Risk Management

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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 Heavy Industries 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 Heavy Industries 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

The Management Committee and ESG Management Promotion Committee under the BoD manage risk agendas and discuss major risks and responses. The ESG Management Promotion Committee includes the CEO appoints the CEO as the chairperson and risk manager, as well as the Chief Strategy Officer, Chief Finance Officer, Chief Administration Officer, PR manager, Director of Changwon Plant Management Division, CPSO (procurement manager in the Power & Industrial Systems division), Power & Industrial Systems CSO, construction planning manager, construction technology manager, and and Construction CSO as members. The Committee manages company-wide financial and non-financial risks. The Finance Office oversees financial risks, which are periodically measured, evaluated, and mitigated in cooperation with business departments within the headquarters and domestic and international subsidiaries. For non-financial risks, we operate company-wide risk management organizations centered on the ESG Management Team, Management Strategy Office, Support Office, Construction CSO, and Power & Industrial Systems CSO under the CEO's direct control, as well as working-level organizations that respond to environment, safety, supply stability, order, on-site, and litigation risk response led by the Director of Changwon Plant Management Division and field supervisors at construction sites.

Board of Directors
  • Management Committee /
    ESG Management Committee
Top Management
  • ESG Management Promotion Committee
    • CEO(Risk Management Officer)
    • Chief Strategy
    • Chief Finance
    • Chief
    • PR Manager
    • Director of
      Changwon Plant
    • CPSO
    • Power & Industrial
    • Construction
    • Construction
    • Construction
    • Sales
Working-level Organization
  • Financial risks
    • Company-wide
      management organization
      • Finance Office
  • Non-financial risks
    • Company-wide
    • Business site
    • ESG Manager
    • Manage
    • Support
    • Power & Industrial
    • Const
    • Director of
    • Field

Management of Risks in Accordance with the Major Types

Management of Risks in Accordance with the Major Types
Classification Details of risk Management activities
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 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 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
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
  • Determining the course of energy development for outstanding partners
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
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
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
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 nonconformant product processing methods
  • Establishment of quality management risk emergency scenarios and training
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 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
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 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
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
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 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
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)