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Risk Management

HS Hyosung Advanced Materials' risk management system prevents and responds to internal and external risks in a timely
manner, thereby reinforcing the foundation for sustainable management. Through effective risk management, we
successfully commercialize the new opportunities discovered by promoting stable business operations.
Risk Management

Risk Management

Risk Management

Risk Management

Risk Management System

HS Hyosung Advanced Materials defines and manages market uncertainties, internal and external risks and opportunities that may a significant impact on business activities as risks. In particular, risks are divided into three categories: finance, business continuity, and management. Major risks are defined by considering impact and probability of occurrence. We are constantly improving the prevention system to identify major risks in advance and take necessary preemptive responses. Risks are annually assessed and updated, and we monitor whether the target of the response plan has been achieved.

Governance for Risk Management

HS Hyosung Advanced Materials designates responsible departments for each field to monitor changes in potential risks. Financial risks are managed by the CFO, while non-financial risks are managed by the Head of Management Strategy and the Head of Support. Identified major risks are reported and discussed through the Risk Management Committee under the Sustainable Management Committee. In addition, the status of major risk responses in each field, such as climate change response, safety and health, compliance, and finance, is regularly reported to the Board of Directors at least once a year through the CEO, who is responsible for risk management, along with a materiality assessment. The corporate risk management organization not only guides the field to properly understand regulatory changes, sudden situations, and to carry out business activities, but also monitors the activities of business unit organizations on a regular basis to prevent risks.
Governance for risk management
  • Board of Directors
  • Sustainability Steering Committee
  • Risk Management Committee
    • Chief Strategy Officer
    • Chief Administration Officer
    • Chief Finance Officer
      • Non-financial Risk Responsibility Company-wide Organization: Management Strategy Office (environment, climate change) safety officers, and PR managers PU: PU heads and plant managers
      • Financial Risk Responsibility Company-wide Organization: Finance Office Business-level: PU Presidents

Risk Management Process

At HS Hyosung Advanced Materials, we manage pre/post-risk occurrence cases through independent processes where risks with high likelihood and huge impact are prioritized for effective management. In 2021, we reinforced the processes so that the evaluation of opportunities and measurement of effectiveness take place.
Risk Management Process
  • Pre-risk
    • Identification Risk and opportunity identification upon biz environment & stakeholder needs
    • Evaluation Prioritize based on risk evaluation sheet
    • Mitigation Plan & execute mitigation / improvement
    • Monitoring & Assessment Check execution and its effectiveness
    • Reporting BOD/CEO reporting of key risk management status
  • Post-risk
    • Identification & Reporting Report of risk situation and response plan
    • Management Response & recovery as per manual
    • Assessment Check and assess effectiveness of risk handling
    • Reporting & Update Final report including root cause analysis and improvement plan

Areas of Risk Management

Risk Management Areas & Responsibility

Teams designated by risk type monitor the changes as well as manage the risks. Also teams are designated by stakeholder type, and are responsible for stakeholder communication by risk type. Finance risks are measured, assessed, and hedged by the Corporate Financial Office(CFO), of which key issues are addressed and reviewed in accordance with the policies approved by the Management Committee of the BOD. Non-financial risks are managed by the designated team who define and conduct regular monitoring for prevention. For risks that require training(i.e. safety), regular training and update of risk manuals take place.

Financial Risk

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Financial Risk
Type of Reporting Risk Details Activities to Manage Risk
Market Risk (Corporate
Finance Office) 		Risks associated with financial factors such as stock prices, interest rates, and exchange rates
  • Risk assessment, analysis and hedging through finance & trade finance specialists
  • Internal accounting management system
  • Minimization of foreign exchange position through systematic foreign exchange risk management
Credit Risk (Corporate
Finance Office) 		Risk that a client or counterparty will not fulfill their contractual obligations
  • Monitoring compliance with bond management regulations; Setting and managing credit limits of transaction parties
  • Management of collection including collaterals and credit check related to investment and lending
  • Financial risk assessment
Liquidity Risk (Corporate
Finance Office) 		Risk of failure to fulfill payment obligations due to temporary lack of funds and the risk of financial loss thereof
  • Liquidity risk assessment (regular cash flow forecast, maintaining a proper level of deposit on hand)
  • Conclusion of an agreement for emergency funds

