The execution of risk management is carried out by the heads of each department and the Audit Office, with the Board of Directors serving as the unit responsible for overseeing risk management.
Risk Management policies
- Any associated risk events should be reported to the immediate supervisors, audit committee, general managers, chairman and the board of directors.
- The risk assessment is carried out by the general manager and used as a record of tracking business performance.
- The Company has established policies and implementations towards Internal Control, Internal Audit Implementation and Self-Assessed Internal Control Procedures. Department managers are each responsible for closely monitoring the associated risks. The audit committee is to perform risk assessment and report directly to the direct supervisors if any irregularities were discovered.
To ensure a stable operation, Eurocharm Group hold important meetings regularly. In terms of quality, environment, occupational safety and health, and information, there are relevant responsible units responsible for management and checking. In addition, the auditing office is responsible for risk management, and the main audit items are listed in the annual audit plan. After the approval of the board of directors at the end of each year, the audit of the internal control system is carried out, and the audit results are disclosed in the audit report every quarter.
| ESG | Type | Important Meeting | Frequency |
|---|---|---|---|
| Economics/Governance, Society, Environment | Routine | Morning Meeting | Every Monday and Wednesday |
| Economics/Governance, Society, Environment | Routine | Business Meeting | Each month |
| Economics/Governance | Routine | Quality Management Review Meeting | Each Year |
| Environment, Society | Routine | Environmental and Safety Management Review Meeting | Each Year |
| Society | Routine | Labor Safety and Health Conference | Each Quarter |
The risks identified include changes in interest rates and foreign exchange rates, inflation, high-risk, highly leveraged investments, lending, or endorsement guarantees, and derivatives transactions, changes in policies and regulations, changes in technology, changes of corporate image, expansion of plants, purchasing and excessive customer concentration, major changes in shareholdings, changes in ownership, expansion of production capacity, climate change, etc. In response to these risks, the Company developed countermeasures to reduce any risk that may influence the Company’s operation.
| Risk | Countermeasures |
|---|---|
| Failed Climate Actions | In August 2022, each of our subsidiary companies established a Greenhouse Gas Inventory Promotion Team, setting greenhouse gas management goals, regularly reviewing achievements, and monitoring regulatory developments to promptly develop response plans. Each subsidiary company disseminated energy-saving and carbon reduction policies to employees through internal communication channels. In 2022, ISO 14064-1 was officially introduced for greenhouse gas inventories, and the Company commissioned a third party for verification. Due to changes in operational activities resulting from the lifting of pandemic restrictions, the base year was adjusted to be 2023. Inventories and verifications are conducted annually to track emission reduction effectiveness, and the results are publicly disclosed on the Company’s website. In 2024, each subsidiary company set an overall carbon reduction target, with Eurocharm TW targeting at 2% and VPIC1 in Vietnam at 3%. Additionally, since September 2022, the Company has been gradually implementing a systematic energy management system and established an “Energy Promotion Team” to review, implement, and improve management plans based on energy goals and responsibilities, ensuring timely execution and progress of the energy management plans as well as compliance with energy management system requirements. The Company has obtained ISO 50001 certification, following the ISO 50001 management system for energy management and control. This helps reduce greenhouse gas emissions, thereby achieving energy-saving and carbon reduction goals. To ensure the continuous improvement and effective implementation of the ISO 50001 energy management system, Eurochram TW added and revised a total of 4 procedures and operational guidelines in 2024. Two action plans were implemented with continuous follow-ups on its implementation and effectiveness after its completion in 2025. On November 14, 2024, Eurocharm TW obtained ISO 50001:2018 third-party verification from SGS. In August 2024, VPIC1 passed the ISO 50001:2018 third-party verification by BSI. Various preventive measures are being taken to fulfill our commitment to energy management for our customers. Additionally, in response to the EU Carbon Border Adjustment Mechanism (CBAM) declaration starting in October 2023, VPIC1 began implementing the ISO 14067 Product Carbon Footprint in September 2023. |
| Interest Rates, Foreign Exchange Rates, and Inflation | The amount of interest income and interest expense of the Company in 2024 is relatively low compared to its operating income and pre-tax net profit. Therefore, future changes in interest rates are not expected to have a significant impact on the Company’s operations. The Company’s exchange gain in 2024 accounted for approximately 1.18% of the consolidated net revenue, which did not have a significant impact on the Company’s profitability. The Company will closely monitor the trend of exchange rate fluctuations, adjust its positions in Vietnamese Dong and US dollars timely, and utilize appropriate hedging operations to reduce the impact of exchange rate fluctuations. In recent years, the high demand for raw materials from emerging countries has inflated the global markets significantly. In order to reduce the inflation risk and lower the production cost, the Company will be actively seeking methods to improve processing and adjust product pricing accordingly. |
