| Strategy Risks | Changes in Technology and Industry | The advent of 5G is reshaping the global technology landscape and driving cross-industry alliances, leading to significant changes in the competitive dynamics within the industry. | - In response to the rise of the digital economy, Inventec is actively engaged in 5G development, and has set short, medium and long-term business goals and financial targets based on its digital transformation roadmap. By leveraging the collection, application and analysis of big data, combined with IoT and AI technologies, Inventec aims to build high-quality 5G smart factories with streamlined manufacturing processes.
- In addition to actively developing digital IT applications, Inventec has also strengthened its information security management.
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| Corporate Culture | Given the global trend toward sustainability, stakeholders such as governments, investors and customers around the world have increasing expectations for the Company’s sustainability efforts and information disclosure. | - Inventec has set up 6 functional teams and a dedicated sustainability unit under the Sustainability Committee. All employees follow the sustainability strategy and strive to achieve short, medium, and long-term goals progressively to enhance the Company’s competitiveness.
- Through internal management mechanisms and external audit reviews, we rigorously examine relevant objectives and strategies to effectively manage the overall risks of the Company.
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| Operational Risks | Procurement and Sales Concentration | Under the impact of the US-China trade war and geopolitical tensions, the global supply chain is experiencing rapid movement. | - Inventec has been vigorously pursuing global diversification, and relocating its production capacity to different regions. By supplying its products in the vicinity of the customers and effectively managing suppliers, Inventec aims to reduce the risk of over-concentration in both procurement and sales.
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| Expected Benefits of Plant Expansion | To reduce geopolitical risks and enhance the resilience of taking orders, manufacturing plants have adjusted their operational plans to build more flexible production patterns. | - Inventec’s operations span across Taiwan, China,Europe, America, and Southeast Asia. Apart from expanding its existing plants in Mexico and Czech, Inventec is strategically establishing new production bases in Thailand and Vietnam, which is expected to bring in new momentum for the group.
- In tandem with the relocation of production capacity, Inventec continues to monetize existing assets to enhance liquidity and mitigate asset risks.
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| Product Transportation Loss Prevention | Risks associated with logistics, warehousing and transportation of global supply chain. | - Inventec will enhance product packaging, inventory warehousing management, and evaluation of freight forwarders/transportation agents, and purchase logistics insurance.
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| Financial Risks | Interest Rate | The group’s major trading currency is the U.S. dollar. The rapid increase in U.S.dollar interest rates and persistent global inflation pressures have led to a sharp increase in corporate financial costs. | - Inventec cautiously manages its funding and regularly reviews its banking relationship and the borrowing interest rates in various currencies that these banks offer. It helps to reduce the financial costs arising from interest rate hikes and mitigate funding liquidity risks. If interest rates are expected to rise, Inventec will secure loans with longer tenor to lock in fixed borrowing costs. Conversely, if interest rates are expected to drop, Inventec will switch to short-term loans or floating rate loans.
- In consideration of liquidity and safety, Inventec optimizes the combination of funding sources and makes the best use of its financing channels while adopting short-tenor or long-tenor strategy as appropriate.
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| Exchange rate | Due to U.S. interest rate hikes and geopolitical risks, the U.S. dollar remains relatively strong. As a result, hedging costs for the assets denominated in U.S. dollars increase and non-U.S. dollar assets face the risk of depreciation. Meanwhile, speculation on the timing of U.S. interest rate cuts has led to increased market volatility, adding to exchange rate risks and hedging challenges. | - Inventec’s exchange rate policy adopts natural hedging strategy, which requires payments and sales proceeds to be denominated in the same currency when establishing commercial terms. If there is a difference in the maturity of receivables and payables, Inventec will use FX swaps or money market instruments to fill the funding gap.
- For the foreign exchange exposure that cannot be hedged naturally, business units and the finance unit enter into FX forward contracts for hedging every month based on expected maturity dates, foreign exchange trends, and hedging costs.
- To hedge against the exposure of net assets or net liabilities in foreign currencies, Inventec utilizes the hedging instruments to mitigate the impact arising from fluctuations in the foreign exchange market with an aim to offset gains and losses between the two.
