ABC adheres to the business philosophy of " To Create and Develop a premium Inductive Components and Mechanical Parts industry through Practical Operation. Creative Innovation and Continuous Develipment." and manages its businesses based on principles of materiality. The Company regularly identifies and monitors risks that are relevant to its operations, which in turn allows timely response to crises and the possibility of minimizing threats or even turning them into opportunities.
A total of 4 risks were identified in 2020; risk factors, threats, and response strategies are explained below:
Risks of industry competition
Taiwanese businesses currently account for a low percentage of the global market. There are more than 100 manufacturers of inductors and coils in Taiwan, and most of which specialize in the production of coils.
1. The Company actively analyzes the markets and industries it is involved in, and commits significant resources into developing new products and technologies in line with the latest market trends.
Interest rate risks
The Company is exposed to interest rate risks due to capital borrowed at both fixed and floating rates.
In the future, the Company will source capital through a combination of floating rate and fixed rate debts to mitigate the effect of interest rate changes on the Company's profitability.
Exchange rate risk
The Company is prone to the impact of changes in USD, EUR, and RMB exchange rates. The purpose of the Company's exchange risk management practices is to avoid risks, and not to profit from risks.
1. Foreign currency sales proceeds received from overseas are first placed in foreign currency deposit accounts, and later converted into NTD at an appropriate time to avoid exchange rate risks.
Business integrity risks
The Company's operations are prone to worker and morality risks and incidents that may harm its goals, personnel, assets, the environment, and reputation.
|The Company's "Business Integrity Code of Conduct" has outlined preventive measures for business activities that are prone to higher risk of dishonesty. Issues that are of concern to internal and stakeholders are subjected to risk assessment at the end of each year to ensure that the system remains effective.|
Supply chain risk
|Downstream buyers are constantly squeezing the prices of components produced by the upstream, whereas the growing number of small- and medium-size manufacturers provokes price competition as a means to increase market share. In some situations, suppliers may be heavily affected by the pandemic that they are unable to ship supplies.||1. Continue maintaining productive relationship with suppliers.|
2. Actively look for and explore alternative suppliers.
3. Establish a dedicated production line for automobile electronics, enforce the IATF16949 system, and aim to take part in the supply chain of world's major brands.
Raw materials risk
|Abnormal test results in raw materials and improper uses of tools, fixtures, jigs, and auxiliary materials may contaminate the final product.||ABC requires all original manufacturers to test the materials supplied, and all suppliers to fully comply with HSF regulations as well as any additional requirement imposed by the Company and any of its customers.|
|IT server disruption, leakage of confidential information, leakage of customers' information, hacker attack, loss of employees' PC terminals.||1. Backup files and store them at an alternative location.|
2. Progressively develop off-site backup servers and practices.
3. Organize backup drills on a regular basis.
4. Regularly examine the external intrusion LOG and develop firewall policy in response.
5. Enhance employees' cybersecurity awareness.
Employment relations risk
|High attrition rate or penalty caused by poor employment relations or failure to comply with regulations.||The Company has implemented and enforced internal policies in accordance with labor regulations on all matters concerning personnel management, such as appointment, dismissal, and retirement of employees. An Employee Welfare Committee has been assembled in accordance with laws to oversee employees' benefits.|
|Hazard risks||Environment, safety, and health risks||Sudden or unexpected occurrence of public health incident, accident, or natural disaster may threaten continuity of the business and cause financial burden or give rise to other risks.||The Company has developed an emergency response plan and a business continuity plan. Regular drills are being organized to ensure the safety of equipment operations, enhance employees' response to crisis, shorten the time of business disruption, and minimize impact.|
|Risk of climate change||Risk of natural disaster continues to rise due to climate change.||The Company plans to adopt ISO 14064-1 standards on greenhouse gas survey, and manage data in a systematic manner that would provide useful reference for reduction solutions in the future.|