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Hyosung Group’s Risk Management

As the complexity of the business environment and society increases, so does the number of unanticipated risks and new business opportunities. To ensure sustainable growth, a system capable of preventing and managing risks in advance is necessary. Acknowledging risk management as a crucial management activity, Hyosung has established a risk management system to minimize direct or indirect negative environmental and social impacts resulting from the company's business operations. In order to respond to stakeholders' increased interest in non-financial risks and to fulfill our corporate social responsibilities, we also enhance the management of risks that may arise from non-financial perspectives, such as environmental and social factors, in addition to traditional financial risks.

Risk management system

Hyosung identifies and manages market uncertainty and internal and external risks and opportunities with a significant impact on business operations, and we revised relevant process regulations in 2021 to enhance company-wide risk management capabilities.
Hyosung classifies risks into financial and non-financial (business continuity and management) and defines major risks based on their impact and likelihood. For major risks, we establish a preventive system to enable preemptive response by identifying the cause of occurrence in advance. We update the risk management status annually and determine if the objectives of the countermeasures for major risks have been met.

Risk Management Organization

Hyosung will manage risk issues and discuss key risks and responses at the board's management and ESG management committees. In addition, the ESG Management Promotion Committee under the CEO shall be the Chairman and Risk Management Officer, and shall manage company-wide financial and non-financial risks with the Director of Strategy, Finance, Support, Communication, Factory, Technology, Research, and CSO.
Financial risk is supervised by the Finance Headquarters and periodically measures, assessments, and hedges financial risk through organic cooperation with business units in the headquarters and domestic and foreign subsidiaries. Non-financial risk operates ESG management team, strategic headquarters, support headquarters, CSO-centered enterprise risk management organization, and business environment, safety, supply stability, orders, sites, and litigation risk response organization led by PU and factory managers.
BoD
Management Committee /
ESG Management Committee
Top Management
ESG Management Promotion Committee

  • CEO
    (Risk
    Managem
    ent Officer)

  • Director of
    Strategy
    Division

  • Director of
    Finance
    Division

  • Director of
    Support
    Division

  • Head of
    Communica
    tion Office

  • Plant
    Manager

  • Head of
    Hyosung
    R&DB Labs

  • Head of
    Power &
    Industrial
    Systems
    R&D Center

  • CSO

Working-level Organization
Financial risks
Company-wide management organization

  • Finance Division

Non-financial risks
company-wide management organization

  • ESG
    Manager

  • Strategy
    Division

  • Support
    Division

  • CSO

Business site
management organization

  • PU Head

  • Plant Manager

Risk management process

  • Understanding the internal and external situation
    Investigation of internal and external stakeholder demands
  • Risk identification
    SWOT, 3C analysis, etc.
  • Risk assessment
    Likelihood, severity
  • Risk mitigation
    Developing and implementing risk mitigation and management plans
  • Post monitoring
    Monitoring result of measures and effectiveness
  • Report to BoD & top management
    Major risk reporting

