Sustainability

HOME Sustainability Operational Governance

Operational Governance

Risk Management

Risk Management Mechanism ｜Risk Identification and Countermeasures

Risk Management Mechanism

To build strong risk management awareness, reasonably assure the achievement of the strategic goals to reach sustainable development, the Board of Directors of the Company passed the establishment of the “Rules Governing Risk Management” and formulated the following risk management policies:

The operational management of the company possesses risk awareness, assuring corporate continued operations.
The business responsible unit shall establish appropriate risk management procedures and continue the review and implementation. The aim is to ensure effective control of the various risks it bears.

The Company's risk management operation is divided into three control levels, through the various departments at different levels of responsibility, to implement risk control and reduce the risks faced by the company's operations. We also integrate with international standards such as ISO 27001 Information Security Management System, ISO 45001 Occupational Safety and Health Management System, ISO 90001 Quality Management System, and ISO 14001 Environmental Management System. Through annual internal and external audits, we confirm the efficacy of risk management measures and reduce operational risks.

The Board of Directors is the highest decision-making unit for the Company’s risk management. The Audit Committee assists the Board of Directors in supervising the Company's risk management operations, supervising the Company's existing or potential risks, and ensuring compliance with relevant laws and regulations and the effectiveness of the risk management mechanism. The Sustainability Committee is the executive unit that urges all responsible units to identify environmental, social or governance risks related to corporate operations, and to implementrisk control and response measures. It also reports the risk control status to the Audit Committee and the Board of Directors on an annual basis.
The Chief Internal Auditor will report the audit results to the independent directors and Board of Directors on a regular basis, assisting senior management and Board of Directors in inspecting and re-examining for deficiencies in internal control system, measuring the effects and efficiencies of operations. The aim is to ensure the operations effects, financial reports and legal compliance continue to be implemented effectively and to provide timely improvement suggestions. These form a basis for the review and corrections of the management system which can prevent frauds from happening and stimulates a strong management of the company.

The Internal Auditing Officer will report the audit results to the independent directors and Board of Directors on a regular basis, assisting senior level management and Board of Directors in inspecting and re-examining for deficiencies in internal control system, measuring the effects and efficiencies of operations. The aim is to ensure the operations effects, financial reports and legal compliance continue to be implemented effectively and to provide timely improvement suggestions. These form a basis for the review and corrections.
The operation in the past year was as follows:

Year	Operation Status
2024	“Risk management status” was reported to the Audit Committee and the Board of Directors in January. Reported to the Board of Directors and the Audit Committee on the implementation of internal audit in January, February, May, August, and November. A business unit meeting was held in November to identify the parent company's overall business environment risks in 2025 and formulated operating strategies.
2025	“Risk management status” was reported to the Audit Committee and the Board of Directors in January. Reported to the Board of Directors and the Audit Committee on the implementation of internal audit in January, February, May, August.

Year

Operation Status

2024

“Risk management status” was reported to the Audit Committee and the Board of Directors in January.
Reported to the Board of Directors and the Audit Committee on the implementation of internal audit in January, February, May, August, and November.
A business unit meeting was held in November to identify the parent company's overall business environment risks in 2025 and formulated operating strategies.

2025

“Risk management status” was reported to the Audit Committee and the Board of Directors in January.
Reported to the Board of Directors and the Audit Committee on the implementation of internal audit in January, February, May, August.

Risk Identification and Countermeasures

In 2024, the overall environment was affected by factors such as climate and geopolitical risks, impacting the stability of global bulk commodities, energy prices, and logistics supply chains. The gradual reduction in arable land and extreme climate fluctuations have led to productivity growth falling way below expectations, resulting in rising agricultural product prices and increased risks.

The overall market environment in 2025 will remain consistent with 2024 as uncertainties such as climate change, geopolitical risks, and labor shortages persist. In addition, under the promotion of the “United Nations Framework Convention on Climate Change”, global supply chains are actively seeking partners, products, and raw materials with net-zero carbon reduction benefits, prompting enterprises to accelerate investments in green energy and carbon reduction equipment. In addition, the increase in utility fees in Taiwan has led to a significant increase in business operating expenses. Furthermore, the policies of the new U.S. president regarding taxation and green energy will also pose additional challenges to the global economy.

