Risk Management
ABC adheres to the business philosophy of "building an industry of world-class inductors and precision components through pragmatism, innovation, and sustainability" 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.
| Risk category | Risk factors | Threats | Response strategies |
| Strategic risks | Risks of industry competition | Taiwanese businesses currently account for a relatively 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. | The Company actively analyzes the markets and industries it is involved in, and commits significant resources to develop new products and technologies in line with the latest market trends. |
| The Company maintains a strong cooperative relationship with upstream and downstream partners, and works with customers in as early as the design stage. By engaging customers as our R&D partners, we are able to develop up-to-date knowledge of product trends and market demands. | |||
| Financial risks | 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 Risks | 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. | Foreign currency sales proceeds received from overseas are first placed in foreign currency deposit accounts, and later converted into NT$ at an appropriate time to mitigate exchange rate risks. | |
| The Company pays constant attention to financial news and exchange rate changes, and maintains active relationships with banks. The Company also evaluates and purchases currency forwards as a means to hedge exchange rate risks. | |||
| Financial Structure Risks | The Company is currently taking debts to expand its operations, and the debt ratio is increasing, resulting in more interest expenses. | In the future, the Company shall carefully evaluate major investment projects and make investments only with the approval of the Board of Directors, and keep an eye on the financial structure, cash flow and return on assets. | |
| Business 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 Risks | 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. | Continue to foster good relationships with existing suppliers. | |
| Actively look for and explore alternative suppliers. | |||
| Establish a dedicated production line for automobile electronics, enforce the IATF16949 system, and aim to take part in the supply chain of the world's major brands. | |||
| Raw materials Risks | Abnormal test results in raw materials and improper uses of tools, fixtures, jigs, and auxiliary materials may contaminate the final product. | ABC-AETC 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. | |
| Cybersecurity Risks | IT server disruption, leakage of confidential information, leakage of customers' information, hacker attack, loss of employees' PC terminals. | Backup files and store them at an alternative location. | |
| Progressively develop off-site backup servers and practices. | |||
| Organize backup drills on a regular basis. | |||
| Regularly examine the external intrusion LOG and develop firewall policy in response. | |||
| Enhance employees' cybersecurity awareness. | |||
| Employment relations Risks | 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. | |
| Customer relationship Risks | Due to the rebound in demand after the pandemic subsided, orders have increased significantly, resulting in the production capacity not being able to meet customer demand in a timely manner. | We will strengthen the cooperation between production and sales, flexibly adjust the production capacity planning, and grasp the delivery schedule and production capacity situation, review and improve the orders with long delivery time, and make budget planning so that each unit can have sufficient time to arrange the production scheduling and production capacity deployment operations. | |
| 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 have been organized to ensure the safety of equipment operations, enhance employees' response to a crisis, shorten the time of business disruption, and minimize impact. |
| Risks of climate change | Risk of natural disaster continues to rise due to climate change | The Company plans to adopt the ISO 14064-1 standard on greenhouse gas surveys, and manage data in a systematic manner that would provide a useful reference for reduction solutions in the future. | |
| Epidemic Risks | The impact of COVID-19 will lead to business and work suspensions. | The Company publishes and implements a policy of epidemic prevention measures and, where necessary, implements segregation and triage measures and simulations to address the risks faced. |