RISK MANAGEMENT/ OUR RISKS AND UNCERTAINTIES

HOW WE ARE GOVERNED

Our Company operates in strict accordance with the Law of the Republic of Armenia on protection of economic competition. This law prohibits any activities that can lead to the violation of competition principles and monopolization of the market. Top Management is following up on the compliance of legal requirements on the products and services.

Employees of Viva-MTS are aware of and obliged to act in compliance with the existing laws, rules and regulations as well as policies and procedures of Viva-MTS. Viva-MTS employees are not allowed to take part in any action or encourage any other third party to violate the laws, rules and regulations, as well as policies and procedures of the Company.

Along with compliance to the national Laws and Legislation, the Company has added internal principles to comply with, which are also our priorities under Corporate Governance:

- ANTICORRUPTION NORMS AND REGULATIONS

- Fraud prevention

- Fair business practices

- Risk Management

- Responsible Supply chain

We have our Anti-Corruption program with an aim to provide requirements of anti-corruption legislation applied to the Company.

ANTICORRUPTION NORMS AND REGULATIONS

It is ensuring the observance of legality, transparency and social responsibility principles by the Company, upholding its reputation in front of the state, its customers, partners, competitors and the entire society. It defines principles of preventing corrupt acts by or towards the Company and/or its employees, as well as principles of observance of anti- corruption legislation and prevention of any expression of corruption by the Company during its economic activities in any country.

Our Anti-Corruption legislation compliance goes beyond the already stringent Armenian anti-corruption legislation as we also use it to comply with the main requirements of FCPA and UKBA legislations. The Anti-Corruption Legislation applies to the Board of Directors as well as all employees, representatives, affiliate and subsidiary companies, their management bodies and employees.

Furthermore, it also applies to all normative documents and processes regulating sponsorships and philanthropic activities of the Company. All financial transactions regarding the above-mentioned activities are explicitly reflected in accounting reports, and the implemented programs are additionally coordinated. Monitoring of philanthropic investments gives the opportunity to make sure that the invested sums do not appear to be a concealed bribe or commercial bribery. Company management takes necessary safety measures to ensure all political contributions and charitable donations are legal in accordance with applicable anti-corruption legislations.

All staff of the Company has been trained to ensure compliance with the anti-corruption program; a special Anti-Corruption Guideline highlights all the corruption vulnerable areas and how to mitigate them. The Company also has its Compliance Policy, which also includes rules of gifts and entertainment for the Company as well as for its stakeholders.

The Company has no record on corruption cases where the Company or its employees have been involved in; the control over proper implementation of the anti-corruption program is done on a daily basis by the internal audit and compliance team.

To keep fraud out of the Company, we have set numerous activities, as we regard this as a threat to our long-term business success. We consider fraud to be a deliberate act or act of omission of physical and/or legal entities with a view to gain benefit at the expense of the Company and/or cause material and/or non-pecuniary damage. Examples of fraud can be misrepresentation of financial statements, cloning of SIM cards, theft of company property, etc. Fraud can also relate to deliberate activity of the entities on the communication networks, including fraudulent, illegal access to receive services and the use of resources of the operator without proper payment, unlawful access to any confidential information of the Operator, including for the purpose of gaining benefit, as well as other actions aimed at causing damage and other harm to the Operator.

At Viva-MTS, we have set activities to prevent, reveal, evaluate, investigate and minimize consequences of fraud, to keep our business reliable, clean and successful. This includes, among others, the implementation of a “Fraud Prevention Policy” and strict guidelines on behavior in case of conflicts of interest or a “Fraud database”. This automated system is intended for systematization, storage, and analysis and is determined for group use of knowledge and sharing experience to several business units:

- Security Unit

- Commercial Department

- Finance and Accounting Department

- Governance Risk and Control Department

- Administration Services Department

- Information Systems Department

- Technical Department

It collects or analyzes information on the activity of the best business partners and competitors, on the management methods applied by them, like research of best technologies, industrial processes and methods of organization and marketing of production and services.

All Viva-MTS employees are required to perform their work most effectively, and as such, the Company prohibits all conflicts of interest. A conflict of interest may arise when personal interests are involved or at stake, and when relevant decisions may negatively affect the Company’s interests.

The interests of the Company and its brand must be the first priority in all decisions and actions taken by Viva-MTS employees. Even the appearance of a Conflict of Interest can damage an important company interest.

Individuals working in Viva-MTS shall at all times act in a manner consistent with their fiduciary responsibilities to the Company and shall exercise particular care that is no detriment to the Company results from conflicts between their interests and those of the Company.

