The Sayano-Shushenskaya power station disaster was one of the most tragic industrial accidents in recent Russian history. As a result of the explosion the turbine hall and the engine room flooded. The ceiling of the hall collapsed and many turbines were damaged or destroyed.  Sadly 75 workers died.

The plant’s entire output and thus a significant portion of the supply to the local grid was lost. This led to widespread power cuts in the area. Companies that depended on a high supply of electricity had to switch to diesel generators or suffered a loss of production.

The insurer Rosno, which is part of the Allianz group, paid a total of $200m to the operator RusHydro. This remains one of the largest insurance claims in Russia’s history.

Mikhail Rogov, Advisor to the Director of Internal Control and Risk Management at RusHydro, is also critical of current insurance options. “The profit that can be lost in our business during a power cut and the fines are much higher than the losses the insurance industry usually compensates in business interruption programmes,” he said at the X. International conference in Moscow.

He emphasised that since the accident in Sayano-Shushenskaya his company has strengthened its focus on risk management. It increased the budget for technical renovation and reconstruction programmes to RUB18.6bn (€445m) compared to RUB8.57bn in 2009.

“We need to ensure the constant and permanent supply of power,” said Polyus’ Mr Ivanov. “Companies with energy-intensive production depend on a continuous supply. A power cut due to an accident or another interruption in a supplier’s power station can mean immense losses as they cannot go on with their production.”

Mr Ivanov admitted that corporate clients in Russia often look to cut costs when buying insurance. “Russians always want to save premiums and are always trying to find some gaps in the insurance regulations,” he said. “And in some cases this even leads to not very legal actions like insuring three production plants for the price of one.”

Often Russian buyers also make do without the help of insurance brokers when placing risks in the global market, he continued. “When you insure your company for the first time you need the broker’s experience, because he knows the details of the market, can organise reinsurance cover and help with consultancy,” he said. “But if you are long enough in the market you can do without brokers, because it is only an extra fee you have to pay.”

Political risk is also a big problem for Russian companies said RusHydro’s Mr Rogov. It is particularly acute due to problems in neighbouring autonomous republics, he explained. Terrorists from these republics have been known to attack Russian companies.

“This is not only a problem for us, but a risk for all large Russian companies,” Mr Rogov warned. His employer RusHydro is paying close attention to this danger. “We work with a special risk indication system that measures the number of terrorist attacks, breaches of law and other factors committed in recent times. This system helps our company to evaluate the risk of a potential attack and enables us to react.”

Speaking at the event RusRisk’s Mr Vereshchagin also warned that macroeconomic risks such as inflation, a decreasing gross domestic product and falling oil prices are the key problems facing Russian risk managers in 2012. “Large Russian companies are vulnerable to these influences and therefore have to be prepared,” he said.

The export of Russian gas to the European Union has decreased in the first quarter of 2012 by 11.5% in comparison with the first quarter of 2011. Gas exports to the countries of the former Soviet Union decreased by a staggering 33%, according to Igor Nikolaev, partner at Moscow-based consultancy firm FBK. “There will be also the risk of inflation due to our country joining the World Trade Organisation,” he added.

In line with their western European colleagues, Russian risk managers will also have to deal with changes in demographics. “There are more pensioners and less working people, which means that companies have difficulties finding qualified staff,” Mr Vereshchagin said.

Ten year ago it became fashionable for young professionals to become lawyers or managers at big companies, he said. “Now we feel a lack of qualified engineers and other skilled engineering workers.”

Some of the large Russian companies have already reacted to the skills shortage and invested a lot of money to keep talented young employees in their business, a measure that is showing some success. Companies finding flats for young staff, for example, is a very attractive perk as many large Russian cities have an enormous housing shortage, he added.

Others companies are trying to attract young professionals by offering them the chance of working abroad for higher salaries.  “But as you have to invest a large amount of money this is only an option for large Russian companies,” Mr Vereshchagin said.

One of the largest risks for Russian enterprises is corruption. “There are laws but it is always difficult when they are not observed,” RusRisk President Vereshchagin told CRE.

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