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Governance

Hyosung 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 Corporation’s Board of Directors and ESG Management Promotion Committee review and approve major company-wide risks and management plans.
In 2022, the ESG Management Promotion Committee established an enterprise-wide risk management plan and process.
Relevant departments identify, assess, and respond to risks based on internal team-level policies. For critical risks, an internal protocol mandates reporting to the ESG Management Committee for appropriate action.
Hyosung Corporation transparently discloses key financial and non-financial risks in its Sustainability Report.

Risk Management Organization

Hyosung will manage risk issues and discuss key risks and responses at the board's management committee and ESG management committee. In addition, the ESG Management Promotion Committee under the CEO shall serve as 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, assesses, and hedges financial risk through organic cooperation with business units in the headquarters and domestic and foreign subsidiaries.

Non-financial risk is managed by 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.

Risk management process

Situation Assessment: Identify internal and external issues of the responsible departments and stakeholder demands

Risk Identification: Risks are identified based on SWOT analysis, 3C analysis, macro-environmental analysis, and issue analysis

Risk Evaluation

Evaluations are conducted based on likelihood and impact

The appropriateness of the evaluation criteria is reviewed regularly and revised as needed

Supervision & Oversight from Board of Directors and Top Management

High-priority risks are reported to the ESG Management Committee along with their details and response plans

The Board of Directors and the ESG Management Committee oversee the process, while field departments continuously monitor these risks

Monitoring: All departments check, at least once a year for changes in existing risks and identify any new risks

Risk Improvement

Develop and implement detailed plans for risk management

Management strategies include elimination of risk factors, modification of likelihood or consequences, sharing, retention, acceptance, or avoidance

Management of risks in accordance with the major types

Financial Risks

Management of risks in accordance with the major types
Category	Risk Details	Control Activities
Market	Fluctuations in stock price, interest rates, and exchange rates	Operate an internal accounting management system Minimize foreign exchange positions; clearly define measurement frequency, hedge duration, and hedge ratios in FX risk management policy
Credit	Inability of customers or counterparties to fulfill contractual obligations	Set and manage credit limits for trade receivables in accordance with internal credit management regulations Conduct credit assessments and manage collateral or recovery measures for investments and loans
Liquidity	Risk of unexpected liquidity deterioration	Regularly forecast future cash flows to maintain an appropriate level of cash reserves Establish agreements with financial institutions for emergency funding

Non-Financial Risk – Business Continuity

주요 리스크 유형에 따른 관리 활동
Category	Risk Details	Control Activities
Supply Chain	Delayed delivery due to failure in securing raw materials or ensuring production continuity	Train for emergency response per scenario Conducts regular quality/environmental assessments of raw material suppliers according to IATF 16949, ISO 9001, and ISO 14001 Supports ESG capability-building for partners and conducts periodic assessments Operates the Bid Approval Committee (BAC)
Disasters & Safety	Earthquakes, fires, or safety accidents at the workplace	Operates a dedicated organization for safety risk management Forms emergency response teams; prepares manuals and recovery actions for each scenario Conducts regular joint public-private drills based on accident scenarios such as fires and explosions
Customer Safety	Health and safety risks from harmful substances like heavy metals during product use; risk of supplying low-quality products	Conducts pre-inspects of hazardous substance leaching, including heavy metals, hazardous substances, and VOCs through component testing and analysis Discloses compliance with quality standards through ISIR reports, specifications, etc. Obtains safety certifications such as flame retardant certificates
Environmental	Legal penalties/fines for environmental regulation violations	Operates a dedicated team for environmental risk management Conducts regular risk assessments and prevention measures via environmental impact analysis Renews ISO 14001 certification and conducts internal audits Performs regular drills based on chemical or wastewater leakage scenarios

Non-Financial Risks – Related to Management

주요 리스크 유형에 따른 관리 활동
Category	Risk Details	Control Activities
Climate Change	Risk of emissions-related regulations and physical risks leading to business transformation	Operates a dedicated organization for climate change risk management, monitors relevant regulations, sets reduction targets, implements high-efficiency equipment, and fosters experts Monitors greenhouse gas emissions from Hyosung Corporation and its subsidiaries’ business sites, calculates product carbon emissions and implements reduction efforts Uses internal carbon pricing to guide business direction and investment decisions
Quality Management	Risks due to changes in the 4M (man, machine, material, and method) Risks affecting continuous supply or delivery	Evaluates the validity of 4M changes and monitors quality levels Manages through the non-conformance handling process Develops and conducts training for quality risk emergency scenarios
Human Rights	Human rights violations and personnel management issues	Conducts regular human rights impact assessments and follows up with improvement measures Establishes and implements a human rights policy and remedy manual for violations Conducts training on human rights protection and non-discrimination, and operates a reporting system
Information Security	Risks of external cyber attacks, internal data leakage, and loss of information	Identifies industrial and automotive floor carpets and carpet yarns (produced by Hyosung Corporation) as requiring information disclosure Conducts periodic vulnerability assessments and mitigation Prevents information leakage via Enterprise Content Management (ECM) and Information Security Center operations
Legal & Ethics	Risks of unfavorable contracts, lawsuits, unfair trade practices, and corruption	Prevents legal risks by adhering to contract review regulations and using standard contract templates; shares case studies to raise awareness Improves understanding through practical training in foreign exchange, patents, and contract management Conducts anti-corruption and ethics training covering the Anti-Graft Act, Subcontracting Act, and Fair Trade Act
Reputation	Corporate image deterioration due to misinformation, negative communication, greenwashing, etc.	Provides PR risk response training for new hires and promotees Conducts training on codes of conduct and response procedures for PR staff using case studies Promotes brand marketing and stakeholder communication through various channels Provides anti-greenwashing training for sales, PR, and marketing departments, and pre-reviews external publications by the compliance team
Information Disclosure	Risk of legal violations, loss of customer trust, or product safety accidents due to insufficient product information	Identifies industrial and automotive floor carpets and carpet yarns (produced by Hyosung Corporaion) as requiring information disclosure Provides details on manufacture date, lot number, material composition, handling instructions, and specifications through labeling Provides customers with technical documentation including inspection standards, test reports, and reliability test results