- The total amount of hedging transactions is limited to 50% of the revenue in the most recent quarter, with the losses capped at 20% of the total amount of hedging contracts. Hedging transactions are reviewed twice a month and the Audit Center conducts internal control audits on these hedging practices every month.
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| Liquidity Risk | Seasonality impact, the occurrence of significant incidents, and adverse changes in the financial market may cause liquidity issues. | - Inventec maintains an adequate cash position and carefully monitors the risk associated with the receivables from customers. Additionally, Inventec has sufficient credit lines extended by banks. With these liquidity sources, Inventec is able to fulfill all payment obligations.
- Inventec has obtained long-term credit facilities extended by the banking group to ensure that funding sources are secured.
- Inventec mitigates the risk associated with delays in the collection of receivables through various solutions, such as selling off accounts receivables to banks upfront.
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| Inflation | As a result of inflation, operating expenses will surge. Economic growth is expected to slow down or decline in the future, leading to heightened investment risk. | - Inventec proactively monitors market development and effectively controls costs and operating expenses to mitigate the impact on its operations and avoid the phenomenon of “false profit and real loss”.
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| Compliance and Intellectual Property Risks | Changes in Law | Changes in regulations. | - Keep abreast of laws, policies, and litigious and non-litigious practices.
- Uphold privacy rights and trade secrets, and comply with export control laws.
- Organize seminars on legal and intellectual property rights, hold new employee orientation, and provide E-Learning courses to facilitate effective risk management implementation.
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| Litigation Matters | Litigious and non-litigious matters development in the industry. | - Get a handle on the Groups’ litigious and non-litigious matters and take appropriate countermeasures.
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| Intellectual Property Rights | Intellectual Property FTO (Freedom to Operate) | - We attach great importance to intellectual property rights, implement trademark management within the group, and spare no effort in protecting product patents and copyrights to safeguard self-developed intellectual property.
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| Occupational Safety Risks | Hazard Risk Assessment and Identification | Occupational safety and health related hazards | - In accordance with the Taiwan Occupational Safety and Health Management System (TOSHMS) and the International Occupational Safety and Health Management System (ISO 45001), Inventec has established the Administrative Measures for Identification and Risk Assessment of Safety and Health Hazards. Comprehensive hazard identification and risk assessment tasks are performed for various hazard factors. This process evaluates the level of risk associated with relevant hazards through a quantitative method, screening out potential factors that pose a high risk of employee injury or accidents. Subsequently, occupational safety and health goals, targets, and management plans are formulated to implement improvements and preventive measures, serving as the basis for planning the safety and health management system.
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| Emergency Response Implementation | The situation regarding emergent incidents and accidents. | - Firefighting lectures, fire drills, emergency evacuation drills, and fire control routine inspections are conducted on a regular basis. Inventec regularly checks its safety facilities, sets up task forces, and conduct fire drills to practice disaster prevention and relief work.
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| Product Safety Risks | Product and Service Policy | Changes in customer relationship and demands, and environmental regulations. | - Inventec provide customers with a comprehensive and sound customer relationship management mechanism. In addition, in response to the regulatory issues related to environmental protection in various countries around the world, Inventec provides customers with better environmental services through assisting customers in acquiring product green mark certification every year.
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| Supplier Evaluation Management | The impact of suppliers’ product quality, costs, delivery time, technology and services, as well as suppliers’ compliance with environmental and regulatory requirements. | Following relevant policies on sustainable supply chain management, Inventec has implemented supplier risk identification procedures. Based on industry characteristics, procurement patterns, and regions, Inventec conducts supplier risk classification. Suppliers are required to comply with Responsible Business Alliance (RBA) Code of Conduct. Furthermore, Inventec organizes sustainable supply chain seminars as a platform for exchange and communication. 1. In terms of multi-faceted evaluation of suppliers, Inventec not only considers quality, costs, delivery time, technology and services, but also extends the evaluation criteria to include green products and corporate sustainability responsibility. In accordance with the requirements of sustainable supply chain management policy, Inventec has established ISO 9001, ISO 14001, ISO 45001, and RBA management systems.