Management of risks in
accordance with the major types

Financial
market, Credit, Liquidity
Market Credit Liquidity
Market risk associated with financial variables like stock price, interest rate, and exchange rate fluctuations Risk that a client or counterparty will not fulfill their contractual obligations Risk of sustaining a financial loss due to an unforeseen decline in liquidity
  • Risk assessment, analysis, and hedging through finance & trade finance specialists
  • Operation of internal control accounting systems
  • By matching deposit and expenditure currencies, minimization of the occurrence of exchange positions and systematic management of exchange risks by specifying the measurement cycling, hedging period, and hedge ratio in the Exchange Risk Management Policy
  • Compliance with the internal receivables management regulations to establish and manage credit limits for trade receivable counterparties
  • Management of recovery methods such as credit checks and collateral for investments and loans
  • Forecasting of cash flow on a periodic basis to maintain an appropriate level of deposit stock
  • Entering agreements with financial institutions regarding the transfer of emergency funds
  • Market activity
    Market
    Market risk associated with financial variables like stock price, interest rate, and exchange rate fluctuations
    • Risk assessment, analysis, and hedging through finance & trade finance specialists
    • Operation of internal control accounting systems
    • By matching deposit and expenditure currencies, minimization of the occurrence of exchange positions and systematic management of exchange risks by specifying the measurement cycling, hedging period, and hedge ratio in the Exchange Risk Management Policy
  • Credit activity
    Credit
    Risk that a client or counterparty will not fulfill their contractual obligations
    • Compliance with the internal receivables management regulations to establish and manage credit limits for trade receivable counterparties
    • Management of recovery methods such as credit checks and collateral for investments and loans
  • Liquidity activity
    Liquidity
    Risk of sustaining a financial loss due to an unforeseen decline in liquidity
    • Forecasting of cash flow on a periodic basis to maintain an appropriate level of deposit stock
    • Entering agreements with financial institutions regarding the transfer of emergency funds
Non-financialBusiness continuity
Supply chain, Disaster and safety, Environment
Supply chain Disaster and safety Environment
Risk of product delivery delays resulting from insufficient raw material supply and production continuity Risks associated with natural disasters such as earthquakes and fires, or workplace safety incidents Risk of legal sanctions and fines if environmental regulations, such as GHG and hazardous substance emissions, are disregarded improperly
  • Establishment of and training on an emergency response system for each supply continuity scenario (e.g. discontinued supply of raw and subsidiary materials, emergencies in customer supply)
  • Routine evaluation and quality and environmental audits of raw and subsidiary material suppliers in accordance with IATF 16949, ISO 9001, and ISO 14001
  • Consulting for enhancing the ESG management competence of partners and regular evaluations
  • Operation of a company-wide safety risk management organization (Safety and Health Team operated under the leadership of the CSO and direct control of the CEO to inspect health, safety and disaster system management for all business sites including the headquarters)
  • Establishment of a disaster and safety accident emergency response organization, as well as the preparation of manuals and recovery procedures for each scenario
  • Regular public-private training based on accident scenarios, such as factory fires and explosions
  • Implementation of annual training on accident cases and the handling of hazardous materials for all plant employees
  • Conducting routine plant safety patrol inspections through an organization responsible for factory environmental safety
  • Operation of an environmental risk management organization
  • Periodic diagnosis and prevention of potential risks through environmental impact assessments
  • Re-certification and self-verification activities for ISO 14001
  • Regular response drills for every environmental accident scenario, including chemical spills and sewer overflows
  • Conducting routine plant patrol inspections through an organization responsible for factory environmental safety
  • Supply chain
    Supply chain
    Risk of product delivery delays resulting from insufficient raw material supply and production continuity
    • Establishment of and training on an emergency response system for each supply continuity scenario (e.g. discontinued supply of raw and subsidiary materials, emergencies in customer supply)
    • Routine evaluation and quality and environmental audits of raw and subsidiary material suppliers in accordance with IATF 16949, ISO 9001, and ISO 14001
    • Consulting for enhancing the ESG management competence of partners and regular evaluations
  • Disaster and safety
    Disaster and safety
    Risks associated with natural disasters such as earthquakes and fires, or workplace safety incidents
