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Risk and Intellectual Property Management

Risk
Management
Risk management
CGPC identifies relevant risks that may affect the Company's sustainable development from its daily operations and formulates relevant management strategies and countermeasures to reduce the possible risks of operational disruption. At present, specific matters or significant risks are identified, evaluated, and screened by each implementation and responsible unit, and relevant plans for corresponding measures are prepared. The Audit Office conducts supervision and follow-up to achieve continuous improvement and PDCA cycle to reinforce risk management practices.
Risk Management Policies and Procedures.
In order to establish sound risk management within the company, our board of directors ensures effective evaluation and oversight of various existing or potential risks. In December 2020, the board approved the "Risk Management Policies and Procedures." The General Manager's Office provides an annual report to the board on the company's risk management operations, allowing the directors to have a comprehensive understanding of the risks faced by the company. This enables them to provide more specific recommendations regarding the company's operating strategies in a timely manner.
Environmental
  • Description of Risks
  • Response Measures
  • Climate Change and Environmental Risks
  • • USI Group has set the 2030 carbon reduction goals of "27% reduction in carbon emissions in 2030 compared to 2017" and "carbon neutrality by 2050" as long-term corporate goals. As of the end of 2023, the cumulative grid-connected capacity of CGPC Main Plant has reached 2.1MW.
    • The Group promotes the goal of "zero grams of leakage", safety and environmental audit plans, formulating plant visits for energy conservation and carbon reduction, and continuously monitoring changes in relevant policies and regulations, as well as publicizing energy conservation and carbon reduction policies, providing self-test information, and introducing the ISO 50001 energy management system, obtaining certificates, and regularly tracking the implementation progress.
    • Passed management system certifications for greenhouse gases, product carbon footprints, water resources management, and organizational water footprint. We have verified our greenhouse gas emissions and uploaded them to the national greenhouse gas registration platform of the Ministry of Environment, Executive Yuan.
    • In 2023, the Company joined the supply chain to participate in the two environmental themes of "Climate Change" and "Water Security" from the Carbon Disclosure Project (CDP) and received a B- and B respectively.
    • In 2023, we established the Climate-related Financial Disclosure (TCFD) Adjustment Management Group at the CGPC Main Plant, which analyzes potential impacts and impacts of climate change, identifies possible risks and opportunities, conducts financial impact analysis, and plans response measures for climate change.
Social
  • Description of Risks
  • Response Measures
  • Human Resources Risk
  • •
    Talent selection:
    Search for talents suitable for vacancies using the talent bank and social media website and establish industry-academia collaborations with well-known universities in Taiwan.
    •
    Talent development:
    Establish training maps, development plans, new employee training, management function training, professional function training, common general education courses, language courses, and actively remodel and reengineer employee skills. An annual promotion reporting system has been established.
    •
    Talent management:
    Streamline the management personnel reserve and reporting process and enhance execution efficiency. Strengthen talent identification and training planning, and concretely implement successor training.
    •
    Prevention of talent loss risk:
    We continue to maintain good communication with the labor union and establish a competitive remuneration system. In addition to setting reasonable and competitive remuneration levels, we also pay employees based on local laws, industry practices, and the subsidiaries' overall operational performance.
  • Occupational Safety Risks
  • • The Group holds the annual technical case study presentation meeting of the group's factories and the semi-annual meeting on the resource integration of the northern plant to encourage each plant to accumulate 1,000 safety days with an excellent performance trophy and public praise to reduce the occupational safety hazard factor. Resource integration meeting of CGPC Main Plant: Held on April 21, 2023 and October 18, 2023.
    • The Group implements the annual safety and environmental protection audit plan, organizes annual safety and environmental protection training, and audits the compliance of industrial safety and health, environmental protection, and fire safety regulations in each plant.
    • Strengthen the safety management of contractors and establish the “USI Group's Contractor Penalty Reference Standard for Violation of Important Industrial Safety Regulations”.
    • We promote the CCPS "Process Safety Beacon" e-newsletter at the beginning of each month and the process safety column of the Petrochemical Industry Magazine in the middle of each month, so as to continuously promote and instill process safety knowledge among the personnel of all plants.
    • The training has been introduced into the USA with the golden rules of industrial safety (preserving life) for the petrochemical industry. The training is divided into the southern zone and the northern zone. The northern session is to be held on 8/17 at the CGPC Main Plant.
    • In February 2023, we entrusted the international organization BSI to train 10 PSM internal auditors and strengthen the auditors' capabilities through cross-plant (Group friend plant) mutual audits to further improve the PSM process safety management system.
    • In September 2023, the Company signed a letter of intent with Toufen City Health Center to promote the correct concept of oral health care, implement oral cancer prevention, and promote a healthy workplace culture.
    • In 2023, Kaohsiung University of Science and Technology assisted in the development of the "Computerized Maintenance Management System (CMMS)" to calculate the Mean Time Between Failures (MTBF) and Mean Time To Repair (MTTR). This in turn increases equipment reliability and reduces occupational safety and health risks from equipment failures.
