Marina Basova - Young Risk Professional interview v1.3

MARINA BASOVA INTERVIEW ASSOCIATION: RUSRISK - RUSSIA AGE: 29 JOB: FINANCE MANAGER (2007 – PRESENT) EDUCATION: MOSCOW STATE UNIVERSITY, BACHELOR DEGREE IN PHYSICS, MASTER DEGREE IN MANAGEMENT (DIPLOMA WITH HONOR). PROFESSIONAL CERTIFICATES: CIRM (CERTIFICATE OF THE INSTITUTE OF RISK MANAGEMENT, LONDON), CIA (CERTIFIED INTERNAL AUDITOR)

WHAT MADE YOU WANT TO BE A RISK PROFESSIONAL ? Q

A “ I started my career in internal control department. But as internal control is part of the bigger system which allows the company to keep its processes and activities in an appropriate way, i.e. to manage risks, I’ve soon become much more interested in the whole thing. In my opinion, risk management resembles managing the business itself as you get to work closely with every business process, every activity and every project in the company without any constraints. A risk manager is able to see the entire company, to realize the interconnections between different areas of the business and to evaluate the cross-impact of risks and opportunities arising in various parts of the organization and together with risk owners develop the most appropriate risk mitigation strategy.”

WHAT TYPE OF SKILLS DO YOU REQUIRE MOST TO BE SUCCESSFUL IN YOUR DEPARTMENT? Q

A First of all I would name communication and soft skills. There is no surprise as at that point I totally agree with risk community: a risk manager is an “information carrier” as he/she consolidates the data about the risks/opportunities /problems/achievements of the company. That is why it is crucial for a risk manager to be able to communicate the data to those who need it for decision-making. Also often it is the risk manager who pushes forward difficult and/or expensive decisions instead of simple and cheap ones or stands up against profitable projects due to high risks arising. In this case it is important for a risk manager to be convincing and firm proving his/her position. Ideal risk manager should possess high position in the company in order to be able to influence the opinion of senior management and the Board. Other necessary skills to cross my mind are analytical skills and systems approach. Risk managers deal with enormous data volumes on day-to-day basis and thus have to be very good in prioritizing the resources and identifying crucial issues. Moreover a risk manager should see the ties and cause-and-effect relations between the risk factors, risk events and their consequences at the corporate level.

HOW CAN REDUCING ORGANIZATIONAL RISK HELP COMPANIES IMPROVE THEIR PERFORMANCE? Q

A Well, to answer your question I should prepare an essay as there’s no area of an organization's activity where risk management is useless. In a nutshell, I believe that risk management allows better planning, fewer negative surprises and better opportunity identification. It’s also important that risk management system defines the responsibilities for managing the risks, so it is always clear who is the owner of a risk.

WHAT KIND OF LINK EXISTS BETWEEN INSURANCE AND RISK IN YOUR ORGANIZATION? Q

A The process of insuring assets and liabilities is closely connected to risk management process and is based on risks' assessment. Our risk management and insurance policies treat insurance as risk managing tool. Most often insurance is used for so called catastrophic risks - those of high impact but low probability. The insurance is viewed as a mitigation of such risks working for the Board, management, personnel and the state authorities due to their disastrous consequences. At the same time having the insurance coverage in place does not mean letting the risk go as it is. We are constantly working on the cost of the insurance by putting proper mitigation plans in place thus decreasing the risk level and the corresponding insurance premium.

WOULD YOU ADVISE STARTING TO LEARN IN A LARGE ORGANIZATION WITH SOME EMBEDDED RISK PROCESSES OR IN A COMPANY WHERE THIS AREA IS AT THE BEGINNING OF ITS DEVELOPMENT? Q

A Both ways have advantages as well as disadvantages. I myself have started my risk management career in the company with no risk management at all. So my team and I have started from scratch. And that’s great to have an opportunity to develop the system for the first time in the life of a company because there are no stereotypes, customs and established practices in that area. So we were able to implement our own vision and ideas regarding how risk management should work without any constraints. As a result our risk management system is alive and exactly fitting this organization as it takes into account all the organizational peculiarities. At the same time starting to learn in a large organization with some embedded risk processes allows to get knowledge of sound and up to date management techniques and methodologies as well as to get acquainted with the process.

WHAT WOULD BE YOUR ADVICE TO STUDENTS CURRENTLY STUDYING RISK MANAGEMENT? Q

A I would advise to remember that managing risks means managing business, so risk manager should not at any case substitute management team and should act as consulting and expertise center, suggesting the ways of managing the risks, not taking the responsibility for managing them.

WHAT WOULD BE YOUR ADVICE TO STUDENTS CURRENTLY STUDYING RISK MANAGEMENT? Q

A I would advise to remember that managing risks means managing business, so risk manager should not at any case substitute management team and should act as consulting and expertise center, suggesting the ways of managing the risks, not taking the responsibility for managing them.

WHAT DEPARTMENTS DO YOU WORK CLOSEST WITH IN YOUR ORGANIZATION? Q

A The department I work closest with is the Internal Audit department because we constantly exchange the information on current status of risks, mitigation plans and the state of the internal control system. Another department we work together is the finance department as they possess the information on risks impact and historic statistics on risks’ realization.

