Board Committees' report

strategy committee

members of the committee

Andrey Melnichenko

Areas of responsibility:

The Strategy Committee is responsible for reviewing management’s proposals, assessing associated risks and developing recommendations to support the Board’s decision-making in the following areas:

  • Developing the company’s overall strategy, strategic plans for business segments and strategies by functional area
  • Carrying out investment planning, project management and capital management
  • Defining the company’s operating priorities and evaluating the operational efficiency of management
  • Improving key business processes

In the reporting year, the Strategy Committee focused on updating the corporate strategy and improving the key business processes to successfully transform the company.

Much focus was given to changing the organisation and principles of budgeting. The Committee proposed financial metrics that would make the budget an effective tool for measuring both shareholder value creation and the performance of individual business units and functions, in the interest of maximising shareholder value.

The Committee monitored the development and introduction of a new commercial operating model implying a change in the concept of ‘acceptable’ risk levels, a unified approach to planning, the unification of commercial regulatory and reference information and the elimination of duplicate processes to achieve maximum economic impact. The new model is to be introduced by the end of 2021.

The Committee reviewed the project to develop SUEK’s business system. We strive to build an effective business management model to adopt a structured approach to improving production efficiency. Such a model is based on optimisation and well-organised business processes.

In 2020, the Committee considered the updated priorities of the strategy for developing SGC’s energy assets in Novosibirsk, the strategy for expanding heat sales at Belovskaya GRES and progress reports of programmes to improve operational efficiency at the Group’s production facilities. The Committee discussed and approved key performance indicators for the programmes.

During the year, the Committee also paid attention to regular matters such as strategic initiatives, control of budget indicators, review of macro parameters and long-term price forecast, business value and M&A alternatives.

Audit Committee

members of the committee

as at 31 December 2020

Michael Baumgärtner (Chairman)

Juerg Seiler

8
meetings in 2020
Michael Baumgartner

Areas of responsibility:

  • Ensuring that published financial statements are complete and accurate
  • Guiding the development of management reporting with regular reviews of performance reports
  • Overseeing budget planning and evaluating the effectiveness of budgeting systems
  • Evaluating the performance of the external auditor and the effectiveness of the external audit process
  • Assessing the effectiveness of internal control and risk management
  • Supervising the work of the Internal Audit Service, including the quarterly analysis of audit findings and annual effectiveness analysis of audit activities and plans.

In 2020, the Committee paid attention to both planned matters and those related to the group-wide business transformation process.

Significant changes were made to the compliance and risk management systems. The main purpose behind these changes was to improve the system for the early warning and prevention of violations and high-risk situations. A single process owner was identified at Group's level, the Compliance and Risk Management Service. The updated compliance and risk management system, which encompasses the function of business risk management, ensures qualitative identification of risks and organisational mechanisms to control them. In addition, in 2020, the Committee undertook a comprehensive reassessment of compliance risks and approved a list of the most significant risks for SUEK’s business.

To further develop the internal audit function, the Committee approved a new approach to planning the work carried out by the Internal Audit Service. The internal audit focused on ensuring the effectiveness of key compliance and business risk management systems, with a focus on the most important areas. Much attention was paid to audits of business processes, which are of great importance for improving the company’s efficiency. The Committee approved the internal audit Work Plan for 2021 and key audit areas based on the analysis of the main risks and their quantitative assessment.

The Committee Chairman initiated an audit of the company’s ESG policies by an independent international rating agency. After analysing the report and assessment results, the Committee implemented measures to improve the quality of disclosure in the areas of environment, social policy and corporate governance. These changes make it possible to introduce organisational changes and practices to enhance the performance in these areas.

The Committee also discussed planned matters related to preparing financial statements (IFRS), evaluating the external auditor’s effectiveness and remuneration, SUEK’s operating results, D&O liability insurance, preparing the Annual Report and the Committee’s work plan.

Andrey Melnichenko

Areas of responsibility

  • Making recommendations to the Board of Directors regarding HR strategy, nominations and compensation, corporate governance and social policy
  • Ensuring the continuity of senior management, developing a succession pool and talent pipeline, designing and assessing programmes for developing future managers

In the reporting year, the Committee’s focus was on the improvement of HR processes.

The Committee revisited its long-term and short-term incentive programmes, including for project team members participating in large investment projects, and set up the processes for actual and planned payments to employees and managers.

In 2020, the Committee began work on functional strategies for cross-cutting functions. It considered the key aspects of the strategy for integrating the HR function and the functional procurement strategy, and subsequently defined key areas of development for their strategies. The Committee identified a number of aspects requiring further refinement that related to the HR function’s strategy, namely, the number of employees and the optimal division of labour resources between internal and external contractors, personnel and working hour management (analysis of additional costs for overtime pay, weekend work, etc.).

The Committee approved the annual individual goals set for senior executives.

It also considered the planned matters of industrial and environmental safety, the Committee’s work plan and the HR function’s budget.

Recognising the significant importance of occupational health and safety issues, as well as the need to develop this area at the highest level, the Committee proposed the creation of a HSE Committee under the Board of Directors and established a HSE director position at the Group level.

HSE Committee

Our efforts are aimed at creating a safe production process with zero injuries and acting in an environmentally friendly way through implementation of innovations.

Michael Hogan, CHAIRMAN OF THE HSE COMMITTEE
Michael Hogan

In 2021, the Board of Directors approved the creation of a new Committee for the purposes of in-depth consideration of health, safety and environmental issues and preparation of recommendations to the Board of Directors in this field to improve industrial and environmental safety across the Group’s operations. In particular, it will be responsible for:

  • Ensuring compliance with industrial and environmental safety standards at our enterprises; monitoring our system of key performance indicators in this area
  • Assessing the compliance of our industrial safety system with regulatory and corporate requirements; assessing the efficiency of controls in this area
  • Analysing the causes and consequences of accidents and developing recommendations on their future prevention

In 2021, the HSE Committee will primarily focus its efforts on revising the industrial safety and environmental strategies for both group and segment levels. The Committee will also pay attention to the revision of HSE-related KPIs which will allow assessing company's performance more effectively.