| High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions | The Company has maintained steady growth and has consistently focused on its core business operations, supported by sound financial management. It does not engage in high-risk or highly leveraged investments. As of the date of this annual report, all loans have been limited to fund allocations among fully owned subsidiaries of the Group. There is no lending to other related parties. Should any future lending to external parties arise, the Company will strictly adhere to its “Procedures for Lending Funds to Other Parties”. In addition, the Company’s use of derivative financial products is solely for the purpose of avoiding foreign exchange risks from business activities. All such transactions will continue to be conducted carefully in accordance with the regulations set by the authorities and the Company’s “Procedures for Acquisition or Disposal of Assets,” to protect the best interests of the Company. Approved by the board of directors, Eurocharm Holdings guaranteed and endorsed the following subsidiaries: Vietnam Precision Industrial No.1 Co., Ltd. for NT$1,081,773 thousand. As of the end of 2024, the amount spent was $0. |
| Changes in Policies and Regulations | The Company is registered in the Cayman Islands while its subsidiaries are registered in Taiwan, Vietnam, and the British Virgin Islands. The Company does not operate in the Cayman Islands. Fluctuation in Vietnam’s internal exchange rate is stable. The political relationship between Taiwan and Vietnam is stable. The Company and its important subsidiaries conduct all their businesses in accordance with regulations of their respective territories. The Company’s major products including automotive and motorcycle parts and medical equipment are not considered part of the restricted industry. Therefore, in the latest year and as of the date when annual report was published, critical policy changes or regulation changes in Taiwan, Vietnam, the Cayman Islands, and the British Virgin Islands are not expected to pose significant influences on the Company’s finances and sales. However, since the Company has customers and suppliers across the world, in the event of changes in respective government’s policy, economy, tax or interest rate, or in the event of incidents involving politics, diplomacy or society, the business of the Company’s client or the Company might be affected accordingly. |
| Changes in Technology (including information security risks) | The Company’s clients include leading vendors across the world. Given the close collaboration relationship between both parties now, the Company is, therefore, able to access information on the latest technology through such relationship. Losing important clients is equal to losing critical sources that help us understand changes in technology as well as shifts in the industry. Failure to master market trend and the trend for future product development will keep the Company from launching products needed by the market, and operation may suffer from a significant and adverse impact. As such, the Company continuously pursues the advancement of metal processing and tooling. On the other hand, the Company also follows clients’ steps closely to obtain, at any time, the latest technological information in the market, understand future changes in the industry and master market trend as well as product future development direction. At current phase, the Company focuses its development on automotive, motorcycle, and recreational vehicle parts as well as medical assistive equipment. As global environmental awareness rises, and the market demands for lightweight products and reinforced vehicle safety, the Company’s business continues to grow. There are currently no technologies or products that can replace our offerings in the short term. Therefore, technological changes and industry developments are not expected to have a significant impact on our financial operations. The Company’s information technology security policy is in place to establish and maintain a secure environment for its information and computer systems. However, despite the implementation of these policies, procedures, and various other information security measures, there is no guarantee that the computer systems controlling or maintaining critical corporate functions, such as the Company’s manufacturing operations and accounting, are entirely immune to attacks from third parties attempting to disrupt the system. These cyber-attacks illegally breach the Company’s internal or external network systems and engage in activities that disrupt the Company’s operations and damage its reputation. In the event of a severe cyber-attack, the Company’s systems may lose critical company data. Therefore, the Company will continuously review and evaluate its cybersecurity regulations and procedures to ensure their adequacy and effectiveness. However, there is no guarantee that the Company will be immune to emerging risks and attacks in the face of the constantly evolving cybersecurity threats. |
| Changes in Corporate Image | The Company has always maintained a good corporate image. Since its listing, the Company has enjoyed a better reputation and image, strengthened internal controls, improved management practices, and a positive impact on our sustainable operation. In the future, we will strive to expand our international business, achieve optimal operational efficiency, and maximize profits, sharing the business results with all shareholders and employees. The listing of the stock will further enhance the Company’s image. |
| Factory Expansion | All the Company’s plant expansions have gone through complete, careful and assessment processes by responsible units and have already undergone comprehensive considerations of investment benefits and potential risks. |