FRAUD PREVENTION

Our Conflicts of Interest Policy has been developed to secure that no employee will personally benefit from or at the expense of the Company’s interest. It has been implemented to assure the highest level of ethical conduct of employees at all levels. It applies to any situation in which employees happen to be in a position to exploit a professional or official capacity in some way for personal benefit as well as all proprietorships, partnerships, associations, joint ventures, corporations, firms, foundations, or other organizations or entities used in carrying on a trade or business, including parent organizations of such entities or any other arrangement in which an entity operates through a subsidiary.

Our Conflicts of Interest Policy refers to money, non-pecuniary and excessive gifts as well as ideas, inventions, technology, creative expression in which a proprietary interest may be claimed, including but not limited to patents, copyrights, trademarks, “know-how”, telecom products, and IT-related products. Each employee of “MTS Armenia” signs a statement, which affirms that a copy of the Conflicts of Interest Policy has been received, read and understood. Employees declare their agreement to comply with the policy and that they will declare any actual or potential case during the whole employment period that might be considered as a conflict of interest.

FAIR BUSINESS PRACTICES

Viva-MTS commits to be a profit-oriented organization. Nevertheless, the way we make these profits is crucial to us. We are committed to conduct our business in a highly ethical manner. This is why we have developed a Code of Ethics based on our core values, which can also be found on our website. Code of Ethics sets forth the principles and ethical standards for the professional conduct and responsibilities of Viva-MTS staff members. These principles and standards should be used as guidelines during our daily professional activities. They constitute normative statements for all of us and provide guidance on issues that we may encounter in our professional work.

At Viva-MTS, we always strive to observe legality, act honestly, and meet our professionals for the good of our operation and the society in which we work. Commitment to ethical professional conduct is expected and mandatory for each member of Viva-MTS.

The Code of Ethics is available to all Viva-MTS employees via internal portal and is being presented to each new employee during the Orientation Sessions. HR Department employees can be contacted at any time for guidance on it and in case of un certainties.

Confidentiality of information and fulfillment of obligations of the law are guaranteed. Viva-MTS has also created a Hotline to ensure respectful and open working environment. It is particularly important that the employees are treated fairly and that they receive prompt responses to their concerns and problems. At the same time, the Hotline of Viva-MTS is created to enhance the effectiveness of prevention, fight against the corresponding risks and detection of the potential facts of fraud, violations and infringements in the fields of finance and accounting, internal control and audit, sales, procurement and customer service, as well as contract relations and in many other processes that have a significant value for the business. All appropriate actions will be taken to investigate any violations reported.

RISK MANAGEMENT

We use an Integrated Risk Management process, aimed at coordination of structural subdivisions of Viva-MTS with regard to the management of the most significant risks. Its objective is to provide the management of the Company with adequate information on significant risks, to take timely preventive measures to respond and to provide the management and concerned subdivisions of the Company with analytics on the most significant risks concerning our economical, ecological and social performance. Each risk has its detailed analysis which contains the actual information on the risk including the description of the risk, risk assessment, the list of regular procedures, additional measures, response plans, cases of risk realization, a quarterly summary on the monitoring results. Measures are aimed at reducing the consequences of risk realization and extend them to Response and Contingency Plans.

Risk-based planned and unplanned internal audit engagements are being conducted and reported to Board of Directors. All suppliers of Viva-MTS are treated via fair competition or bidding. There is an inclusive, independent, objective, and fair consideration of the supplier qualification, product/service quality, reputation through a tender or other fair/reasonable means based on Viva-MTS Purchasing Policy. Around 52% of our whole purchases are made with local suppliers.

We abide by the laws and regulations against unfair competition or monopoly, corruption and bribery. We protect the legal interests of the Company and reject bribes, discounts through unauthorized repayments, or material benefits that could be offered by a supplier. We comply with Viva-MTS corporate culture and respect the corporate culture of the supplier, treat suppliers and their representatives in an accepted etiquette and strictly keep the confidentiality of supplier information in accordance with mutual agreement and legislation.

We aim to build up social and environmental standards throughout our supply chain with our direct suppliers. This is done by improving their CSR performance and supply chain management. By integrating our CSR standards in our procurement procedures, we can sustain our reputation and make a difference in the community in which our suppliers operate.

We anticipate our suppliers to apply certain standards in the fields of labor, ethics, safety, and the environment (based on our CSR Clause). Compliance with these standards will be verified through questionnaires and discussions with suppliers. The strategic supplier will have an in-depth analysis to identify CSR-related risks and an appropriate improvement plan will be drawn up for high-risk suppliers.