Risk Management Policy and Procedures

In November 2021, the board of directors approved the establishment of the “Risk Management Policies and Procedures” as the Company’s overarching guiding principle for risk management. The Company would evaluate risks on an annual basis and formulate and implement risk management policies covering mechanisms such as management objectives, organizational structure, division of authority and responsibility and risk management procedures to effectively identify, measure and control the various risks of the Company and to contain the risks arising from business activities within an acceptable range.

Risk Management Coverage

The Company undertakes to integrate and manage all potential strategic, operational, financial and hazard risks that may affect its operations and profitability in a proactive and cost-effective manner, to assess annually the frequency of risk events and the severity of their impact on the Company’s operations, to define the priority and level of risk, and to adopt corresponding risk management strategies according to the level of risk.

The Company’s risk management system covers “strategic risk,” “operational risk,” “financial risk, ”hazard risk” and “other risks.”

Structure

The Risk Identification and Mitigation Measures for 2024 are as follows:

Major Issue	Risk	Relevant Issue	Risk Mitigation Measures
Environment	Hazard	Climate Change	Continuously mindful of the international climate change risk alarming information, mitigation and adjustments. Research for the energy efficiency opportunities via internal GHG accounting.
		Energy Crisis	The climate risks are inclusive of the new factory site selection and design which include ground elevation, industrial reservoir, self-generated energy designs to steer clear of the production being impacted by the climate disasters. Emergency power generators in case of power supply shutdown.
		Waste	Improvement of the product yield rate to avoid wasting resources. Improvement of the wastes recycle with a qualified company.
Society	Operation	Staff	Conducting the talent view periodically. Mapping out and carrying out employee training and development programs. Designing competitive compensation and employee benefit plans.
Society	Other	Infectious disease	Setting up a task force in each factory to draw up a pandemic prevention plan. Remote offices using information tools.
Corporate Governance	Strategy	Changes in industry markets/competitors	Accelerating the deployment of production lines in Southeast Asia and continuing to automate production lines to reduce manpower demand. Continuing to upgrade technology and production processes both domestically and internationally.
	Strategy	Policies and regulations	Continuously watching and keeping abreast of changes in laws and regulations in the countries where the Company’s production sites are located to avoid operational risks arising from such changes. To regulate the management measures in compliance with the regulations and law.
	Operation	Customers	Promoting projects in line with customers’ energy saving and carbon reduction targets to meet their expectations.
		Supply chain	Including risk-taking capability in the selection of suppliers and strengthening supplier management. Encouraging strategic suppliers to promote energy saving and carbon reduction initiatives as part of their corporate social responsibility.
		Production/ manufacturing/ R&D	Developing documentary guidelines for various process items and strictly carrying out SOPs. Boosting the energy efficiency of equipment; working with equipment suppliers regarding high energy-consuming machines and equipment to research and develop, introduce energy-saving models and carry out procurement control in order to effectively improve energy efficiency. Phasing out existing high energy-consuming machines according to their age or retrofitting them according to the results of effectiveness analysis.
		Information security	Continuously strengthening the management of computer equipment, network security, virus protection and system access control. Enhancing cybersecurity promotion and education training.
		Intellectual property	Signing Non-Disclosure Agreements (NDAs) for the development of production technology to reinforce product patenting.
	Finances	Interest rates, exchange rates, taxes, strategic investments	Regularly assessing market funding conditions and bank interest rates. Avoiding systemic and liquidity risks in financial markets by adopting a high degree of liquidity as the basis for capital allocation. Keeping abreast of tax changes in different countries and proposing timely responses.

2024 Implementation

The company implements proactively the risk management mechanisms and reports to the Board of Directors annually started from 2021. The 2024 implementation is as follows:

To formulate the Risk Management and Procedure on November 11,2021

To report the 2021 the implementation progress to the Board of Directors on January 18,2022

To report the 2022 the progress of the Risk Identification and Mitigation Measures to the Board of Directors on November 11,2022.

To report the 2023 the progress of the Risk Identification and Mitigation Measures to the Board of Directors on November 10,2023.

To report the 2024 the progress of the Risk Identification and Mitigation Measures to the Board of Directors on November 13,2024.

Optoelectronics