Risk Management | Corporate Governance | Philosophy | ASUS ESG website, ASUS ESG goal
Risk Management
Enterprises are facing risks that become complex and thus the ability to prevent risks and recover from emergencies are tested. A well-structured risk management mechanism could form a good protection through identifying possible future challenges and ensuring that it can response to the threats and have the ability to perform continuous operations, demonstrating organizational resilience. According to the "Global Risks Report 2021" recently published by the World Economic Forum (WEF), the major risks that may affect the world in the next decade include economic confrontation between major powers, political fragmentation, extreme climate change, cyber attacks, etc. Businesses must take adequate measures to protect themselves from these risks as early as possible.
Risk Management Policy
- Proactively deploy management measures in response to risk threats.
- Demonstrate organizational resilience and ensuring operational continuity.
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Goals
- Establish Key Risk Indicators (KRI) for real-time monitoring.
- Establish short, medium and long-term risk prevention plans,and review and improve them on a regular basis.
- Continuously strengthen various emergency response strategies and execute regularly drills
Business Continuity Management Committee
To ensure more comprehensive and routine risk management, ASUS established the Business Continuity Management (BCM) Committee to focus on critical risks that are not urgent. We actively identify possible future hazards and ensure that we can respond to threats and maintain continuous operations.
The BCM Committee summarizes the annual risk management report and submits the BCM management performance to the board of directors at least once a year. On July 20, 2022, the BCM policies and procedures, the organizational structure and management scope of the BCM Committee, and the annual operation summary werereported to the board of directors.
| Organization | Role |
|---|---|
| Board of Directors | Oversees the strategy development of the BCM Committee |
| Co-Chief Executive Officers (co-CEOs), Chief Operating Officer (COO), and senior business executives | Implement joint supervision, review and establish protection mechanisms in daily operations |
| Taskforce Units (TUs) | Responsible for monitoring risk trends and preventive risk management in all areas, and are responsible for developing quantifiable KRI( Key Risk Indicator) and risk prevention plans. When the risk occurs, they must respond immediately and establish an emergency contingency plan to minimize the impact and disruption time. |
Risk Management procedure
Step.1
Collect risk issues
Step.2
Analyze risk issues
Step.3
Conduct risk management activities
Step.4
Conduct regular reviews and improvements
The BCM Committee presented to the Board of Directors in July 2022 for the approval of the risk management policies and objectives, management Scopes, organizational structure and Risk Management procedure, all of which are defined in the 'Asus Enterprise Risk Management Standard.
Step.1
Collect risk issues
Identify relevant risk issues based on international reports, industry benchmarks, stakeholder concerns, company needs, as well as the requirements from the BCM committee and board of directors.
Step.2
Analyze risk issues
Risk Assessment Procedures
Risk Identification
Risk event identification
Risk value calculation
Acceptable risk level
Risk Improvement
Low
- Set up KRI for continuous monitoring
Medium/High
- Set up KRI for continuous monitoring
- Set up risk prevention plan
Impact Mitigation
High
- Set up emergency contingency plan
Emerging Risk Identification Procedures
Step.1
Collect international risk trends
Step.2
All BCM units identify risks
Step.3
Identify emerging risks and analyze impacts
Step.4
Pay attention to emerging risks and establish an adaptation plan
Step.3
Conduct risk management activities
Risk aspects
Stabling Organization Operation
External Communication
Information security
Sustainable development
Innovation development
Stabilizing supply chain
Financial Resilience
Business Risk
Customer Service
Management activities
Key Risk Indicators (KRI)
Risk Prevention Plans
Business Continuity Planning(BCP)
Step.4
Conduct regular reviews and improvements
Develop a management plan for high-risk events and incorporate it into regular reviews.
In 2022, we evaluated each impact of emerging risk and identified two major emerging risks of concern to ASUS, including Imbalance in the supply and demand of renewable energys, and geopolitical instability leading to supply chain disruptions risks. We then began related adaptation actions for each type of incident.
Imbalance in the supply and demand of renewable energy
In response to the global target for net zero by 2050, foreign customers' demand for low-carbon products, and stricter regulations for major electricity consumers in Taiwan, companies must immediately activate low-carbon operation transformation.
ASUS is committed to using 100% renewable energy in all global operations by 2035. However, due to the imbalance in the supply and demand of renewable energy in Taiwan, if the Company fails to make preparations in the renewable energy market, it would face rising operating costs which may also affect purchase orders.
- Trends in the Renewable Energy Market and Compliance Policies
- Mechanisms for Operating in the Renewable Energy Market
- Analysis of Power Consumption at Asus Facilities
- Asus' Renewable Energy Pathway Planning and Procurement Methods
- valuation of Overseas Renewable Energy Certificate Systems
Geopolitical instability leading to supply chain disruptions
In recent years, global geopolitical instability and supply chain pressures have escalated due to factors like international trade conflicts and the COVID-19 pandemic. The Russo-Ukrainian conflict in 2022 further heightened these challenges, leading to a decline in globalization and trade liberalization. As a global brand and manufacturer, Asus operates a widespread sales network and supply chain manufacturing facilities worldwide. Faced with the growing protectionist measures and economic regulations imposed by governments, Asus must proactively adapt its operational model to address the diverse policies and economic conditions in different countries. This strategic adjustment is essential to secure the resilience and continuity of its supply chain operations in the future.
- With the ongoing geopolitical tensions, governments worldwide are expected to persist in implementing economic intervention measures. If Asus fails to promptly address export control concerns in different countries, it may result in supply disruptions and a loss of customer confidence. Additionally, sanctions and protectionist regulations can disrupt cross-border logistics and result in increased taxes, thereby raising business expenses. Consequently, Asus' product sales and revenue may be affected, leading to delays, increased compensation costs, and potential implications for the company's overall business operations and financial position.
- The intensification of the Ukraine-Russia conflict has caused global energy and raw material prices to fluctuate, leading to shortages. This has resulted in higher upstream procurement costs, supplier instability, longer lead times for raw materials, and increased production costs. Furthermore, the volatile international situation has increased supplier risks, leading to delivery delays and potential disruptions to scheduled shipments. As a consequence, the company may face order compensations and revenue losses.
- The mentioned risks will have short-term consequences for Asus, leading to operational and financial losses. However, in the long term, these risks will also impact the company's trade opportunities and international reputation.
- Setting a geopolitical export control detection system to monitor and ensure compliance with international regulations.
- Diversifying the manufacturing network and standardizing products and production lines to reduce the risk of supply chain disruptions caused by geopolitical conflicts in a specific region.
- Streamlining material transportation routes to ensure a satisfactory service experience for customers on a global scale.
- Deploying a supplier operational disruption risk detection platform to proactively monitor and manage supplier risks, incorporating a whistleblower mechanism for real-time alerts and crisis management to prevent supply disruptions.