    • In 2023, the Company made improvements to the noise caused by the high noise during the pulverizing process of PVC plastic pipes in the plant. The noise in the area was reduced from 95.3 dBA before the improvement to 81.1 dBA.
    • In 2023, the AOI intelligent sensing safety system for forklifts was introduced. It has been installed on 6 forklifts, and the trial operation is in good condition. We will continue to expand to the whole plant in the future.
    • In 2023, we invited the supply chain to respond to the "Self-Evaluation Scale for Corporate Sustainability Occupational Health and Safety Performance Table" of the Occupational Safety and Health Administration, MOL, to conduct a self-evaluation on the achievement status. Subsequently, the evaluation and analysis results were used as reference for improvements to the supply chain occupational health and safety weaknesses.
Governance
  • Description of Risks
  • Response Measures
  • Production, Marketing, and Operational Risks
  • • We adopt a vertically integrated strategy from materials procurement, production, and sales, and regularly review raw material and finished product inventories.
    • Production and sales scheduling: Flexible adjustment of production plans and response to market changes by reviewing inventory changes on a rolling basis, stabilizing product interest spreads, and preventing devaluation losses.
    • To comply with the circular economy and the development of environmentally friendly products, we developed non-PVC plastics and other processed products, and obtained the international GRS certification to facilitate the promotion of environmentally friendly product areas.
  • Financial Risk
  • •
    Interest rate fluctuation:
    Central banks around the world have raised interest rates to curb inflation. During the rising interest rates, short-, medium-, and long-term capital needs are adjusted accordingly. The loan limit is increased and the proportion of short-term, medium-term, and long-term loans is adjusted accordingly while monitoring the market trends and changes in order to reduce the risk arising from interest rate fluctuations.
    •
    Exchange rate fluctuation:
    The US Federal Reserve hiked interest rates significantly to combat inflation, resulting in extreme volatility in the international foreign exchange market. In principle, the Company adopts a 100% hedging of the net position during foreign exchange operations. However, when the exchange rate market is clearly favorable to the company, the hedging ratio is appropriately adjusted within the risk scope.
    •
    Property Insurance:
    we mitigate risks by obtaining various property insurance policies, effectively transferring the risk to insurance companies. For example: fire insurance, business interruption insurance, cargo transportation insurance.
    •
    Endorsement guarantee:
    implemented in accordance with the “Procedures for Making Endorsements and Guarantees”.
    •
    Accounts receivable risk:
    actively care about customers' business conditions or analyze customers' financial reports.
    (1)
    Domestic customers:
    add substantial guarantees and qualified joint guarantors.
    (2)
    Export customers:
    increase the amount of credit insurance and increase the letters of credit insurance for certain countries.
  • Disaster Risk
  • •
    Intensive drill:
    On August 24, 2023, 30 seed personnel were dispatched to the "Petrochemical Disaster Rescue Training Course (Actual Fire Training)" at the Training Center of the Fire Department of the Ministry of the Interior. In September of the same year, the security inspectors who passed the training were selected to carry out the structure and equipment maintenance, self-inspection, and safety management of public dangerous goods places.
    • Continue to create and update the H-CARD for public dangerous goods to facilitate the provision of disaster relief information.
    • In response to the explosion accident at the Pingtung Plant of Ming Yang International, a total of 3 organic peroxide (catalyst) locations in the plant were inventoried in September 2023. The storage and use are in compliance with the laws and regulations of the existing locations.
    • In June 2023, we began to promote the establishment of a chemical cloud in the plant to facilitate the subsequent systematization of chemical information, providing the plant chemical type, quantity, location, layout, location plan, and necessary rescue information.
  • Technology and Information Security Risk
  • •
    Audits and verifications:
    The Company has passed ISO 27001 certification for 9 consecutive years this year. Through external audits, social engineering drills, and information security education, training, and tests are conducted every six months to strengthen the information security awareness of employees. The Company also conducts information environment and information security health checks and the Group's Internal Audit Department conducts 2 information security audits every year. Continue to create and update the H-CARD for public dangerous goods to facilitate the provision of disaster relief information.
    •
    Security management:
    Two sets of endpoint detection and response software with important heterogenous information assets and a three-stage defense system (before, during, and after the event) are deployed to manage information security, and to perform the recycling, inventory, and scan of the Group's USB external storage devices and anti-virus health checks.
    • Establish an information security responsible unit, responsible manager, and personnel to be responsible for planning, monitoring, and executing information security management operations and supervise them.
    •
    Introduction of artificial intelligence (AI):
    Moving toward the goal of smart factories. Project: Manufacturing process (drying process) optimization, manufacturing process safety and supervision, electric plate AOI thermal image identification, fully automatic 3D storage system, pipe production line automatic detection and adjustment, safety identification for PVC resin packaging machines, intelligent sensing safety system for forklifts.
  • Others
  • •
    R&D risk:
    Incorporate carbon emissions into product development, define circular economy, clean processes, green energy, and other aspects for product development, and meet regularly to review the competitiveness of product development.
