Risk Management

Risk Management Policy

In response to changes in the Company's development strategy, TCC approved the amendment to its Risk Management Policy at the Board meeting on May 14, 2024, incorporating biodiversity as a key area of risk identification to prevent and mitigate the impact of operations on nature and biodiversity.

Risk Management Policy

Organization Structure

The Risk Management Committee was established directly under the Board of Directors in May 2020. In 2021, the committee was re-elected, with the addition of a member with a legal background. It currently consists of three members, all independent directors with expertise in risk management, two of whom are women.

Risk Management Process

TCC refers to the World Economic Forum's (WEF) 2023-2024 Global Risk Report, cement and energy industry risk reports, and international trends to identify risks across seven dimensions, including product and service development. Based on the risk identification results, each department develops corresponding response strategies.
The Risk Management Committee reports to the Board of Directors on risk control at least once a year.

Operational Status

Two meetings were held in 2021 (on August 10 and November 8), with 100% committee member attendance.
Reported on the annual updates to TCC's risk identification matrix, results of the Task Force on Climate-related Financial Disclosures (TCFD) project, and content related to the ISO 37001 Anti-Bribery Management System implementation.
The third meeting of the second term was convened in 2022 (on August 5)
Reported on updates to TCC's risk identification matrix, outlined the impacts on operations and mitigation strategies in response to war, geopolitical issues, the energy transition, and demographic shifts.
The fourth and fifth meetings of the second term were convened in 2023 (on March 24 and November 10)
Reported on updates to TCC 's risk identification matrix, climate-related performance indicators and targets, and the potential impact of Taiwan's carbon fee collection in 2024 and payment in 2025.
Each year, TCC requires all employees to read the Risk Management Policy and complete a related assessment. With an estimated reading and assessment time of three minutes per person, a total of 15,684 employees participated in risk management education and training in 2023, accumulating 784.2 hours in total.

TCC's 2024 Risk Matrix

Cement Industry Development Risk in Mainland China

Exchange Rate, Interest Rate, and Financing Risks

Carbon Fees / Carbon Taxes / Carbon Trading

Natural Disasters - Earthquakes

Internationalization Strategy

Information Technology Security Risks

War and Geopolitical Conflicts

Compliance and Litigation Risks

Talent Recruitment and Succession (Including Salary and Incentives)

Climate Change - Natural Disasters (Typhoons, Floods, Droughts, Wildfires)

Rising Prices for Raw Materials (Fuel) and Substitutes

Biodiversity

Risks Faced by TCC	Risk Factor Description	Mitigation Actions
Cement Industry Development Risks in Mainland China	Due to real estate regulation in Mainland China and the gradual saturation of infrastructure development, cement demand has declined.	The China Cement Association has intensified peak-shifting operations and implementing production reduction measures Monitor the recovery of economic activities and market demand in various regions Closely observe carbon reduction policies in various regions and accelerate carbon reduction to align with industry policies Invest in European, Asian, and African low-carbon cement markets to reduce dependence on the Mainland Chinese market and stabilize cement business EBITDA Evaluate and modify certain under-performing plants in Mainland China
Carbon fees/ Carbon Trading	Carbon fees, carbon trading, carbon taxes, or carbon fee collection implemented due to restrictions on total greenhouse gas emissions causing increased costs The introduction of carbon trading or carbon fee collection under new regulations will lead to higher costs, which will inevitably be reflected in selling prices. However, if these costs cannot be fully passed on, there is a risk of declining profits Without the establishment of carbon border taxes, imported goods are not subject to carbon costs, creating unfair competition and posing risks to business operations	TCC implements multiple measures dedicated to reducing greenhouse gas carbon emissions: Greenhouse gas Scopes 1, 2, and 3 Planning to set Science-Based Targets for carbon reduction following the 1.5°C pathway Establishing a sustainable business coordination unit Building an ESG data management system Promoting internal carbon pricing management and internal carbon trading mechanisms Greenhouse gas Scopes 1 and 2 Promoting seven major carbon reduction strategies (including: alternative raw materials, alternative fuels, process improvements, waste heat power generation, renewable energy installation, energy storage, battery and charging services, negative carbon technologies: carbon capture and carbon sinks) Greenhouse gas Scopes 1 and 3 Introducing EV electric mining trucks and low-carbon vehicles Initiating supplier carbon emission data collection and guidance