In accordance with the principle of materiality, the Company identified major risks and compiled corresponding risk response measures proposed by each department, as detailed in the table below. The above-mentioned major risk items have been submitted to the Audit Committee and the Board of Directors on January 10, 2025. Identify and measure risks, monitor them effectively, and take appropriate measures to respond to them. Currently, various risks can be controlled within the limits.

Strategy Risk
Risk Item / Scenario	Risk Countermeasure
Market trends in environmental and food safety The government of every country is taking rigorous control of the registration, production, and sales regulations for the crop protection products, and implements various measures based on promotion of soil protection and food safety. If response is not taken, there will be risk in being replaced by the market.	Control Department：All business departments Accelerate the registration of new products and alternatives, and develop self-brand biological control materials and microorganisms products, registration-exempt crop protection products, and controlled-release fertilizer products through industry-government academia collaboration to reduce or ban the use of chemical pesticides and fertilizers. We remain committed to developing innovative plant protection products, including microbial products and safe formulations, and actively promote them in both domestic and international markets to gain a competitive sales advantage at an early stage. Monitor products in inventories, track product quality, and improve and upgrade equipment to minimize the risk of unqualified results of product sampling checks. We continuously enhance the talent training plan to maintain the skill and knowledge level of all R&D and sales personnel, making them experts on crops. Through technology advice for Sinon's agricultural cultivation methods, and various promotion and demonstration events, we provide farmers with complete crop protection solutions
Insufficient human resources in the agriculture industry/changes in technologies Insufficient labor due to the old age of farmers and population loss in rural areas. Agricultural drones are now widely used to replace workforce.	Control Department：All business departments Promote the features and advantages of Sinon's products to save time and labor. Develop dosage forms suitable for agricultural drone and increase the application of agricultural machinery and strengthen promotion. Encourage employees to obtain licenses for operating drones and for pesticide-spraying services. Once certified, they will be qualified to operate and help address spraying issues.
Change in policies and regulations The Ministry of Agriculture's policy of reducing the seasonal crop rice resulted in a decrease in the agricultural acreage. Carbon reduction subsidy for domestic resource compound fertilizer. The Ministry of Agriculture is promoting a policy to reduce the risks associated with chemical pesticides by 50%, prioritizing the phase-out of high-risk pesticides and banning organophosphate pesticides. Unstable electricity supply, frequent instantaneous jumps, and rising electricity prices. Cross-strait tensions may result in changes in the export tax rebate policy.	Control Department：All business departments Development of community crop combination using pesticides/fertilizer and cultivationmanagement. Adding new domestic resource compound fertilizer items. Develop alternative products for chemical pesticides, microorganism protection, organic fertilizer, and other circular economy products. Encourage employees to obtain a plant doctor license to effectively prevent plant pests and diseases under the influence of climate change and strengthen the resilience of Taiwan’s agriculture. Maintain 100% availability rate of emergency generators and continue to promote energy conservation and waste reduction. Increasing the number of suppliers of raw materials and diversification of raw material supply sources.
Decline in customer demand/Product competition Customers postpone or reduce purchases due to high product inventory. The price of raw materials is on the decline, so farmers are buying now and using them instead of stockpiling them. Me Too product competition	Control Department：All business departments Accelerate product development and increase product diversity and differentiation. Adjust selling prices and sales activities in line with market conditions, stock up on short term inventory, and increase inventory turnover. Expand from contract manufacturing to end-product supply, resulting in higher production value.