Risk to Business Continuation

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Risk to Business Continuation
Type of Reporting Risk Details Activities to Manage Risk
Environment risk (Sustainability Management Team, Environment & Safety Team) Risk of legal sanctions or penalties due to inappropriate response to environmental regulations related to GHGs and hazardous substances
  • Regular training based on accident scenarios such as chemical and wastewater spills.
  • Diagnosis and prevention of potential risks through environmental impact assessments considering biodiversity
  • Re-certification and self-verification activities for ISO 14001
  • Regular response drills for every environmental accident scenario, including chemical spills and sewer overflows
Climate
Change Risk (Sustainability Management Team, Emissions Manager, Power Supply Team, etc.) 		Legal risk related to emissions regulations, physical risk, business transition risk
  • Operation of an organization dedicated to climate change risk management under the supervision of a C-level executive
  • Monitoring amendments to applicable laws and regulations
  • Establishment of reduction targets in line with global warming of 1.5℃
  • Conducting climate change impact assessments
  • Real-time monitoring and analysis through the carbon asset management system
  • Operation of the internal carbon pricing system for setting business direction and making investment-related decisions that reflect climate change risks and opportunities
Supply Chain
Risk (Purchasing Team) 		Risk of delay in product delivery due to raw materials supply chain failure and or interrupted production continuity
  • Periodic evaluation and audit of all major materials suppliers’ quality and ESG based on international standards such as IATF16949, ISO9001 and ISO14001
  • Establishment and regular training of an emergency response system/protocol and training in accordance with the scenario of raw material supply chain failure to enhance customer responsiveness
  • Enhance responsiveness by defining emergency supply situations for final products, establishing emergency response system and training in accordance with the scenario of emergency supply situations
  • Regular assessment of suppliers and enhancement of their ESG capabilities.
Disaster and
Safety Risk (Safety & Health Team) 		Risk of disasters (e.g. earthquake, fire) and safety accidents in the workplace
  • Operation of an organization dedicated to company-wide safety risk management
  • Establishment of emergency response organization for disasters and safety accidents, preparation of manuals including response and recovery measures for each accident scenario
  • Joint and independent training with public organizations covering accident scenarios involving fires and explosion on a regular basis
  • To all employees, regular safety patrol checks in the plant and education of accident case studies and hazardous substances handling training
Talent Management & Human Rights Risk (HR Team) Human rights violation risk, human resource management risk, etc.
  • Establishment and distribution of human rights policies and guidelines
  • Conduct periodic human rights impact assessment and promote improvement
  • Regular training for human rights protection and prohibition of discrimination to all employees
  • Whistleblowing system
Quality
Mangement Risk (Production Team, Quality Assurance Team) 		Risks caused by 4M changes, risks affecting continuous supply or delivery, and risk of supplying nonconforming products
  • Compatibility assessment of 4M changes
  • Quality monitoring including Cpk and product performance trend, etc.
  • Compliance of non-conforming product handling process
  • Establishment and training of emergency scenarios for quality management risk