    • Operation of a company-wide safety risk management organization (Safety and Health Team operated under the leadership of the CSO and direct control of the CEO to inspect health, safety and disaster system management for all business sites including the headquarters)
    • Establishment of a disaster and safety accident emergency response organization, as well as the preparation of manuals and recovery procedures for each scenario
    • Regular public-private training based on accident scenarios, such as factory fires and explosions
    • Implementation of annual training on accident cases and the handling of hazardous materials for all plant employees
    • Conducting routine plant safety patrol inspections through an organization responsible for factory environmental safety
  • Environment
    Environment
    Risk of legal sanctions and fines if environmental regulations, such as GHG and hazardous substance emissions, are disregarded improperly
    • Operation of an environmental risk management organization
    • Periodic diagnosis and prevention of potential risks through environmental impact assessments
    • Re-certification and self-verification activities for ISO 14001
    • Regular response drills for every environmental accident scenario, including chemical spills and sewer overflows
    • Conducting routine plant patrol inspections through an organization responsible for factory environmental safety
Non-financialManagement
  • Supply chain, Disaster and safety, Environment
    Supply chain Disaster and safety Environment
    Regulatory risks, physical risks, and business transition risks related to emissions Risk due to changes to 4M (Man, Machine, Material, Method), risks impacting continuous supply or delivery, and risk of occurrence or leakage of nonconforming products Human rights violation risk and human resource management risk
    • Operation of a climate change risk management organization
    • Monitoring amendments to applicable laws and regulations
    • Establishment of reduction goals and performance management
    • Monitoring GHG emissions at business sites and calculating product carbon emissions through the carbon asset management system
    • Business promotion and investment-related decision-making reflecting climate change risks and opportunities using internal carbon
      • pricing
    • Feasibility assessment (change management and impact of 4M changes)
    • Quality level monitoring
    • Management based on nonconformity product processing methods
    • Establishment of quality management risk emergency scenarios and training
    • Implementation and advancement of periodic human rights impact assessments
    • Formulation and dissemination of human rights policies and guidelines
    • Periodic implementation of human rights training, discrimination prohibition training, etc.
    • Operation of a reporting system
  • Security, Law and ethics, Reputation
    Security Law and ethics Reputation
    Risk of data leakage due to cyber terrorism or data leakage Risk of concluding unfavorable contracts and lawsuits, engaging in unfair trade, corruption, etc. Risk of damaged corporate image from misinformation or negative communication
    • Operation of a dedicated security organization
    • Establishment of security standards and regulations
    • Enterprise-level knowledge management through ECM
    • Comprehensive monitoring of the entire process of creating, modifying, and transporting documents, including the implementation of security solution multifunction devices, the use of dedicated USB ports, and control of cameras, including mobile devices
    • Ten rules for information security, monthly training on internal security guides, and separate IT security training at least once a month
    • Prevention of legal risks by adhering to the company's contract screening policy and utilizing standard contracts, and raising awareness by disseminating litigation case studies
    • Improvement of comprehension through on-the-job training in foreign exchange, patent law, contract management, etc.
    • Anti-corruption and ethical management training, including instruction on the Improper Solicitation and Graft Act, Fair Transactions in Subcontracting Act, and Monopoly Regulation and Fair Trade Act, among others
    • Update on the Compliance Program Handbook
    • Raising awareness by requiring all new recruits to sign an ethical management pledge Operation of reporting channels
    • Training on PR risk response for new recruits, newly promoted, and newly appointed team leaders
    • Raising PR managers' awareness through training on behavior principles, behavior processes, and case studies
    • Brand promotion and communication with stakeholders via multiple channels
  • Marketing ethics, Brands/Trademarks, 수주 활동
    Marketing ethics Brands/Trademarks Orders
    Risk of false, exaggerated, or reduced information in advertising or marketing, or transmission of information that disregards those who are limited in understanding information Risk of brand or trademark infringement or value loss Risk of malicious orders as a result of payment terms, contract clauses, ambiguous specifications, unsecured delivery, civil complaints, local country conditions, etc.
    • Establishment and implementation of the "operating principles on ethical marketing"
    • Encouraging not only Hyosung but also external advertising and marketing companies to adhere to the operating principles