2. Through multi-faceted evaluation consideration, Inventec ensures that the cooperating suppliers can effectively address key supply chain issues, such as product eco-design, requirements for environmentally friendly manufacturing processes, restrictions on hazardous substances, prohibition of child labor, protection of employee rights and interests, workplace safety, etc. Inventec also conducts supplier RBA audits to ensure compliance and prevent any violations.。
3. Every year, Inventec performs on-site audits on existing suppliers with medium and high risks and request improvements where necessary. Furthermore, our contracts explicitly stipulate legal compliance clauses. In case of violations of relevant laws and regulations that have a significant impact on the environment and society, the contract can be terminated or canceled pursuant to these clauses.
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| Environmental Risks | Climate Change | Transition risks and physical risks may cause operating losses. | - Following the TCFD (Task Force on Climate-related Financial Disclosures) framework for climate change governance, Inventec implements mitigation and adaptation measures. In accordance with climate action practices, we develop risk assessment and identification processes, and keep abreast of the risk elements related to policies and regulations, technology, market dynamics, reputation, and extreme weather events. We also evaluate potential opportunities to identify niches, explore opportunities in new energy, markets, products/services, and resource efficiency, and develop new businesses and services, integrating them into the operational processes of the Company.
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| Management System Certification | Missing out the requirements of key stakeholders and international standards. | - Each plant has set up a dedicated unit responsible for environmental management. Inventec’s environmental sustainability management system considers the needs of stakeholders including government, customers, employees, and the community, and is established based on international ISO/IECQ standards such as ISO 14001 Environmental Management System, IECQ QC 080000 Hazardous Substance Process Management System, ISO 14064-1 Greenhouse Gas Management System, and ISO 50001 Energy Management System. All these operations have been externally verified and validated by independent third-party verification agencies, and Inventec has obtained various system certificates for affirmation.
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| Environmental Protection | The operations have a negative impact on the environment. | - The main focuses are on environmental prevention, treatment, monitoring, certification, activities, and education.
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| Information Security Risks | Information Security Management | Information security protection and contingency measures are not implemented effectively. | - Establishment of information security management organization: The President presides over the information security response team and holds regular information security meetings.
- Formulating information security policies, setting information security objectives, and regularly reviewing the policies and the achievement rate of objectives.
- Implementation of the ISO 27001 Information Security Management framework and planning for the new version transition verification.
- The Board of Directors approves the "Annual Internal Audit Plan", with regular audits conducted annually. The audit results are reported to the Board of Directors.
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| Employee Information Security Awareness | Lack of information security awareness among employees. | - To raise employees' awareness of information security, all employees are required to sign the Code of Conduct with information security clause and complete information security general training.
- Information security professional technology forums are held every quarter, and information security awareness is promoted through bulletins, posters, video walls, and videos.
- Regular social engineering drills are conducted for employees, and for those with a severe lack of information security awareness, corrective action forms are issued, followed by arrangements for information security reinforcement training.
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| Hacker Attack | Information leakage or damage caused by hacker attacks. | - Inventory and identification
1. Implement asset inventory systems and network access management to enhance internal environment visibility and restrict unauthorized devices from accessing.
2. Conduct information security risk assessments to identify, analyze, and evaluate related risks. - Defense in depth
1. Establish an internal deep defense mechanism and carry out information security management systems, employee awareness enhancement, network segmentation, endpoint protection, and physical environment safeguards..
2. Strengthen supply chain information security management through advocacy and inspections. - Real-time Detection
1. Enhance information security monitoring through third-party threat detection.
2. Conduct vulnerability detection and penetration testing, and fix bugs. - Rapid Response
1. Deploy EDR and NDR for immediate response to attack incidents.
2. Conduct regular information security drills to enhance incident response capabilities. - Full recovery
1. Establish recovery procedures to restore damaged network and system services.
2. Conduct regular data backup and restoration drills to meet RPO requirements.
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| The Risks Associated with Emerging Technologies | The development of AI and cloud technologies has created vulnerabilities in information security management. | - Plan to adopt enterprise AI technologies and organize AI information security forums to enhance employees' awareness of using AI tools and prevent the leakage of sensitive corporate information.
- Assess the soundness of cloud security, establish a cloud management organization, formulate cloud usage regulations, complete information security settings and protection, and conduct security monitoring.
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