HOW BIG IS THE TEAM YOU ARE WORKING IN? Q

A There are three of us at the Group’s Head Office, we coordinate the risk management system (including insurance) in the Group. Each of the Group’s assets has its own risk coordinator, so there are about 40 people in the Group responsible for coordinating and monitoring risk management system. I would like to underline that those people are not risk managers, they are only risk coordinators as our system assumes that the responsibility of managing risks stays with risk owners, i.e. with management team and CEO as an ultimate risk manager.

TELL US SOME OF THE TASKS THAT MAKE UP YOUR DAILY WORK ROUTINE AND THE CHALLENGES THAT A RISK MANAGER FACES EVERY DAY. Q

A My daily work routine includes the analysis of risk maps of the Group assets as well as of the Group projects, discussions with risk owners on the risks’ evaluation and mitigation planning, monitoring the status of risks, development of general Group’s strategy for managing typical risks, review and analysis of insurance programs, development and review of Group’s policies and regulations related to risk management and insurance, conducting trainings for management on risk management topics etc. The Main challenge for risk manager as well as the challenge for any relatively new function is to prove the value for the company. Risk management more often than not is an expense item and takes time. And at the same time the results of good risk management are not clearly seen (and the results of poor risk management are seen at once). So it’s difficult to prove the efficiency and the effectiveness of risk management function especially in quantitative terms.

AT WHAT LEVEL IS RISK MANAGEMENT AND ISSUES AROUND MANAGING RISK ADDRESSED IN YOUR ORGANIZATION? Q

A Risk Management and issues around managing risk in my organization are addressed at all levels starting from ground level where the actual status of risk is monitored and mitigation plans are implemented to the Board and its Committees who monitor the key Group’s risks and define the risk appetite.

WHO ARE YOUR KEY STAKEHOLDERS IN YOUR COMPANY? Q

A Key stakeholder in my company (besides the shareholders and staff) is the state as Basic Element Group employs around 250 000 people. That means that at least half a million of people (including the families of our personnel) are dependent on the Group. That is why the social programs and social responsibility of the Group is always under high scrutiny by the state.

HOW HAS THE RECENT FINANCIAL CRISIS AFFECTED THE WAY ORGANIZATIONS SEE RISK? WHAT ARE SOME OF THE MAJOR CHANGES HAPPENING IN RISK MANAGEMENT IN RUSSIA? Q

A Before the crisis most of Russian companies already had the processes of identifying, evaluating and monitoring their risks. There was regular reporting in place – risk managers presented pretty nice risks maps to the Boards, Risk Committees etc. But there was no real managing those risks and the crisis showed that the companies were not prepared to it as most of them had the same problems as growing Russian economy had: high cost price, low quality of products, high costs of raw materials, high debt and open foreign exchange position etc. So in the two years of the crisis, risk management developed from pure academic exercise to very practical issue. Russian companies started to manage their key risks. The ability to survive depended on the company’s ability to define the deficiencies of its business processes and take appropriate measures to fix them. By the beginning of the crisis risk management system of Basic Element Group had been formally implemented, among other things there were risk coordinators acting in every business of the Group. Most of coordinators were inside internal audit functions, that allow tuning risk management systems to search of reserves and additional sources of income in the businesses. That was done through setting strict requirements towards working capital, credit portfolio, review and cutting of management functions (for example, most of managing companies were cut at least twice), increase of labor productivity and standardisation of working places, managing fraud risks at all levels etc.

A The efficiency and the effectiveness of managing those risks were governed by the efficiency and the effectiveness of existing tools. Among those are effective corporate governance system, i.e. the Board and its Committees, setting special working groups for managing specific groups of risks for example Commissions on accounts payable and accounts receivable, internal audit quarter reports to the Board and Audit Committee, audits of production processes etc. Risk management process was performed with direct involvement of the Group top managers including the Group CEO on day-to-day basis and we were able to recover with minimal losses (for example, total Group debt was decreased by 27% since 2008 and 2010 revenue of the core assets increased by 30% in comparison with 2009) and clear vision of our future development. At the moment the Group has embedded the elements of risk management system into the decision-making process. The review and the approval of a budget is performed together with the analysis of the risks included in the budget and estimation of the completeness and appropriateness of the proposed mitigation plans regarding the existing risk factors; the approval of any investment project is possible only after the analysis of its risk map; annual insurance program is approved by the Board as another risk management tool; in case of key risks is realized the audit of the reasons is carried out in order to amend the business process and to avoid the similar risks in future etc.

GET INVOLVED IN THE NETWORK @ JOIN THE YOUNG RISK PROFESSIONAL NETWORK ON LINKEDIN : The Young Risk Professionals Network is targeted at European Risk Professionals under 35 years of age, and provides a platform for discussion and networking. We aim to raise awareness of Risk Management, and show the benefits of collaboration across industries and countries. This group, for experienced Young Risk professionals and aspiring students alike, provides the opportunity to share insights and experiences of working in Risk Management, as well helping build a vision of the industry’s future. On LinkedIn the top right hand corner, search Groups for ‘Young Risk Professionals’ or click here: http://www.linkedin.com/groups/Young-Risk-Professionals-4086521

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Marina Basova - Young Risk Professional interview v1.3

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