Management Risk

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Management Risk
Type of Reporting Risk Details Activities to Manage Risk
General
Management Risk (Corporate Strategy Office) 		Operational risk caused by personnel or system errors
  • By using ERP (Enterprise Resource Planning) system, entire business processes including production, logistics, finance, accounting, sales, purchases, and inventory are integrated and managed efficiently
  • Systematic VOC(Voice of Customers) management and customer satisfaction enhancement through the application of the C-cube system
  • COVID-19 risk management (e.g. meetings via digitally mediated services, flexible working hours, expansion of IT support, response process establishment and operation)
Legal & Ethic
Risk (Legal Compliance Team) 		Risks related to contract signing and litigation that are unfavorable to business, and compliance risks such as unfair trade and corruption
  • Legal risk prevention by compliance with corporate’s contract screening policy and use of standard contract form
  • Anti-corruption and ethical management training; On-the-job training on compliance; Dissemination of litigation case studies
  • Compliance Program opeation
  • Signing the ethical management pledge for all employees - Whistleblowing center operation
Security Risk (Chief Information Security Officer, Security Department) Risk of cyber terrorism or information loss due to data leakage
  • Monitoring/management by a designated security organization - Establishment of corporate-wide security policy and operating standards
  • Enterprise-level knowledge management through Enterprise Contents Management(ECM)Management
  • Due diligence on security status and breaches
  • Regular training of 'Corporate Security Guidelines’ and additional IT security training at least once a month
Marketing
Ethics (Business Management Team) 		Risk of false, exaggerated, or reduced information, or transmission of information that disregards those who are limited in understanding information
  • Enactment of the operating principles on ethical marketing (applied to partners)
Brands/
Trademarks (Business Management Team) 		Risk of brand or trademark infringement or value loss
  • Protection of the brand and promotion of its value by enacting and complying with the brand and trademark guidelines
Stakeholders Risk (Communication Team, Sustainability Management Team) Risk triggered by management activities failing to reflect stakeholders' needs
  • Online and offline exchanges and meetings with stakeholders
Reputation &
Filings (PR, CFO) 		Risk of damaged corporate image from misinformation or negative communication
  • Proactive response in PR
  • Training for all newly employed and promoted employees as well as team leaders to prevent corporate image damage caused by wrong media response, misinformation and negative communication
  • Brand promotion and communication with stakeholders via multiple channels

2030 Key Risks Management

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2030 Key Risks Management
Issue Department Detailed Risk Mitigating actions Plan & Targets
Climate
change response 		Sustainability Management Team
Power Supply Team 		●
  • Accelerate the rise in Earth’s average temperature
  • Failure to produce and supply products based on renewable energy and provide carbon footprint information for each product may weaken product Competitiveness
  • Increase in investment and operating costs for conversion to renewable energy
    * Estimated total of investment and operating costs: 52 to 103 KRW Mil. per year
  • Expand the use of new and renewable energy
  • Conduct LCA of major products with voluntary third-party verification
  • Establish and implement a roadmap for product LCA reduction
  • Transit to renewable energy (30% expansion by 2030)
  • Conduct product LCA and implementation voluntary third-party verification
Occupational
safety & health 		Safety & Health Team ●
  • Physical damages to executives and employees due to workplace accidents and risk of injury, Increase in separation rate
  • Expenditure on damages, fines, lawsuits, etc., in case of accidents or loss of life
  • Increase ISO 45001 acquisition rate
  • Strengthen continuous accident prevention activities
  • Conduct emergency response training and education
  • Eliminate potential risk factors through risk assessment
  • LTIFR 0.42 (2030)
  • Safety performance score 96 points (2030)
Eco-friendly
product and technology 		R&D Team
QA Team 		●
  • Increased risk of greenwashing
  • Corporate value declines in the event of lawsuits due to reasons such as poor implementation of low-carbon practices
  • Cost burden associated with implementing low-carbon manufacturing process technology
  • Decreased profit in short-term due to the higher procurement costs of low-carbon raw materials with lower cost competitiveness
  • Expand the development of products using recycled raw materials
  • Promote the development and commercialization of recyclable automobile carpets
  • Develop green technologies and obtain certification considering LCA
  • Identify and invest in suppliers of low carbon raw materials
  • Transit to sustainable materials (100% PET tire cord by 2050, 40% PET technical yarn by 2040)
Supply Chain Purchasing Team ●
  • Supply continuity risk due to ESG risks within the supply chain
  • Regulatory violations and the payment of fines due to failure to respond to supply chain due diligence disclosure Expected fines due to non-compliance with EU CSDDD: 29.5 to 37 KRW Bil. (2030)
  • Update purchasing strategy
  • Manage supplier emissions reductions
  • Reorganize the supply chain management system to identify potential ESG risks and implement mitigation measures
  • Achieve 100% ESG risk diagnosis rate for major suppliers by 2030
  • Secure 100% data on GHG emissions of major raw materials by 2030

Risk management

Risk management