Annual Report 2010 - Baltika Breweries

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Baltika Breweries | Annual report 2010
Risk management
The Company’s operation is subject to various business
risks. The Company has developed a special risk
management system to prevent, identify, control,
monitor and minimize risks. The risk-related policy
and management system are subject to periodic
analysis and revision in accordance with changes in the
Company’s operation, as well as in external conditions.
The Company’s Board of Directors is responsible for
implementing the risk management system. The Board
of Directors also controls system functioning. The
Audit Committee of the Company’s Board of Directors
controls adherence to the risk management policy
and analyzes the expediency of the risk management
system, in conjunction with the Company’s Internal Audit
Department.
In case any of the risks listed below arise, the Company
is ready to take appropriate measures to minimize their
consequences.
Financial Risks
The Company’s primary financial risks are associated
with foreign exchange, credit and liquidity. To minimize
financial risks that can affect the Company’s financial
performance, a complex action plan has been developed
and implemented that consists of the following points:
To analyze financial risks, yearly, quarterly, monthly,
etc. planning, evaluating actual profitability and cash
flow, calculating the open FX position;
Implementing cost cutting programs;
Budget control on an on-going basis;
Controlling working capital — the Company
implements a program to manage accounts
receivable, accounts payable and stocks;
The Company grants secured supplier credits to its
buyers.
Foreign exchange risks may arise
due to changing exchange rates.
The risk is inherent to purchasing
raw materials and services
the Company uses that are
denominated in foreign currencies.
The Company’s foreign
exchange risk exposure
is high, since a significant share
of the Company’s sales is rubledenominated,
whereas prices
for equipment components and
raw materials used in production
are denominated in foreign
currency. The Company makes
every effort to reduce foreign
exchange risks. Measures
include reducing foreign currency
liabilities, as well as increasing
the number of domestic suppliers
of raw materials, fixed assets and
components. The Company also
uses passive instruments to hedge
foreign exchange risk.
One of the Company’s main tasks
is to increase foreign currency
revenues by increasing export
volume.