daily basis.
In 2019, NSD continued its efforts to improve its risk management tools and practices. The Risk Management System Development Strategy for the Period until 2020 defines the following three key areas of focus.
The key activities completed in 2019 include the following:
Risk management, along with other support functions, is intended to create an environment that would enable NSD to pursue its strategic goals and objectives. Accordingly, the following priority areas of focus have been identified to improve risk management practices: