The main objectives of IAS are as follows:
- independent evaluation of the efficiency and effectiveness of the organization and performance of the internal control activity, corporate governance, and financial and economic activities, organization of the risk management framework;
- evaluation of the efficiency of the approaches (methods) used to ensure safeguard of assets, compliance with the law and internal documents, information security, reliability, completeness, objectivity and timeliness of financial statements, statistical and other reports;
- drafting and subsequent control of recommendations on risk reduction, improvement of the risk management framework, and improvement and enhancement of the effectiveness of processes, systems, frameworks, and procedures;
- assistance in development and effective cooperation of the Group’s internal audit.
NCC’s internal audit activity is to provide independent and objective guarantees and consultations to NCC’s shareholders and is aimed at improving NCC’s operations. The targeted approach of NCC’s internal audit is also to assist NCC’s management in achievement of the established goals while using the systematic and consistent approach to the assessment and improvement of the processes of risk management, internal control and corporate governance.
IAS activity is based on such principles as independence, impartiality, constancy of activity, conscientiousness, professional competence and exclusiveness of IAS’s activity. The Service operates under the direct control of NCC’s Supervisory Board. The head of IAS is appointed to the position and dismissed by the resolution of the Supervisory Board.
In 2020, in compliance with the Articles of Association of NCC and recommendations of the International Standards for the Professional Practice of Internal Auditing (hereinafter, the Standards), the external evaluation of NCC’s internal audit function was carried out.
The main goals of the external evaluation, carried out by AO Deloitte & Touche CIS, were analysis of compliance of NCC’s IAS activity with the Standards, expectations of the stakeholders and identification of opportunities for further improvement of IAS activity. Based on the evaluation results, IAS activity was rated as partially consistent with the Standards and the Code of Ethics, the analysis also demonstrated that NCC’s internal audit function was developing with regard to the majority of existing practices, recommendations for further development and convergence of IAS towards the Standards were submitted.
For implementation of the recommendations of AO Deloitte & Touche CIS and future development of internal audit function at NCC, the 3-year Road Map for transformation and development of NCC IAS was elaborated and approved by NCC’s Supervisory Board. Besides, in 2020 the system actions were taken to strengthen IAS team, to improve the annual risk-based planning and monitoring of the recommendations and the methodological approaches to implementation of the process and the risk-based audit, application of the advanced IT methods, internal audit role with account of the expectations of the main stakeholders. The key actions of the Road Map are planned to be completed by the end of 2021.
During 2020, NCC also initiated and substantially implemented the projects aimed at comprehensive strengthening and improvement of NCC’s internal control framework.
As a part of the implementation of the Stabilization 3.0: Development of the System of Controls. Highly Critical Recommendations Project, the following improvements were introduced:
- approaches to the controls related to significant risk management in the area of improvement of certain trades / execution of transactions;
- functioning of the ‘hotline’, which enabled employees and other persons to inform promptly (including anonymously) about any conflicts of interests and any other compliance incidents and aimed at improving the level of trust and comfort of NCC employees, its clients and partners;
- the program to train NCC employees in the area of compliance providing for concept and improvement of the training format, including usage of the multimedia content to lay key emphasis and arrest attention of employees.
Works under the Stabilization 3.0: Development of the System of Controls. Moderately and Highly Critical Recommendations Project will be continued by NCC in 2021.
In 2020, operational audit of NCC was successfully performed by PwC, auditing and consulting company, in compliance with Bank of Russia Regulation No 556-P of 11.11.2016 ‘On the Procedure for Conducting Operational Audit by Central Counterparty’.
Among other things, the audit covered such elements of NCC’s activity as the corporate governance system in terms of internal control and risk management framework, stress testing of its risks and determination of the approaches to restoring of its financial sustainability.
Based on the audit results, the road map for implementation of the auditors’ recommendations was developed and approved, which was partially implemented in 2020 and planned to be completed in 2021.