    •
    Legal risk - dispute resolution:
    In 2023, the Company provided legal advice and assistance for the air pollution incident at the Toufen Main Plant and the issue of idle land at the Zhongshan Plant. On the others, in terms of legal
    compliance risk, transaction risk, and legal compliance awareness and behavior, all have operated normally this year.


Implementation of risk management
Each unit shall analyze the related risks, propose countermeasures, and report the implementation status to the high-level executive. Report to audit committees and the board of directors at least once a year.
  • Year
  • Description
  • 2024
  • For the 2024 risk management operation report, please refer to the abridged version of the proceedings.
    Summary highlights: Key risks faced in 2024 include: oversupply of bulk commodities globally due to China's excess capacity and weak domestic demand, anticipating responses to major countries entering an interest rate cut cycle as inflation eases, countering the slowdown of global economic growth and the accelerated restructuring of supply chains, climate change, fluctuations in energy prices, and risks arising from changes in policies and regulations related to greenhouse gases.
    Upon review of operations, it was found that all risks were identified and assessed in accordance with the risk management process. Except for the fire at Toufen Rigid Film plant, where the plant has re-examined the SOP for calendar power on and off and the safety of kerosene operations, strengthened early warning monitoring of safety facilities, all other risks can be effectively monitored and appropriate response measures taken, and all are within an acceptable range
  • 2023
  • For the 2023 risk management operation report, please refer to the abridged version of the proceedings.
    Summary highlights: The main risks in 2023 include rising global inflation and interest rates that continue to suppress end demand, China's faltering recovery after unblocking, which will lead to slower global economic growth and accelerated supply chain shifts, climate change, energy price fluctuations, and net-zero emissions in 2050, etc. Risks are also increasing day by day. After reviewing the operation status of each risk management unit, they can identify and measure risks according to the risk management process, effectively monitor and take appropriate response measures. Currently, all risks can be controlled within a tolerable range.
  • 2022
  • The report of implementation status of risk management 2022, please refer to proceedings.
    Summary: In 2022, the global economy was overshadowed by a decrease in demand due to a high inflation rate, rising interest rates, the Russia-Ukraine conflict, the COVID-19 pandemic, extremely climate change, the energy crisis, and the transition to net-zero emissions. The risks are currently under control within the acceptable range, and the operating status of each risk management unit has been summarized (as attached).
  • 2021
  • The report of implementation status of risk management 2021, please refer to proceedings.
  • 2020
  • To enhance corporate governance, reduce operational risks, and maintain stable and sustainable operations, the audit committees and board of directors of CGPC approved the Risk Management Policies and Procedures in December 2020.
Cybersecurity risk management
We adopt the 「Risk Management Policies and Procedures」 as the standards for the establishment and development, operation, review and continuous improvement of the overall information security management system.
We also establish information policies and objectives according to our operating activities and risks to carry out information security management and effectively control risks.
Intellectual property rights management plan
To enhance the Company's industrial status and maintain the existing technological achievements, we integrate intellectual property rights with operations objectives and R&D resources. It is expected that the establishment of the Company's intellectual property management system can improve the Company's competitive advantage in the industry and obtain higher benefits through high-value products and services (using the PDCA cycle to construct an intellectual property management system).
Implementation status of intellectual property rights:
To safeguard our valuable advanced technology, we have established an intellectual property management system. We submit an annual report to the audit committee and board of directors to review the system's effectiveness.
  • Year
  • Description
  • 2024
  • For the report on the implementation of intellectual property rights management in 2024 and the R&D plan in 2025, please refer to the abridged version of the proceedings.
    Summary highlights: Management execution status (7 patents, trademark management - 41 total registrations), business secrets management, R&D plan execution status, 2024 product R&D plan progress, 2025 product R&D plan.
  • 2023
  • For the report on the implementation of intellectual property rights management in 2023 and the R&D plan in 2024, please refer to the abridged version of the proceedings.Summary highlights: Management execution status (6 patents, trademark management - 41 total registrations), business secret management, R&D plan execution status, 2023 product R&D plan progress, 2024 product R&D plan.
  • 2022
  • Please see the proceedings for the implementation status of intellectual property management 2022 and the R & D report 2023.
    Summary: Implementation status management (Patent and Business mark), trade secret management, implementation status of R & D project, implementation status of product development plan 2022 and product development plan 2023.
  • 2021
  • Please see the proceedings for the implementation status of intellectual property management 2021 and the R & D report 2022.
  • 2020
  • On November 3, 2020, the "Intellectual Property Management Plan and Annual Implementation Report" was submitted to the board of directors and approved.
    The implementation status of intellectual property management plan 2020 and R & D plan 2021 were also approved by the board of directors.
  • 2019
  • On August 12, 2020, the "Intellectual Property Management Plan“ was submitted to the board of directors and approved. The company, based on its commitment to improving its industry position and protecting its existing technology achievements, submitted the "Intellectual Property Management Plan" to the board of directors on August 12 to implement the company's intellectual property management policy.
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