Risk Management
INVESTOR RELATIONS
The Board of Directors is fully responsible for the establishment and oversight of the merged company’s risk management framework.
The risk management policy of the merged company is designed to identify and analyze the risks the company faces, set appropriate risk limits and controls, and monitor the compliance with risk limits. The risk management policies and systems are reviewed periodically to reflect changes in market conditions and the operations of the merged company. The merged company develops a disciplined and constructive control environment through training, management guidelines, and operational procedures, ensuring that all employees understand their roles and responsibilities.
Credit Risk – Accounts Receivable and Other Receivables
Credit risk refers to the risk of financial loss to the merged company due to a customer or counterparty in a financial instrument failing to fulfill their contractual obligations, primarily arising from accounts receivable from customers.
The merged company has established a credit policy, under which each new customer undergoes management and credit risk analysis before setting terms and conditions for entering into contracts or delivering goods. Internal risk controls are implemented by evaluating the customer’s financial condition, past experience, and other factors to assess their credit quality.
Liquidity Risk
Liquidity risk refers to the risk that the merged company may not be able to meet its financial obligations as they come due, such as failing to settle financial debts. The company manages liquidity risk by ensuring, as much as possible, that it has sufficient liquidity to meet its debt obligations in both normal and stressed conditions, thus avoiding unacceptable losses or damage to the company’s reputation.
Market Risk
Market risk refers to the risk of changes in market prices, such as exchange rates, interest rates, or equity prices, affecting the merged company’s income or the value of its financial instruments. The objective of market risk management is to control the extent of exposure to market risks within acceptable limits and to optimize investment returns.
Interest Rate Risk
The merged company’s short-term and long-term borrowings are subject to floating interest rates. As a result, changes in market interest rates will cause fluctuations in the effective interest rate of short-term borrowings, leading to variations in future cash flows. However, given the stable financial environment and limited changes in market interest rates, the company does not anticipate significant risk from interest rate fluctuations.
Foreign Exchange Risk
The merged company is exposed to foreign exchange risk arising from sales, purchases, and borrowing transactions that are denominated in currencies other than its functional currency. The primary currency for these transactions is USD. To manage foreign exchange risk, the merged company buys or sells foreign currencies at prevailing exchange rates, maintaining its net foreign currency position within a set limit.
Other Market Price Risks
The merged company holds financial assets measured at fair value through profit or loss, primarily structured financial products. Therefore, market price changes will affect the investment value. The company’s financial assets subject to interest rate-related fair value risk include bank deposits, while financial liabilities include short-term and long-term borrowings. The impact of interest rate changes on the fair value of these financial assets and liabilities is not considered significant.