Risk Management

Procedures and Policies of Risk Management

For the purpose of stable operations and sustainable development at CSC, the Board of Directors approved the establishment of the "Risk Management Policy and Procedures" as the highest guiding principle for risk management. In accordance with the risk management policy and procedures, business units should identify, evaluate, and formulate response strategies or measures for risk factors. The Risk Management Team regularly compiles risk assessment forms and reports, presenting information to the Corporate Governance and Sustainability Committee/Board of Directors semi-annually and annually, to effectively manage related risks.

    Risk Appetite Statement

  • Risk management mechanism should be established to keep risks within a tolerable range, aiming to reasonably balance between risk and reward.
  • Risk management culture should be constructed and comprehensively practiced by all employees to enhance risk awareness and implement risk management.
  • It is necessary to comply with legal regulations to avoid compliance risks. The directors, managers, employees, appointees, and actual controllers of the company should adhere to, but are not limited to, the regulations related to listed companies and other laws concerning commercial conduct when carrying out business operations.
  • Business activities that present higher risk of unethical behavior within the business scope should be analyzed, and relevant preventive measures should be strengthened to create an environment for sustainable operation.

In 2025, China Steel Corporation (CSC) conducted risk identification across various categories, including operational risk, financial risk, information security risk, environmental risk, and compliance risk—covering economic, social, and environmental dimensions. A total of 42 risks were identified. These were then categorized into five risk levels to determine the prioritization of risk management strategies.

Based on the evaluation, risks classified as high or above include:

  • Demand reduction or disappearance due to protectionist measures such as tariff policies and export restrictions
  • Greenhouse gas emission restrictions or increased emission-related costs

Medium risks include a total of nine items such as major occupational accidents, energy usage restrictions or shortages, high stock levels of hot-rolled flat steel billets, rising regional terrorism and armed threats, deterioration of corporate labor structure, reduced demand caused by rapid currency appreciation…etc. A total of 31 risks were classified as low or below.

In addition, CSC incorporates the results of its annual materiality assessment into its risk management framework and processes. Relevant departments are tasked with identifying risk events associated with each material topic and proposing mitigation measures. As a result, these risks remain within the company's controllable range.

Material Topic Risk Identification Mitigating actions
Climate Change Restrictions on greenhouse gas emissions or rising emission costs
  • China Steel Corporation (CSC) established the “Task Force on Energy Saving & Carbon Reduction and Carbon Neutrality” to set short-, medium-, and long-term carbon reduction goals. With the long-term goal of achieving carbon neutrality by 2050, CSC has preliminarily formulated a number of strategies and mapped its pathways towards carbon neutrality. In the short-term, CSC has mainly planned to increase the use of renewable energy and step up efforts to improve energy efficiency, actively promoting energy conservation and carbon reduction action plans to lower carbon fees by reducing carbon emissions.
  • Taiwan's carbon fee system is introduced in 2025. CSC will propose a self-determined reduction plan in accordance with Carbon Fee Regulations, striving to qualify for preferential rates to lower carbon fees, and to mitigate the impact of the carbon fee on CSC.
Energy Efficiency Energy usage limitations or energy scarcity
  • CSC will implement a range of resilience enhancement measures to improve the robustness and reliability of its power and energy systems, in order to mitigate the impact and severity of power curtailments or outages.
  • CSC is continuously improving its equipment and has developed a replacement and renewal plan, with completion and trial operation targeted for 2026. These efforts aim to enhance operational efficiency and system stability.
  • By implementing routine maintenance and closely monitoring equipment conditions, CSC ensures the stable supply of utilities, including water, electricity, oil, and gas.
  • Establish annual maintenance schedules for equipment and strengthen preventive maintenance operations.
  • Regular emergency response drills are conducted to strengthen preparedness and ensure effective crisis management.
Significant Risk Events Demand may slow down or disappear due to tariff policies and export restrictions driven by protectionism
  • Increase sales to automotive clients to diversify market risks.
  • Monitor changes in international geopolitical risks and continue relocating orders from high-risk regions to other areas.
  • Leverage the geographical and trade advantages of overseas production bases as the alternatives of the parent company.
  • Continue exploring sales opportunities in emerging markets to secure stable shipping and reduce maritime freight costs.
Operational and Financial Performance Economic recession and instability in capital and foreign exchange markets
  • CSC continuously evaluates the feasibility of issuing corporate bonds in light of market conditions, with the aim of increasing fixed-rate debt holdings and mitigating interest rate fluctuation risks.
  • CSC implements hedging strategies for foreign currency exposures related to equipment purchases or engineering projects with significant payment amounts and extended payment schedules.
Air Quality Tightening regulations on environmental pollutant emissions
  • Strengthen plant inspections and enhance CCTV surveillance.
  • Holds monthly review meetings to address non-conformities.
  • Conduct regular and ad-hoc audits of industrial waste storage, disposal practices, and reporting records within the facility.
Occupational Safety and Health Major occupational accidents
  • Enhance employees' occupational safety awareness and competence through training programs.
  • Conduct safety walkthroughs by senior management to reinforce commitment and ensure implementation.
  • Implement review mechanisms to ensure the continued effectiveness of corrective and improvement measures.
Employee Remuneration and Welfare Workforce and talent constraints in the sector
  • CSC provides competitive talent retention measures, continually pays attention to the reasonableness of employee remuneration development, plans annual salary adjustments, and provides an employee stock ownership trust (ESOT). Within the scope of available resources, CSC provided appropriate welfare measures for employees. A satisfaction survey on welfare facilities and services is conducted at the end of each year to continuously improve and enhance various welfare-related services.
Research Innovation Growing demand for sustainable products and services
  • In response to the demand for green steel materials, CSC continues to develop recycled content (RC) materials. By increasing the use of scrap steel in its production processes, the Company aims to reduce carbon emissions and fulfill the low-carbon product expectations of downstream customers in industries such as computers and home appliances.

