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 | 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 2023, each subsidiary company set an overall carbon reduction target of 1%, with Eurocharm TW and VPIC1 in Vietnam targeting 1% energy savings per year. 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, VPIC1 in Vietnam added and revised a total of 25 manuals, procedures, and operational guidelines in 2023. An action plan was implemented to improve air compressor leak points with continuous follow-ups on its implementation and effectiveness after its completion in the same year. In August 2023, VPIC1 passed the ISO 50001:2018 third-party verification by BSI. Eurocharm TW added and revised a total of 28 manuals, procedures, and operational guidelines in 2023. Two action plans were conducted to replace air conditioning equipment in the same year. After these are completed in 2024, the team will continue to track their implementation and effectiveness. On December 25, 2023, Eurocharm TW obtained ISO 50001:2018 third-party verification from SGS. 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 Rate | The amount of interest income and interest expense of the Company in 2023 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. |
| Foreign Exchange Rate | The Company’s exchange gain in 2023 accounted for approximately 1.21% 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. |
| Inflation | 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 adjusting product pricing accordingly. |
| High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions | Eurocharm grows stably and has always been concentrating on its core business. The Company did not engage in any high-risk or high-leveraged investments. As of the publication date of the Annual Report, all loans of the Company are capital transfer among companys where the Group hold 100% of the shares. There are no loans lent to other affiliated enterprises. The transactions and procedures related to lending and endorsement should be strickly based on the Company’s “Procedures for Lending”. Furthermore, derivative transactions engaged were all with the aim to avoid the risk resulting from currency exchange. The Company will follow the “Procedures for Acquisition and Disposal of Assets” to protect the maximum right of the Company. |
| 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 and some countries in Asia have specific political climate, 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, a 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 to information of the latest technology through such relationship. Losing such important clients is equal to losing critical sources to 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 molding. On the other hand, the Company also follows clients’ steps closely to obtain, at any time, the latest technology 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. With the popularity of environmental protection consciousness, the need for lightweight and strengthened vehicle products is in demand. This allows the Company’s business to enjoy continued growth. There is no replacing technology or product in a short time going forward. Therefore, changes in technology and industry are not expected to pose significant influence on the Company’s finance business. The Company has an information technology security policy to establish and maintain a secure environment for company information and computer systems. However, even if a company has established the above policies, procedures, and many other information security protection measures, there is no guarantee that the computer system that controls or maintains important corporate functions such as the company’s manufacturing operations and accounting are completely immune to attacks from any third-party systems. These cyber-attacks illegally invade the company’s internal (external) network systems, disrupt the company’s operations, and damage the Company’s goodwill and other activities. In the event of a severe cyber-attack, a company’s system may lose important company data. Therefore, the company will continuously review and evaluate its cybersecurity regulations and procedures to ensure their appropriateness and effectiveness, but there is no guarantee that the Company will not be affected by emerging risks and attacks amid the ever-changing cybersecurity threats. |
| Changes in Corporate Image | The Company enjoys a good business reputation in the international market, and this has established the Company’s credibility and position in this industry. After being listed, the emphasis on corporate image is larger than ever. The Company will continue to expand its international sales territory and maximize its profit through high productivity. We will also share the positive results to all the shareholders and employees. After the Company go public, it will be more beneficial to our corporate image. |
| Capacity Expansion | All of the Company’s plant expansions have gone through complete, careful and assessment processes by responsible units, and have already taken 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 from individual customers, the operating income of the top two customers takes up to 52.75% 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 directors and shareholders with more than 10% of the shares transferred large portion of their share rights in the latest year and as of the date when annual report was published. No directors were replaced. |
| Changes in Management Rights | In the latest 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 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 this possible risk, 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 2023, all departments conducted regular annual risk assessments and develop risk management strategies and plans based on the principles of materiality, considering corporate governance issues such as economic, environmental, and social aspects that may have a significant impact on customers, investors, and other stakeholders. For high-risk issues, in addition to reporting on the risk status and strengthening control plans during monthly meetings, a report will also be submitted to the board of directors at least once a year for supervision and review. Eurocharm established its Risk Committee on June 1, 2022, with four directors and independent directors serving as committee members. The Committee elected an independent director, Jen-Tien Yuan, as the convener and chairperson of the meetings. High risk issues reported to the Board of Directors in 2023 included compound disaster risks, status of supervision for data risks. The operation of the Risk Committee follows the Bylaws of the Company. The Risk Committee should convene two meetings every year and call for other meetings if necessary. In 2023, the Risk Committee hold 2 meetings with 100% average attendance for all members and discussed a total of 2-related motions.
On December 26, 2023, the “Annual Board Performance Evaluation and Self-Assessment of Board Members for 2023” and “Self-Assessment of Functional Committee Members” were conducted, yielding a “satisfactory” evaluation. The result is expected to be presented to the Board in the first quarter of 2024.
| 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 |
|---|---|---|---|
| Number of Meetings | Times | 2 | 2 |
| Attendance Rate | % | 100 | 100 |
| Motions Reviewed | Cases | 2 | 2 |
| Meeting Date | Content | Opinions and Suggestions from the Risk Committee and the Measures in Response |
|---|---|---|
| 02/24/2023 | Evaluation report of the risk management | Unanimous consent |
| 12/26/2023 | Evaluation report of the risk management | Unanimous consent |