The Company is registered as a taxpayer in Moscow, carries out the main activities in the Russian Federation, Kazakhstan, Uzbekistan, and also closely cooperates and interacts with partners from a wide range of countries around the world, which is associated with certain risks of political instability, for example, government cabinet changes, negative political changes, and civil disorders. Russia’s difficult relations with the United States and the European Union can potentially exert pressure on Western partners of the Company. Moreover, the further imposition of sanctions against Russia and the non-cooperation at the international level in several areas can lead to the deterioration of the national business climate, economic slowdown and, as a result, the suspension of investment programmes.

These factors may have an adverse effect on the Company’s market value, the conditions of its operations, lead to the deterioration of relations with Western partners, the reduction of orders and, as a result, take a heavy toll on the operating and financial performance of Evropeyskaya Elektrotekhnica.

The Company continuously monitors political processes and follows the progress of the situation both in and beyond the Russian economic space. The Company assesses the significance level of these risks as below average. The main country risks affecting the Company are the risks of the Russian Federation. In accordance with changes in the political and economic situation and in order to improve the banking, judicial, tax, administrative, and legislative systems, the Government of the Russian Federation is carrying out a series of consistent reforms aimed at stabilising the modern Russian economy and its integration into the world system. While reforming of the business and legislative infrastructure is in process, the following risks remain: the inconvertibility of the national currency in foreign countries, low liquidity in the long-term lending and investment markets, and inflation in excess of inflation of developed nations.

Macroeconomic risks in Russia can be of significant impact. Stagnation in some sectors of the economy may interfere with the plans for the further development of the Company’s business. The following factors can hamper further socio-economic development of the Russian Federation:

• overexposure of the budget to international energy prices;
• underdevelopment of political, legal, and economic institutions;
• immaturity of the judicial system;
• inconsistency and frequent changes in tax and currency laws.

Risks associated with possible military conflicts, the imposition of the state of emergency and strikes in Russia and in the region where the Company is registered as a tax payer are assessed as unlikely.

The risk of natural disasters, the possible termination of transport communication and other regional factors is minimal.

Most of the economic, political, and legal risks specified in this section, due to their global reach, are beyond the Company’s control. In the event of significant political and economic instability in Russia or in the region, which can negatively affect the activities and revenues of the Company, it is expected that a number of anti-crisis measures will be taken to mobilise the business and minimise the potential negative impact of the political situation at the national and regional level on the Company’s business.

There are no projections for negative changes that may adversely affect the activities and economic position of the Company in the near future. In the Company’s opinion, the economic situation in the country (and region) is looking up, which is favourable to the Company’s business and its ability to fulfil obligations.

The prospective actions of the Company in the event of a negative impact of changes in the situation in the country (countries) and the region on its activities: in the event of a negative impact of changes in the situation in the Russian Federation and other countries, as well as in the region of registration of the Company, the city of Moscow, on the Company’s activities, it is planned:

• revise the Investment Programme;
• optimise the cost structure;
• change the structure of the provided services in order to maximise profits.