Implementation of Risk Management Culture

Item Description
Training on Organizational Risk Management Principles Risk management education for all non-executive directors We organize regular risk management education for all non-executive directors to enhance their professional capabilities in identifying and assessing various types of risks, thereby facilitating the integration of risk awareness into the decision-making process. 19th Board members completed risk management training as part of their continuing education (details here).
Senior executives Executive Management Training Program for CSC group's senior executives is held on a regular basis, covering topics such as corporate sustainability and risk management.
All employees
  • In 2024, CSC provided risk-related courses that covered topics such as occupational safety and health, cybersecurity, internal audit, risk management, intellectual property management, internal control, and corporate sustainability, with a total participation of 47,827 employees, accumulating a total of 108,556 hours of training.
  • The Risk Management Policy and Procedure of CSC is available on the company internal website for all employees to examine and adhere to the established standards for risk analysis, as well as the policies and procedures related to risk management.
  • CSC occasionally organizes seminars related to risk management, covering topics such as intellectual property management and corporate sustainability, to enhance employees' awareness of risk management and risk-handling skills.
  • Annual online cybersecurity training is conducted, complemented by monthly cybersecurity announcements. All employees are given to online cybersecurity courses aimed at enhancing cybersecurity awareness and safeguarding the company's overall security posture. Security and defense meetings are held quarterly for risk managers and related roles to exchange the latest information on cybersecurity measures and to assess response strategies and prevention techniques through case studies.
Product Development Risk Management
  • CSC has proactively strengthened its product development risk management by obtaining IATF 16949 certification and adopting industry-standard risk management tools such as DFMEA and PFMEA. These methodologies enable systematic control of risks throughout the design and manufacturing processes, ensuring that products consistently meet expected performance, quality, and regulatory requirements.
  • Specifically, DFMEA and PFMEA are utilized to identify and mitigate risks related to non-compliance with regulatory safety standards, failure to meet customer specifications, defects affecting product reliability and durability, and potential issues associated with product handling, packaging, and transportation. For risks assessed as high, targeted risk mitigation actions are mandated.
  • To enhance the effectiveness of implementation, CSC provides professional training on the AIAG & VDA FMEA methodologies to personnel from relevant departments, thereby reinforcing internal competency and promoting a culture of proactive risk management. These initiatives directly support CSC's commitment to delivering high-quality, compliant products and maintaining customer trust.
Hazardous Substance Risk Management
  • CSC has established a comprehensive Hazardous Substance Process Management (HSPM) system in accordance with IECQ HSPM QC 080000 standards, systematically addressing environmental and human health risks associated with hazardous substances. Recognizing the significant ecological and health impacts of restricted substances—such as heavy metals, persistent organic pollutants, and carcinogens—CSC implements stringent control measures from raw material procurement through product development and design phases.
  • In compliance with international environmental regulations and customer-specific requirements (including EU RoHS and REACH-SVHCs), all products undergo third-party testing based on ISO/IEC 17025 and ISO/IEC 62321 standards. Only products that achieve full compliance and receive certified inspection reports are released, ensuring regulatory adherence and high customer satisfaction.
  • Moreover, CSC's HSPM policy integrates a Product Life Cycle (PLC) management approach, reinforcing hazardous substance-free (HSF) controls across procurement, design and development, production, and external provider management. Through these efforts, CSC actively contributes to environmental sustainability, fulfilling its corporate social responsibility and supporting the goal of sustainable living and ecosystem protection.
Financial incentives which incorporate risk management metrics

At CSC, financial incentive systems incorporating risk management indicators across multiple domains, including employee occupational safety and health performance, individual morality and ethics, cybersecurity, climate change transition, and overall workplace safety are being actively implemented to promote a culture of risk management incentives.

Individual risk management incentives:

Incentive measures are allocated to individuals based on evaluation criteria related to occupational safety and health performance (for all employees, including those in management positions, the weight varies from 9% to 11%, depending on their positions), as well as morality and ethics (for professional positions and below, the weight ranges from 10% to 11%, depending on their positions)

Executive committee members’ incentive:

In addition to function-related criteria, the performance evaluation metrics for executive committee members encompass risk objectives, such as cybersecurity risk, occupational safety risk, and climate change transition risk. This alignment ensures that the compensation for executive committee members corresponds with the company's operational performance and future risk management strategies.

Non-disabling Reward:

If the company can reach 5 million man hours without disabling events, employees will be rewarded. The bonus raises as the non-disabling man hour accumulates. This encourages employees to value more about workplace safety.

Rewards (such as commendations, merits, bonuses, or salary increases):

Rewards are given to individuals who effectively identify, address, and eliminate significant risks, accidents, or changes in a timely manner. These rewards are designed to encourage employees to actively respond to and manage risks, ensuring that potential threats are minimized and their impacts on the organization are reduced.