Operating Risks
Risk Item / Scenario	Risk Countermeasure
Raw material price fluctuations and supply chain risk Prices of raw materials fluctuate due to unstable international developmen. The overproduction in China has created spillover effects, leading to a decline in global prices.	Control Department：Supplu Chain Department The Company establishes a global sourcing platform to integrate the demand for raw materials; searches for substitute raw materials and suppliers to stabilize the source of supply. Through regular production and sales meetings, we review and control the safety stock level, monitor the market changes, and enhance bargaining power for raw materials and products to respond to product production demand flexibly, and effectively control raw materials and finished product inventory targets. Specify raw material compensation measures in OEM contract agreements to reduce volatility risk. Many logistics companies for flexible adjustments in the goods supply for raw materials and products.
Human resources risks Aging population in the society structure and industrial type, the salary is lower than peer industry or relative competitor in the electronics industry. The unfavorable labor-capital relationship will affect stuff turnover and impact our corporate image. Loss of key talent. Emergency medical care and labor health protection under climate change.	Control Department：Management Division, Legal Affairs Office, All business departments Ensure that the management and operations of human resources comply with international human rights standards and the requirements of local laws and regulations where our operations are located. Maintain smooth labor-capital communication channels and improve labor-capital harmony. Increase automation in production to raise the production efficiency. Provide stable salary and welfare measures and career development plans for the benefit of talent retention and recruitment. Participate in campus recruiting events, organize corporate internships for students, and keep close contact with universities and colleges in Central Taiwan to secure talents from the source. Enhance the supervision and inspection of high-temperature operations and the promotion of hazard prevention.
Environmental protection and occupational safety and health risks Occurrence of emergency disaster events (fire hazard, explosion, chemical substances leakage, raw materials tank leakage) will create danger to the internal and external environment and personnel of the factory. Industrial waste results in harm to the environment, surrounding residents of the factory area, and employees. Inappropriate operating procedures and insufficient control that result in harming the safety and health of personnel or financial losses of the Company. Limited wastewater treatment capacity and limited production capacity.	Control Department：Construction & HSE Management Division Contingency plans The Company formulates various contingency plans that clearly defined the person in charge and the division of responsibilities. We also conduct regular disaster drills every year to reduce the impact of disasters. We are a member of the "Taiwan Responsible Care Association", and we regularly conduct blind drills or fire drills every year, and we have signed a nationwide joint prevention organization to help each other improve the contingency capabilities. Purchase property insurance, marine insurance, and employer’s liability insurance to mitigate the risk of loss to business assets caused by major natural or non-natural disasters. Purchase public liability insurance and toxic chemical operator’s liability insurance to reduce the risk of physical injury or property damage to third parties caused by operations or products. Environmental protection and workplace safety The executive leads an Occupational Safety and Health Committee and SNPM Promotion Committee to hold the audit findings improvement and energy saving and waste reduction meeting weekly to review the effectiveness of the management mechanism and the response to special situations. Implement the ISO 14001 Environmental Management System and ISO 45001 Occupational Safety and Health Management System, combine with SNPM activities (Sinon-Productive-Management), and urge the corporations to implement various energy conservation, carbon reduction, waste reduction, and hazard prevention measures to reduce the occurrence of disasters. We interact with domestic and foreign companies, large factories, and government agencies to improve environmental safety and health technology and equipment. Organize professional and general knowledge educational training, improve employees' environmental safety and health awareness, ensure the professional qualification of operating operation and hygiene certificates, and create a healthy workplace. Organize different health improvement activities, sports facilities, event subsidies, and care for employees' healthy diet. Develop new production processes for waste reduction and recycling.

Financial Risks
Risk Item / Scenario	Risk Countermeasure
Exchange rate risk Interest rate policies of major global central banks lead to changes in borrowing costs and fluctuations in exchange rates. Political and economic conditions and interest rate policies in various countries cause fluctuations in currency exchange rates.	Control Department：Management Division The Finance Department sets risk tolerance levels and a risk warning system based on the risk management policy, and selects appropriate tools for hedging. Adjust the structure of held currencies and apply natural hedging strategies to mitigate the impact of interest and exchange rate fluctuations, ensuring financial and profit stability. Adjust product structure, sales strategy, and optimize inventory.
Liquidty risk The risk of the inability to obtain funds at reasonable prices or terms in the short term. The risk of the inability to settle liabilities at appropriate prices or terms.	Control Department：Management Division Establish stable cash reserves and maintain diverse financing channels. Strengthen asset management and cash flow prediction, optimize capital structure, etc., to effectively respond to risks and ensure stable business operations.

