Key risks associated with the Long-Term Development Programme until 2025
The key risks associated with the Long-Term Development Programme until 2025 are identified based on their impact on the Company’s performance, and are grouped by source as follows:
- macroeconomic;
- state regulation;
- market;
- investment;
- tax;
- management;
- HR;
- R&D and technology;
- technology.
| Risk category | Risk description | Impact | Mitigants |
|---|---|---|---|
| Macroeconomic | Weaker than forecasted macroeconomic performance and lower freight volumes, including as a result of more rigorous sanctions | High impact | Keeping in constant touch with the Government and key customers to provide them with complete and objective information about potential adverse effects of the adopted decisions Efficiency improvement initiatives, long-term contracts with suppliers Resolutions to provide development institutions with additional liquidity |
| Higher than expected growth of prices for consumed products, including petroleum products and electricity | |||
| State regulation | No government resolutions on long-term financing of the railway transport development or a failure to implement such resolutions | Сritical with high probability | Searching for alternative sources and tools of financing Optimising technical solutions for capital investment projects Breaking down projects into stages with their subsequent implementation in the order of priority Keeping in constant touch with the Government and key customers to provide them with complete and objective information about potential adverse effects of the adopted decisions for Russian Railways |
| Changes in the regulatory framework / regulations providing support to other transport modes | Could make railway sector less competitive | ||
| Liberalisation of the railway freight transportation market | Critical with low probability | ||
| Reduced public financing | Triggers the need to raise and service debt, and to cut the investment programme | ||
| A gap between the existing regulatory framework and ongoing railway transformations | Significant with high probability | ||
| Market | Significant changes in cargo types and transportation routes versus the forecast | Slower freight turnover growth will render relevant projects proportionally infeasible while also reducing Russian Railways’ net profit used to finance such projects | Building long-term relations with customers and improving consumer feedback strategies Enhancing market flexibility and expanding business in deregulated segments Strengthening logistics capacities to satisfy customer demand for comprehensive services Implementing the initiatives included in the Comprehensive Plan for Upgrading and Expanding Core Infrastructure |
| Investment | Insufficient investment in infrastructure development | Critical with medium probability | Optimising technical solutions. |
| Failure to comply with the investment programme implementation schedule | Improving the investment project management framework | ||
| Tax | Higher tax burden driven by tighter fiscal policies in Russia amidst social and economic uncertainties | Critical with high probability | Staying in constant contact with the federal and regional tax authorities |
| Management | Insufficient management competencies | Insignificant with low probability | Improving the management framework |
| HR | Deficit of qualified staff due to the insufficient competitiveness of Russian Railways as an employer | Significant with medium probability | Keeping compensation on a level above the Russian average for a competitive employee value proposition Offering staff development opportunities in line with best practices in training Implementing dedicated social programmes Developing a compensation and benefits package that meets employee needs |
| Stronger competition in the labour market on the back of a decrease in Russia’s working population in the medium term | |||
| R&D and technology | Weaker competitiveness of the railway transport due to a technology gap with other modes of transport | Low with low probability | Implementing the Comprehensive Innovative Development Programme of Russian Railways Group |
| Underperformance in adoption and utilisation of innovative R&D solutions | |||
| Insufficient cooperation with global railway engineering leaders | |||
| Technology | Slower debottlenecking at associated transport facilities (port capacities, warehouse terminals) vs the forecasts contained in the Company’s investment programme | Adjusting the timing of Russian Railways’ investment programme where necessary | Keeping in constant touch with the operators of associated transport modes to synchronise the investment programmes |
| Failure to meet the freight transportation market needs due to the inefficient freight railcar fleet | Cooperating with rolling stock operators to improve railcar fleet management efficiency |