| Excessive Concentration of Purchasing Sources and Excessive Customer Concentration | The main raw materials the Company uses are iron pipes, iron, iron rolls, aluminum, steel, coating, etc. The purchasing decisions are made based on the factors including quality, price, delivery, and flexibility. As these raw material suppliers are not monopolistic and there are at least two or more suppliers for the same raw material, the sources of supply are considered sufficient. Therefore, there is no risk of excessive concentration in purchasing. As for the sales of individual customers, the operating income of the top two customers takes up 49.89% of the consolidated operating income. Sales from the Company’s other clients does not exceed 10%. However, As the Company’s largest customers holds 70% of the market share in Vietnam and the Company is their main supplier, the situation of excessive customer concentration is expected. As a result, the Company has been actively developing new customers to diversify and lower the impact of excessive customer concentration. |
| Large Share Transfers or Changes | No such cases in the most recent year and as of the date when the annual report was published. |
| Changes in Management Rights | In the most recent year and as of the date when annual report was published, the management rights has not changed. The Company has also established a professional management system. Therefore, the changes in management rights should have a minimal effect on the Company. |
| Capacity Expansion | The Company regularly conducts long-term market demand forecasts for its products and services to make overall plans for production capacity. Because the demand forecast changes significantly in the market environment at any time, when the demand decreases, the Company would temporarily reduce the operation of some production lines or machines and idle capacity would be generated. In response to the above possible risks, the Company will continue to observe market changes and work closely with customers. If market demand is not as expected, the Company will adjust its production capacity plan in a timely manner to reduce the negative impact on the company’s financial performance. |
Summary of Risk Committee Operations
In 2024, each department will conduct risk assessments and formulate risk management strategies and plans based on the principle of materiality, considering the potential significant impact of corporate governance issues, such as economic, environmental, and social aspects, on customers, investors, and other stakeholders. For high-risk issues, in addition to reporting risk status and strengthening controls at monthly regular meetings, a report will be submitted to the Board of Directors at least once a year for supervision and review. Eurocharm Group established a Risk Management Committee on June 1, 2022. The committee is composed of four directors and independent directors, and an independent director is elected by the members to serve as the convener and meeting chair. Currently, the position is held by Independent Director Yuan Zhen Tian. In 2023, high-risk issues including compound disaster risks, cybersecurity risks, and climate change management were reported to the Board for supervision and response. The committee operates according to the company’s “Organizational Regulations,” and is required to hold at least two meetings annually, with additional meetings convened as necessary. In 2024, the Risk Management Committee held two meetings, with 100% attendance by all members. Details are available in the company’s annual report for the Risk Committee. The first meeting was held on February 29, 2024, to report the results of the 2024 risk management assessment. The second meeting was held on December 27, 2024, to report on the status of risk tracking and management implementation for 2024, and the same report was presented to the Board of Directors on December 27, 2024, covering the full year’s risk assessment and management execution status. On November 12, 2024, the “Annual Board Performance Evaluation and Self-Assessment of Board Members for 2024” and the “Self-Assessment of Functional Committee Members” were conducted, with all evaluation results rated as “Good” and all indicator items successfully completed. The results are scheduled to be reported to the Board of Directors on March 6, 2025. For further details, please refer to the Board Performance Evaluation Report (including the Functional Committee Performance Evaluation).
| Title | Name | Experience (Education) |
|---|---|---|
| Chairman | Chen-Tien Yuan | MBA, Guanghua School of Management, Peking University Managing partner, Chih Cheng Law Firm Executive Vice President, EY Management Services Inc. |
| Independent Director | Yen-Hsi Lin | Philosophy, Fu Jen Catholic University General Manager, DDI-Asia/Pacific International Ltd. (Taiwan) Senior Advisor, Asia/Pacific Region, Caliper Human Strategies |
| Independent Director | Yi-Jen Kuo | Transportation Engineering and Management, National Chiao Tung University Administrator, China Steel Corporation Manager, China Steel Aluminum Corporation President, China Steel Global Trading Corporation |
| Director | Antonio Yu | Industrial Engineering- University of Wisconsin- Madison Bioengineering- National Taiwan University |
| Item | Unit | 2022 | 2023 | 2024 |
|---|---|---|---|---|
| Number of Meetings | Times | 2 | 2 | 2 |
| Attendance Rate | % | 100 | 100 | 100 |
| Motions Reviewed | Cases | 2 | 2 | 2 |
| Meeting Date | Content | Opinions and Suggestions from the Risk Committee and the Measures in Response |
|---|---|---|
| February 29, 2024 | Evaluation report on the risk management | Unanimous consent |
| December 27, 2024 | Evaluation report on the risk management | Unanimous consent |