Corporate Governance

By enhancing transparency, accountability, and efficiency, strengthen the balance between management and shareholders, establish effective risk management and internal control mechanisms, to enhance long-term corporate value and promote sustainable operations.

Risk Management

Risk Management Policy

Risk Management Mission

To establish and maintain an effective risk management system and continuously improve it, enabling the company to fulfill its commitments to customers, protect shareholders’ interests, ensure employees’ work environment and health, and strive for sustainable operations.

Risk Management Commitment

Absolute Adherence to Commitments Leaders, especially supervisors, should lead by example and fulfill their supervisory responsibilities.
Employee Training: Ensure that all employees receive appropriate training and possess the necessary capabilities to carry out risk management tasks, thereby ensuring the smooth operation of the company.
Provision of Necessary Resources Provide the necessary resources to maintain effective risk management operations, continuously promote improvement activities, and reduce risks.
Enhanced Communication with Stakeholders Strengthen communication between employees and stakeholders, raise awareness of risk management across the organization, provide relevant consultation mechanisms, and thoroughly implement the risk management policy.

Risk Management Objectives

Reduce risk levels.
Increase the organization’s capacity for risk management.
Strengthen the consistency in the application of risk management within the organization.
Eliminate or reduce the frequency of special crisis events.

Enterprise Risk Management Analysis Table

Aspects	Type of Risk	Impact on operations	Response strategies	Business opportunities
Environment(E)	Power and Water Disruptions	Power and water resource disruptions impacting operations.	• Develop emergency response plans to mitigate the impact of power and water isruptions. • Install generators, uninterruptible power systems, and evaluate the implementation of energy storage acilities. • Establish in-factory water storage and external water support mechanisms; implement water and energy conservation measures.	Accelerate the improvement of energy and resource use efficiency, adopt renewable energy usage, and establish energy and resource emergency echanisms.
Environment(E)	Environmental Risks	Greenhouse Gas Emission Management Energy Resource Management Air, Water, Waste, Toxic, and Noise Emission Management	• Review international environmental protection trends to formulate environmental protection strategies that meet operational needs. • Conduct disaster prevention monitoring nd drills for emergency response and recovery capabilities. • For impacts or threats and response strategies, please refer o the "Climate Change Risks and Opportunities" section.	For potential opportunities, please refer to the "Climate Change Response" section.
Social(S)	Threat of Major Infectious Diseases	Due to the spread of infectious diseases, employees are unable to come to work, and materials cannot be delivered to the company on time, leading to production line stoppages and the company's inability to meet customer demands.	• Activate quarantine organization and SOP mechanism to ensure employees are safe to come on line and restart operation. • Diversify and off-site work to spread risks. • Strengthen the supply chain partnership, sharing and cooperating with the supply chain epidemic prevention mechanism.	A swift and prudent plan to gradually restore normal output to demonstrate crisis management capabilities and gain customer trust and more business opportunities.
	Occupational Safety Risks	Occupational injuries and public safety incidents can impact the company's normal operations. Depending on the severity, they can even lead to personnel and property losses, as well as factory shutdowns.	• Account occupational disease hazard factors to avoid employee exposure to harmful factors. • Enhance daily security awareness and drills; in case of emergency disasters or public safety incidents, immediately activate task forces for rescue operations. • Strengthen labor- management communication channels to establish harmonious labor relations. • Implement regular employee health check-ups.	Reducing and preventing the occurrence of occupational accidents, ensuring the safety of employees' property, and increasing stakeholders' confidence in the Company's continued operation.
	Information Security Risks	Damage caused by leaks, theft, sabotage, or natural disasters can result in abnormal company and personal information, as well as disruptions to internal and external communication systems. This can lead to operational losses and even damage to the company's reputation.	• Conduct bi-annual off-site data recovery drills to simulate data loss due to natural disasters or human factors, ensuring system operation is restored in the shortest possible time. • Maintain backup dedicated lines with two telecom providers to ensure normal external operations. Enhance system encryption capabilities and password management. • Implement employee training and awareness programs to strengthen information security management and promote employee compliance.	To build a highly reliable information security management system to prevent any possibility of communication disruption, data loss and leakage in order to gain the trust and support of all stakeholders in the company.
Corporate Governance(G)	Ethical Risk	The Company suffered osses due to violations of the Code of Conduct and Integrity. In 2023, we conducted a corruption risk assessment for each plant and identified significant risks in the area of procurement, such as inappropriately accepting gifts, money, or exchanging social expenditures for referential treatment in exchange for suppliers' goods and service bids.	• New employees at Phihong are required to receive training on "Code of Corporate Ethics and Business Conduct" and to sign a letter of approval after the training. • From time to time, we promote the importance and practice of ethical management through education and training s well as employee advocacy.	• All employees abide by the Code of Corporate Ethics and Business Conduct and operate with integrity
	Financial Risk	• Changes in interest rates and exchange rates affect financial income and expenses, impacting financial leverage and inflation risk. • Tariff barriers increase customers' willingness to place orders and production costs, and impede supply chain delivery.	• Evaluate interest rate exposure items and the impact of floating interest rates. • Use natural hedging for exchange rate risks; invest short-term funds in liquid, principal-protected, and income-secure bank financial products and fixed deposits. Avoid high- risk, highleverage investment actiZvities. • Dispose of idle assets for cash inflows and apply for financing from financial institutions to support operational funds and longterm capital expenditures. • Actively develop production bases in Vietnam to enable effective and flexible adjustments, reducing the impact of trade tariffs.	• Manage the impact of changes in interest rates and foreign exchange rates on assets and cash flow, and stabilize the company's financial operations. • Strengthen the ability to respond to changes in operations and production modes, and expand supply chain partnerships and sustainability. • In line with the government's investment incentives, we will continue to strengthen our R&D capabilities and technological talents in our Taiwan headquarter, and lay out our production bases outside of China.
	Supplier Risk	Failure of suppliers to provide raw materials as scheduled, affecting normal operation and shipment.	• View inventory management mechanism and "Timely Alert System for Material Supply". • Provide backup mechanism for substitute material suppliers to ensure stable material source and no risk of chain breakage. • Regularly perform BCP audits on suppliers to assist suppliers in establishing risk management mechanisms.	• Strengthen the sustainable partnership with suppliers to fulfill customers' needs and expectations, and create win-win situation together.