Information Risks
Risk Item / Scenario	Risk Countermeasure
Information security risk Improper information security structure design or insufficient control of the system, equipment, network, privacy management mechanism leading to higher possibility of intrusion of the information system facing risks in operation interruptions and on. The use of AI tools may lead to the leakage of confidential information.	Control Department：Management Division The Company has implemented the ISO 27001 Information Security Management System to integrate and strengthen information security mechanisms. We conduct information security trainings and drills, to enhance information security awareness and contingency capability. Set up dedicated chief and dedicated personnel for information safety to assume responsibility for information safety and protection affairs. Implement strict access controls to protect personal data in all information systems. Enhance employee awareness of AI tools to prevent them from leaking sensitive corporate information.

Legal Compliance and Ethical Risks
Risk Item / Scenario	Risk Countermeasure
Social, economic, and legal compliance Operation risks arise due to non-compliance to related laws and regulations (labor laws, Company Act, Securities Exchange Act, anti corruption, environmental laws and so on) by the corporation or employees.	Control Department：Management Division, Legal Affairs Office We formulate internal rules to specify operational regulations, conduct internal control, and establish a whistle blowing mechanism to ensure that operations and employees comply with laws and regulations. We keep up to date with legal changes. We assign staff from time to time to participate in advocating meetings and courses held by government agencies and conduct educational training and regulatory identification to ensure compliance with legal requirements. All business departments of the Group shall have legal compliance personnel in place. Such personnel shall be responsible for the control and implementation of legal compliance in all departments. Promotional measures to reinforce ethical corporate management and intellectual property rights (educational training and the execution of compliance commitment).

Other Risks
Risk Item / Scenario	Risk Countermeasure
Climate Change risk The initiatives of net-zero carbon emission in different countries restrict the carbon dioxide emission volumes of enterprises, which impacts the supply of raw materials, increases the operating costs of enterprises, and affects the Company's production capacity. Various countries are discussing the carbon tax/carbon fee systems, giving rise to the operating costs of enterprises. Policies of various countries call for a reduction in using chemical fertilizers (judicious use of fertilizers). GHG inventory and verification requirements to enterprises. Extreme weather and climate events (high temperatures, droughts, floods, and storms) resulted in an increase in crop production variables and a reduction in crop cultivation, affecting our product demand. The occurrence of climate events will also impact the supply of raw materials and affect our production stability.	Control Department：Sustainability Committee, All business departments Operating management Reinforce production, procedures, operating models, supply chain, and decision-making operating management to make real-time responses to effects derived from climate change. Establish the GHG inventory and verification plan of the Group to accelerate talent cultivation for the establishment of corporate carbon inventory capacity. Corporations have gradually introduced the ISO 14064-1 greenhouse gas inventory guidance and third-party verification and established a carbon inventory system and carbon emission compliance management mechanism. Establish carbon emission volume of products. Circular economy and carbon dioxide emission management Keep abreast of domestic and foreign carbon dioxide laws and regulations to immediately respond to and adjust our operating strategies. Establish production energy consumption standards and conduct energy consumption optimization operations. Establish water-saving objectives to mitigate impacts of water resources in the future through measurement, reduction, and recycling for reuse (rainwater recycling and wastewater recycling). Plan for the addition of optoelectronics equipment for self-generated and self-use solar power to improve the utilization rate of renewable energy. Establish energy-saving objectives and implement energy-saving plans (equipment efficiency improvement, repeated use of energy, and waste heat recycling) to improve the use efficiency of energy. Establish waste reduction objectives and implement waste reduction plans (source reduction, waste reduction, and recycling and reuse of raw materials, scraps, or wastes) to reduce the output of waste and the carbon dioxide emissions arising from processing wastes Product R&D and technological upgrades Reinforce product portfolio and actively develop adverse circumstance management products to respond to the adverse circumstances for growth. Develop eco-friendly products, such as organic fertilizers, compound fertilize, biological pesticides, and other products. Develop new planting areas and develop innovative plant protection technologies. Develop light and biodegradable green packaging material products.