Ms Nosova admitted that it is not an easy task for risk managers to influence management boards. “Many management boards in Russian companies are ignorant when it comes towards risk management,” she said.

In her experience top managers continue to say: What are you going to tell us? We know our risks. “They are not very appreciative, even though a risk manager may bring a different perspective on a risk,” she said.

The role of risk managers in Russian companies was one of the key subjects discussed at the Moscow meeting, entitled ‘Risk management in Russia and the Commonwealth of Independent States (CIS): New realities’.

Close to 100 risk managers, brokers and insurers discussed how to integrate risk management into business models and what role risk management should play in the strategic orientation of a company. They also sought answers to the management of reputational or environmental risks.

German Gorshkov, from the risk management department of Russian energy supplier RusHydro, warned that companies underestimate the dangers arising from reputational risks. Just as in western Europe these risks are rising fast, he said.

“In the past, Russian consumers did not attach much importance to quality when buying products for daily life,” Mr Gorshkov said. However, this situation is changing. “As the quality of life is improving, consumers have the opportunity to travel around the world and compare the quality of Russian products with their international counterparts,” he said.“As a consequence, their quality requirements for consumer goods are increasing.”

There are several examples that illustrate the increasing demands made by Russian consumers from within the energy sector alone.

“For many years energy companies have held monopolies in their respective regions and very often the consumer service is very bad or even non-existent,” Mr Gorshkov said.

“For a long time people did not even consider changing the supplier as there was no alternative in their region.” Industrial companies, he said, even had to pay compensation to their energy supplier if they intended to change provider. Once these barriers disappear certain energy suppliers will have an enormous image problem, he believes.

RusHydro has attempted to prepare for the new environment and has already made considerable efforts to become more customer-friendly. The company, which mainly provides energy to households and companies in the Krasnoyarski, Bashkir and Rjasanski regions, has centralised its client service operations in order to provide standard rules for dealing with consumers. It has also established a single risk management department, which is responsible for the complete holding.

Another reputational risk stems from the lack of competition between the Russian phone operators. “Due to technical reasons, currently customers in Russia can’t retain their mobile phone numbers after switching their mobile operator,” Igor Mikhailov, Risk Manager at MTS said. Ex-president Dmitry Medvedev has recently called for the implementation of new rules in order to change the situation.

As well as reputational risks, Russian companies dramatically underestimate the existing danger of environmental risks and are therefore barely prepared to deal with the challenges, experts at the conference said. This was one of the key messages put across by Yuri Markin, Liability Manager at insurer Chartis.

One reason is that liability insurance and holding companies to account is a relatively new concept in Russia. For example, it was only at the beginning of 2012 that the Russian government passed a federal law that obliged owners of hazardous production plants to buy liability insurance in order to protect third parties from damages caused by production processes.

However, companies remain reluctant to buy the cover. “In Russia, companies do not have confidence in the legal system and therefore are reluctant to go to court in order to enforce their claims,” Andrey Sedov of insurer Zurich said.

Chartis’ Mr Markin warned that this reservation towards liability insurance may have severe consequences in cases of an environmental loss. A lack of cover is made more likely by the fact that some environmental claims are excluded from standard liability cover and have to be insured with a specialist policy. “Companies should know that there are gaps in their insurance, as some of the costs for environmental pollution are excluded,” he said.

For example, general liability insurers will not pay for clean-up costs or measures to minimise any damage. Also they often do not cover damage resulting from gradual pollution or damage to flora and fauna.

Companies should be aware of these gaps and close them with special environmental liability cover, Mr Markin said. But many companies are not experienced in dealing with such risks and only a few companies in Russia have purchased the extended liability cover.

This might also have to do with the fact that insurers demand complete transparency from companies before they provide such cover. Before signing a policy, insurers want statistical data about the environmental risk exposure of a company, as well an overview of potential historical risks. This is especially delicate in Russia as many companies cannot judge the extent of environmental pollution caused in the times of the Soviet Union. “When it comes to historic claims, the insurance problem is critical,” Mr Markin said.

The call for more transparency over corporate risks comes not only from insurance specialists, but also from insurance buyers themselves. “Companies need to make their supply chains more transparent to business partners,” MTS Risk Manager Igor Mikhaylov demanded. “To identify all your supply chain risks you need to know all your partners’ partners. Your partner company may be strong, but if it depends on a small piece of equipment from an unreliable supplier it could become a problem.”

One barrier to transparency is the behaviour inherent in many companies, he argued. “Transparency is controversially discussed by companies, because it concerns their core business, which they do not want to disclose to competitors and insurers,” Mr Mikhaylov said.

Sistema’s Ms Nosova believes that Russian companies have become more demanding when it comes to transparency of costs and calculations by insurers and brokers. “They want to be part of the brokers’ negotiations with the underwriters, they want to know who is placing and underwriting their risks, under which conditions and at what price,” she said. “They need to understand how the business runs, and want to know what the fees are for the special services brokers provide.”

Petr Sudoplatov from broker Willis CIS asked insurers to give more exact details in the wordings of insurance policies.

“There is a gap in the transparency of what is actually going to be covered and what is not,” he criticised. “Let’s say we have an offshore project and an offshore construction. The wording may or may not say what extra costs are covered. It’s sometimes really hard to establish whether the physical damage is insured or not,” he said.

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