Governance Risk Management

Governance Risk Management

  • Risk Management

    As the business environment and society become more complex, unforeseen risks and a new business opportunities increase simultaneously. To ensure the sustainable growth of a company, a system for preventing and managing risks in advance is necessary.
    Hyosung TNC recognizes risk management as a crucial aspect of its business activities. To minimize a negative environmental and social impacts, both direct and indirect, arising from the company's business operations, a risk management system has been put in place. Furthermore, to fulfill its social responsibilities more faithfully, Hyosung TNC has strengthened its non-financial risk management, in addition to traditional financial risk management, in response to the heightened interests of various stakeholders in environmental and social issues.

Risk Management System

Hyosung TNC defines and manages risks as factors of uncertainty in the market that could significantly impact its business operations, as well as internal and external risks and opportunities. In 2021, the company revised related process regulations to enhance its overall risk management capabilities.

Risks are categorized into financial and non-financial (management, business continuity) risks. The company defines key risks, considering their impact and likelihood, and establishes a preventive system to identify the root causes of risks in advance. Annually, the company updates its risk management status, evaluates whether the objectives of response measures for key risks have been achieved, and proactively responds to the risks thus identified.

  • Goverance structure

    Hyosung TNC manages and discusses a key risk matters within the Board of Directors' Management Committee and the ESG Management Promotion Committee under the CEO's office. Financial risks fall under the jurisdiction of the Finance Department at the headquarters, and the department collaborates closely with business units within the company and domestic and global subsidiaries. They periodically measure and evaluate financial risks, implementing risk mitigation measures such as hedging. Non-financial risks, on the other hand, are managed by the ESG Management Team directly under the CEO's office. Within various operational units related to environmental, social, and governance (ESG) matters, ESG management personnel are designated, and an ESG management working group is established to continuously identify and devise ways to mitigate risks. Risks that require management are overseen by appointing the CEO as the chairman and a risk management officer. This includes executives such as the Director of Corporate Strategy, Director of Finance, Director of Support, Executives in charge of Purchasing and Public Relations, Plant Manager, and Department Heads of each business unit as members. Both the Management Committee and the ESG Management Promotion Committee review and approve the final plans for managing overall financial and non-financial risks.

    • With the enforcement of the Major Accidents Punishment Act, risk management related to safety and health is under the responsibility of the Chief Safety Officer (CSO) and the Safety and Health Team throughout the company.
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  • Activities By Risk Types

  • Finance


    Risks associated with financial factors such as stock prices, interest rates, and exchange rate fluctuations

    • Risk measurement, analysis, and hedging through the operation of specialized personnel for capital procurement/trade finance
    • Operation of internal accounting management system
    • Minimization of exchange position discrepancies by aligning deposit and withdrawal currencies, and specifying measurement frequencies, hedging periods, and hedging ratios in the exchange risk management policy


    Risk of counterparties not meeting contractual obligations as per contract terms

    • Compliance with internal receivables management regulations, setting and managing credit limits for counterparties in sales receivables transactions
    • Credit investigation and recovery plan management for investments and loans, among others


    Risk of unexpected liquidity deterioration leading to financial losses

    • Regularly forecasting the future cash flows to maintain an appropriate level of deposit cash
    • Entering into agreements with financial institutions for emergency fund injections
  • Non-financial Business continuity

    Supply chain

    Risk of delayed product delivery due to a raw material shortages or production continuity disruptions

    • Establishing response systems and training for supply continuity emergencies (raw material supply interruption, customer supply emergency) by scenario
    • Regular evaluation and quality/environmental audits of suppliers in accordance with IATF 16949, ISO 9001, and ISO 14001 standards
    • Consulting support and regular assessments to enhance the ESG management capabilities of partner companies
    • Regularly identifying energy improvement directions for partner companies

    Disaster and safety

    Risks of disasters such as earthquakes, fires, or workplace safety accidents, etc.

