Risk Management Policy and Procedures

NANPAO has established "Risk Management Policy and Procedures" which is approved by the Board of Directors by resolution and serves as the highest guiding principle for risk management. From 2021 onward, risk assessment is performed regularly each year, whilst different risk management policies are formulated and implemented to mitigate different risk type, covering management goals, organizational structure, accountability and risk management procedures. Furthermore, effective identification, measurement and mitigation of various risks must be performed to contain risks produced by various business activities within a manageable scope.

 

Scope and Organizational Structure of Risk Management

The Company starts off from three risk issues of concern pertaining to ESG to further identify risk items. The main scope of risk management includes four aspects, namely “environmental safety”,“information security”, “legal compliance”, and “corporate governance”.

                                        

 

In 2021, the Company had consolidated various risk management units and established “Risk Management Task Force”, which is under the purview of the Board of Directors. The CEO serves as the convener of Risk Management Task Force. The highest executive of each functional unit serves as member of the task force. Each functional unit regularly undertakes identification of risk items and risk control. Each year, the task force regularly reports on the risk assessment results and operation of riskmanagement of the preceding year to the Board.

 

                                    

 

 

 

Risk and Oppertunities of Climate Change

 

According to the Intergovernmental Panel on Climate Change (IPCC), the global average temperature has risen by nearly 1.1 degrees, and in recent years, natural disasters caused by extreme weather have become more frequent worldwide. Controlling climate change has become one of the most important global actions, and NANPAO is also doing its best to mitigate the impacts of climate change. NANPAO combines its existing governance framework and follows the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) to disclose the company's four core governance, strategy, risk management, and indicators and targets related to climate change, and effectively carry out responsive management.

       

 

 

Emerging Risk

 

Emerging Risks	Key Talent Risk	Energy Management and Alternative Energy Risk
Description	NanPao, located near the Southern Taiwan Science Park, is situated in a semiconductor industry cluster. The semiconductor industry attracts frontline workers, contributing to increased recruitment challenges for other industries.	In pursuit of Taiwan's 2025 nuclear-free homeland goal and international carbon reduction commitments, the government has implemented new energy policies to promote energy transition for Taiwan Power Company and businesses. Starting in 2024, the government will impose a carbon tax, potentially increasing operational costs. Within 3 to 5 years, industry-specific carbon emission limits are expected to be set for overall greenhouse gas control.
Potential Business Impacts	To attract talent, NanPao must actively raise salaries and benefits, and recruit foreign talent. The competition for talent acquisition has led to a 62% increase in recruitment costs for NanPao in 2022 compared to 2021.	·      During peak electricity demand, if there are generator or transmission system failures at Taiwan Power Company and instability in renewable energy supply, power shortages may occur. ·      In anticipation of future carbon taxation, raw material suppliers will be directly impacted, affecting raw material prices and profitability. ·      Exceeding the total greenhouse gas emission control limit will incur additional costs to purchase carbon credits.
Mitigating Actions	NanPao is implementing measures such as establishing a talent database, implementing retention plans for key personnel, initiating employee trust stock plans, and engaging in campus recruitment.	·      Implementing a voltage stabilizing and energy-saving system to reduce electricity consumption. ·      Continuously deploying solar photovoltaic self-use equipment. ·      Developing customized energy-saving plans to reduce overall electricity usage and implementing non-production electricity load reduction during power shortages.