Speech by Deputy General Director of OJSC MMC Norilsk Nickel Dmitry Kostoev at the Round Table organized by the National Council on Corporate Governance and KPMG: “Corporate Governance During Financial and Economic Crisis”

Moscow. June 16, 2009

It is a rather frequent business development when a company as such does not experience any major problems but its management encounters difficulties when evaluating how the business should be conducted or developed in the unfavorable market environment. Our company is a good example: despite external turbulences its performance remains stable and robust but it is extremely important that the management devise proper short- and long-term strategies in order to navigate through these volatile times.

The management has to clearly identify all problems and risks inherent to their specific business. There is only one risk management tool – budget development processes and implementation of the budget, which should be strictly executed within its fixed period. Only within the frames of budgeting processes the company may reasonably organize all of its simultaneous multi-level projects, align them in a system and monitor the results.

It is evident that the set of risks may vary depending on the industry. We at Norilsk Nickel have identified a number of areas where, in our opinion, major risks for the company performance may exist. Firstly, it is the issue of price risks, i.e. prices for our final products. The second risk is associated with the exchange rate between our national currency and USD – the Company’s main operating currency as it sells its metals on international markets. In addition, our corporate balance sheet bears a significant debt burden exceeding USD 6 bln, and this debt needs servicing.

Another issue is the contractor’s risk – a parameter the most difficult to estimate for the company. Even those contractors who were always prompt and efficient might suffer from the crisis, and this may result in negative financial effects for our Company. In contractor relations a tailored approach is a must. We have carried out some serious work to set individual credit limits for our main contractors and our suppliers in particular. I can state that currently the company has no problems related to any bad debts.

Another crucial question is that of the company’s strategic investments, which also represent a risky area. This matter is particularly important to the companies of mining industry because the consequences of their today’s decisions will come into effect within two, three or five years of operation. It is obvious that for any mining company one half of its operation is reflected in the investment program outlining future recovery of natural resources which represent a major part of its sales.