Corporate Governance

Risk management JSC "NC "QazaqGaz"

The activities of QazaqGaz and its subsidiaries and affiliates are affected by production and non-production risks. QazaqGaz is aware of the importance of risk management as one of the key components of the corporate governance system aimed at timely identification, assessment and taking measures to reduce the level of risks that may affect the achievement of the strategic and operational goals of the QazaqGaz Group of companies, as well as its value and reputation.

The purpose of QazaqGaz risk management is to provide reasonable confidence in the strategic and operational sustainability of the business.

Risk management program of the group of companies of NC QazaqGaz JSC in 2021.

As part of the implementation of the benchmark risk management model, Samruk-Kazyna National Welfare Fund JSC continued to formalize the internal control system and business continuity in 2020.

According to the results of the survey conducted by QazaqGaz and Intergas Central Asia JSC in March 2020 to ensure the continuity of the internal control system and business, measures were taken to improve the indicators of the IPS and BPS.

Identification, assessment of risks of the QazaqGaz group of companies is carried out in an automated risk management system. (risk.kmg.kz).

In QazaqGaz and subordinate organizations, the responsible risk management person is subordinate to the first head of the company.

In the period from August 2 to October 1, 2019, a special risk management interview was conducted with QazaqGaz and its subordinate organizations:

• Risks that may affect the achievement of the goals of the QazaqGaz group of companies have been identified;
• the amount of potential damage during the implementation of the risk is determined; In connection with the coronavirus pandemic in 2020, a risk register was developed in QazaqGaz and subordinate organizations.

Also in 2020, in connection with the coronavirus Pandemic, The Register of risks of QazaqGaz and its DSO was updated. The risk management action plan of QazaqGaz and its subordinate organizations identified "natural impacts and cataclysms" (Covid-19) as a risk factor and assessed the impact on the activities of the QazaqGaz group of companies. The following are the risks that have a significant impact on the activities of QazaqGaz and its subordinate organizations.

According to the qazaqgaz group of companies, 24 key risks were identified and reflected in the qazaqgaz key risks map, including:

Uncertainties

Risk of non-fulfillment of obligations regarding gas supply under the gas purchase and sale agreement (export) 

The occurrence of risk is due to several factors:

• increased consumption in the domestic market;
• refusal to accept gas from the buyer;
• non-fulfillment of obligations on the part of the supplier.

 Risks associated with the implementation of the integrated gas strategy 

The realization of this risk is due to the following factors:

• lack of resources, due to an increase in gas consumption, taking into account the introduction of gas chemical projects in the domestic market and a decrease in gas production;
• high cost of purchasing imported gas.

 Fluctuation of tenge against the US dollar 

There is a possibility of currency losses associated with changes in the US dollar against the tenge, interest rates, the state of the current trade balance, inflation, economic and political conditions.

 Risk of non-fulfillment of financial and/or non-financial covenants 

Due to the fact that QazaqGaz is a borrower and/or a guarantor when receiving a loan from its subsidiaries, QazaqGaz must comply with financial and/or non-financial covenants defined by the terms of loans.

Tenge fluctuation against US dollar

Improving the risk culture of NC QazaqGaz JSC

In order to ensure reasonable confidence in the strategic and operational sustainability of the business, the Company operates a risk management and internal control system aimed at solving the following tasks:

• increase of risk culture and integration of risk management and internal control into all aspects of QazaqGaz activities;
• reducing the volatility of QazaqGaz's results of operations;
• increasing the value of assets and profitability of QazaqGaz in the long term.

1. The work of the Risk Committee is carried out on an ongoing basis, all significant events that may negatively affect the achievement of the goals of QazaqGaz and its subsidiaries are collectively reviewed at meetings of the Risk Committees of QazaqGaz and subsidiaries, including risk reports for the 4th quarter of 2019 and for the 1.2 and 3 quarters of 2020.

2. Work has been carried out on the organization of insurance protection of risks of the QazaqGaz group of companies.

3. A financial risk reporting package has been formed – quarterly monitoring on:

• compliance with country risk limits;
• limits on obligations for counterparty banks;
• currency risks;
• percentage gaps in the context of currencies.

4. Based on the results of the internal analysis of corruption risks conducted from April to May 2021 by JSC NC QazaqGaz, recommendations have been developed aimed at further development of the control environment in order to counter corruption and curb corruption-causing factors.