    • Development of and adherence to additional guidelines to safeguard and enhance brand and trademark values
    • Operation of the Bid Approval Committee (BAC) for order deliberation
  • General management
    General management
    Operational risk caused by personnel or system errors
    • Integrated management of all management activities based on enterprise resource planning (ERP)
    • Systematic management of the voice of the customer and customer satisfaction improvement through C-Cube system establishment
    • COVID-19 risk management (e.g. meetings via digitally mediated services, flexible working hours, expansion of IT support, response process establishment and operation)
  • Supply chain
    Supply chain
    Regulatory risks, physical risks, and business transition risks related to emissions
    • Operation of a climate change risk management organization
    • Monitoring amendments to applicable laws and regulations
    • Establishment of reduction goals and performance management
    • Monitoring GHG emissions at business sites and calculating product carbon emissions through the carbon asset management system
    • Business promotion and investment-related decision-making reflecting climate change risks and opportunities using internal carbon pricing
  • Disaster and safety
    Disaster and safety
    Risk due to changes to 4M (Man, Machine, Material, Method), risks impacting continuous supply or delivery, and risk of occurrence or leakage of nonconforming products
    • Feasibility assessment (change management and impact of 4M changes)
    • Quality level monitoring
    • Management based on nonconformity product processing methods
    • Establishment of quality management risk emergency scenarios and training
  • Environment
    Environment
    Human rights violation risk and human resource management risk
    • Implementation and advancement of periodic human rights impact assessments
    • Formulation and dissemination of human rights policies and guidelines
    • Periodic implementation of human rights training, discrimination prohibition training, etc.
    • Operation of a reporting system
  • Security
    Security
    Risk of data leakage due to cyber terrorism or data leakage
    • Operation of a dedicated security organization
    • Establishment of security standards and regulations
    • Enterprise-level knowledge management through ECM
    • Comprehensive monitoring of the entire process of creating, modifying, and transporting documents, including the implementation of security solution multifunction devices, the use of dedicated USB ports, and control of cameras, including mobile devices
    • Ten rules for information security, monthly training on internal security guides, and separate IT security training at least once a month
  • Law and ethics
    Law and ethics
    Risk of concluding unfavorable contracts and lawsuits, engaging in unfair trade, corruption, etc.
    • Prevention of legal risks by adhering to the company's contract screening policy and utilizing standard contracts, and raising awareness by disseminating litigation case studies
    • Improvement of comprehension through on-the-job training in foreign exchange, patent law, contract management, etc.
    • Anti-corruption and ethical management training, including instruction on the Improper Solicitation and Graft Act, Fair Transactions in Subcontracting Act, and Monopoly Regulation and Fair Trade Act, among others
    • Update on the Compliance Program Handbook
    • Raising awareness by requiring all new recruits to sign an ethical management pledge Operation of reporting channels
  • Reputation
    Reputation
    Risk of damaged corporate image from misinformation or negative communication
    • Training on PR risk response for new recruits, newly promoted, and newly appointed team leaders
    • Raising PR managers' awareness through training on behavior principles, behavior processes, and case studies
    • Brand promotion and communication with stakeholders via multiple channels
  • Marketing ethics
    Marketing ethics
    Risk of false, exaggerated, or reduced information in advertising or marketing, or transmission of information that disregards those who are limited in understanding information
    • Establishment and implementation of the "operating principles on ethical marketing"
    • Encouraging not only Hyosung but also external advertising and marketing companies to adhere to the operating principles
  • Brands/Trademarks
    Brands/Trademarks
    Risk of brand or trademark infringement or value loss
    • Development of and adherence to additional guidelines to safeguard and enhance brand and trademark values
  • Orders
    Orders
    Risk of malicious orders as a result of payment terms, contract clauses, ambiguous specifications, unsecured delivery, civil complaints, local country conditions, etc.
    • Operation of the Bid Approval Committee (BAC) for order deliberation
  • General management
    General management
    Operational risk caused by personnel or system errors
    • Integrated management of all management activities based on enterprise resource planning (ERP)
    • Systematic management of the voice of the customer and customer satisfaction improvement through C-Cube system establishment
    • COVID-19 risk management (e.g. meetings via digitally mediated services, flexible working hours, expansion of IT support, response process establishment and operation)