Sustainable Risk Control

Opportunity is a double-edged sword. With opportunities for corporate development, come risks. Such risks can only be offset through control mechanism in order for opportunities to become means of fulfilling sustainable management.

Risk Management Policies

To reinforce corporate governance and establish sound risk management to reach corporate targets, the Board approved Risk Management Policies on November 12, 2020. The objective is to ensure sustainable management, reduce damages and enhance corporate profit. Risks and opportunities should be evaluated accordingly for all business conducts to identify, evaluate, monitor and control risks, keeping risks within manageable range to rationalize risks and benefits.
⇥ Risk Management Policies

The organizational structure of the Company in the field of risk management includes the Board of Directors, Corporate Management, and Operating Business and relevant divisions. The obligations of each applicable entity are outlined within the Risk Management Policies. In the event of unanticipated major risks, an emergency response team shall be established to formulate immediate responses and handle the risk conditions to ensure regulatory compliance while minimizing potential damages and impacts. Monthly risk control briefings are presented to the Board members and senior executives. Risk issues discussed include management, sales, industry operation as well as energy and carbon reduction to keep the Board members and senior executives informed while making policy decisions.

Structure of Risk Control Organization

Board of Directors	The Board of Directors serves as the highest decision-making unit of the risk management. The Audit Committee and Sustainability Committee oversee the control management of business risks as well as sustainability risks, respectively, to ensure the effectiveness of the risk management process and outcome.
Corporate Management	Corporate Management is responsible for the overall risk management and establishment of preventive measures. Monthly task: The units conduct regular meetings to review the risk management status and monitor the implementation and coordinated operation of risk management. Yearly task: The units shall submit a risk management report to the Board of Directors at least once a year. The 2022 report was presented to the Audit Committee on November 2, 2022, and to the Board of Directors on November 9, 2022.
Operating Business and Relevant Divisions	All units shall identify major risks and conduct risk planning, implement necessary process of risk management and report management status to Corporate Management on a regular basis.

Identification and Management of Major Risks

Major Risks of FENC

FENC identifies potential risks and their sources for all departments. For more details on the measures established, please refer to the corresponding chapters in FENC Sustainability Report or FENC Annual Report.

Financial Risk	Including the volatility of local and foreign interest rates, currency exchange rates and credit risks, etc.
Strategic and Operational Risk	Including operations strategies, local and overseas market competitions, industry alliance, policy or regulation changes, etc.
Information Security Risk	Including but not limited to potential threats to the confidentiality, integrity, and availability of the Company’s information asset due to any natural, man-made or technical factors.
Environmental, Carbon Reduction and Energy Risk	Including those induced by climate change, geographical resources, global carbon reduction progress, energy as well as fiscal and tax policies.
ESG Risk	Including those induced by the environment, society and governance that are derived from global corporate sustainability issues.

Risk Management Principles, Mitigation and Control Measures, and Identification and Management Procedures

FENC establishes risk indicators and stays on top of environmental and regulatory changes through regular tracking. Once the risks are defined through internal meetings, evaluation is conducted by designated units on the potential threats and impacts on the Company to formulate action plans. Responses and control measures are carried out through special projects. The implementation and progress are reported to the highest governing entity on a regular basis.

Risk Management Mechanism

The Company’s risk management mechanism consists of risk alert system, regulatory compliance system,and etc. The Company offers the staff regular training to be risk awareness. Furthermore, risk control is implemented in conjunction with the internal audit system and is conducted through various monthly meetings, covering risk issues such as management and sales, industry management, environment sustainability and GHG reduction, etc.

1. Risk Alert System: Conduct regular follow-ups and examine corporate risks to establish advanced corresponding measures.
2. Regulatory Compliance System: Regularly implement self-evaluation on compliance to reduce risk of violation
3. Risk Ranking Project: Regularly conduct plant risk ranking projects to reduce operational risks.
4. Risk Control Training: Implement staff training to increase risk awareness.
5. Internal Control System: Oversee and manage risks through internal control system.
6. Regular Meeting: Conduct multiple monthly meetings to ensure management of and focus on risk issues from the highest governing entity.

FENC Regular Meetings

■ Environment ● Social ◆ Governance

Corresponding Issue Important Meeting		Interval	Corresponding Issue	Highest Ranking Attendee
Board Meeting	Board Meeting	Quaterly	■ ● ◆	Chairman
	Audit Committee	Quaterly	◆	Independent Directors and Directors
	Remuneration Committee	Semi-Annual	◆
	Sustainability Committee	Semi-Annual	■ ● ◆
Themed Meeting	Management Meeting	Annual	■ ◆	Chairman
	Human resources management and development	Semi-Annual	● ◆
	Special report on R&D	Annual	■ ◆
	Seminar on industry strategies	Semi-Annual	◆
	Budget review	Annual	◆
	Environment sustainability	Annual	■
Regular Meeting	Operation review meeting	Monthly	■ ● ◆
	Sales Meeting	Semi-Monthly	◆
	Risk management meeting	Monthly	■ ● ◆	President of Corporate Management