    • Operation of a dedicated organization for company-wide safety risk management
      (operation of a safety and health team under the direct leadership of the CEO to manage safety, health, and disaster systems for all business locations, including the head office)
    • Establishment of emergency response organizations and preparation of manuals and recovery measures by scenario
    • Regular civil-military joint exercises based on accident scenarios such as factory fires and explosions
    • Annual accident case and hazardous substance handling law training for all factory employees
    • Continuous factory safety patrols through the factory environment safety organization

    The environment

    Risk of legal sanctions and fines due to inadequate responses to environmental regulations such as greenhouse gas and hazardous substance emissions, etc

    • Operation of a dedicated environmental risk management organization
    • Regular diagnosis and prevention of potential risks through environmental impact assessments
    • ISO 14001 certification reexamination and self-verification activities
    • Regular response training by scenario for environmental accidents such as chemical spills and wastewater discharge
    • Ongoing factory safety patrols through the factory environment safety organization
  • Non-financial Management

    Climate change

    Regulatory risks related to emissions, physical risks, and related business transition risks

    • Operation of a dedicated climate change risk management organization
    • Monitoring of changes in related regulations
    • Establishment and management of reduction targets
    • Monitoring of greenhouse gas emissions at business sites and calculation of product carbon emissions through the Carbon Asset Management System
    • Direction and investment decision-making for business reflecting climate change risks and opportunities using internal carbon pricing

    Quality management

    Risks related to changes due to the 4Ms (Machine, Material, Method, Man), risks affecting continuous supply or delivery, and risks of defective products or leaks

    • Feasibility assessment (impact of change management and 4M changes)
    • Monitoring of quality levels
    • Management according to the process for dealing with defective products
    • Establishment and training of quality management risk emergency scenarios

    Human rights

    Risks of human rights violations and risks related to human resource management

    • Periodic human rights impact assessments and improvement initiatives
    • Establishment and dissemination of human rights policies and guidelines
    • Regular training on human rights protection and non-discrimination
    • Operation of a reporting system


    Risks such as information loss due to cyberattacks from external sources or data leakage from within the organization

    • Operation of a dedicated security organization
    • Establishment of security regulations and operational standards
    • Knowledge management through the use of an enterprise content management (ECM) system
    • Thorough monitoring of the entire document process, including document creation, modification, import/export, and disposal, through the introduction of security solutions, dedicated USB devices, and mobile device camera controls
    • Regular training on the top-10 information security rules and in-house security guidelines, with IT security training conducted once a month

    Legal and ethical

    Risks such as unfavorable contract agreements, lawsuits, unfair trade, corruption, etc.

    • Prevention of legal risks through compliance with contract examination regulations and the use of standard contracts
    • Enhancement of understanding through practical education in foreign exchange, patents, and contract management, among others
    • Anti-corruption and ethical management education in accordance with the Act on the Prevention of Corruption and the Fair Trade Act, among others
    • Update of the Fair Trade Voluntary Compliance Manual
    • Raising awareness through the signing of ethical management pledges by all new employees
    • Operation of a reporting channel


    Risks such as a decline in corporate image due to misinformation or negative communication

    • Conducting PR risk response training for new hires, newly promoted employees, and new team leaders
    • Raising awareness through the formulation and dissemination of action principles and action processes for PR personnel
    • Communication with stakeholders through brand marketing and various channels

    Marketing ethics

    Risks such as conveying false, exaggerated, or downplayed information in advertising or marketing, or conveying information without considering groups vulnerable to such information

    • Establishment and operation of "Ethical Marketing Operating Principles"
    • Encouraging external agencies that handle advertising and marketing to respect and introduce the operating principles


    Risks of infringement on brand/trademark rights or damage to their value

    • Establishment and compliance with separate guidelines for the protection and enhancement of brands and trademarks


    Bad order risks due to payment terms, contract exclusion clauses, unclear specifications, delivery uncertainty, complaints, local country situations, etc.

    • Order review and the operation of the Bid Approval Committee (BAC)

    Management in general

    Operational risks due to errors by individuals or systems

    • Integration of various management activities through the use of enterprise resource planning (ERP)
    • Systematic management and improvement of the voice of the customer (VOC) through the establishment of the C-Cube system
    • COVID-19 risk management (promotion of remote meetings, expansion of flexible work hours and IT support, and establishment and operation of response processes)