Risks Faced by TCC

Risk Factor Description

Mitigation Actions

Cement Industry Development Risks in Mainland China

Due to real estate regulation in Mainland China and the gradual saturation of infrastructure development, cement demand has declined.

The China Cement Association has intensified peak-shifting operations and implementing production reduction measures
Monitor the recovery of economic activities and market demand in various regions
Closely observe carbon reduction policies in various regions and accelerate carbon reduction to align with industry policies
Invest in European, Asian, and African low-carbon cement markets to reduce dependence on the Mainland Chinese market and stabilize cement business EBITDA
Evaluate and modify certain under-performing plants in Mainland China

Carbon fees/ Carbon Trading

Carbon fees, carbon trading, carbon taxes, or carbon fee collection implemented due to restrictions on total greenhouse gas emissions causing increased costs
The introduction of carbon trading or carbon fee collection under new regulations will lead to higher costs, which will inevitably be reflected in selling prices. However, if these costs cannot be fully passed on, there is a risk of declining profits
Without the establishment of carbon border taxes, imported goods are not subject to carbon costs, creating unfair competition and posing risks to business operations

TCC implements multiple measures dedicated to reducing greenhouse gas carbon emissions:

Greenhouse gas Scopes 1, 2, and 3
1. Planning to set Science-Based Targets for carbon reduction following the 1.5°C pathway
2. Establishing a sustainable business coordination unit
3. Building an ESG data management system
4. Promoting internal carbon pricing management and internal carbon trading mechanisms
Greenhouse gas Scopes 1 and 2
1. Promoting seven major carbon reduction strategies (including: alternative raw materials, alternative fuels, process improvements, waste heat power generation, renewable energy installation, energy storage, battery and charging services, negative carbon technologies: carbon capture and carbon sinks)
Greenhouse gas Scopes 1 and 3
1. Introducing EV electric mining trucks and low-carbon vehicles
2. Initiating supplier carbon emission data collection and guidance

Climate Change Transition and Emerging Risks

Climate risks

Item	time	Impact
Carbon emissions cap-and-trade/ carbon fee/ carbon tax	Increase in operational costs, decline in profitability, and creation of operational risks	Low-carbon circular production Smart new energy business
Renewable energy regulations and procurement	Government penalty risk	Low-carbon circular production Smart new energy business
Low-carbon technology, equipment, and management cost investment	Increase in capital expenditure leading to disadvantages in market competition	Low-carbon circular production Leading the industry in low-carbon construction materials Low-carbon supply chain
Increase in raw material and energy prices	Creation of operational pressure
Impact on Company Reputation	Mitigating unfavorable stakeholder views of TCC	Low-carbon circular production Leading the industry in low-carbon construction materials Smart new energy business Low carbon and negative carbon technology innovation
Affecting the level of support from financial institutions in investment, financing, and insurance	Affecting investment willingness and generating operational risks
Drought (Production)	Increase in operational costs and impact on operational activities	Climate disaster adaptation
Flood (Production)	Government penalty risk
Changes in precipitation patterns and extreme changes in climate patterns (Transportation)	Increase in operational costs, decline in profitability, and creation of operational risks
Drought (Production)	Increase in operational costs and impact on operational activities	Low carbon and negative carbon technology innovation
Carbon Capture and Storage (CCS) advanced technology breakthrough	Increase in operational costs	Low carbon and negative carbon technology innovation

Emerging risks

Item	Time	Item
War and geopolitical conflicts \| geopolitical issues	The South China Sea holds an important strategic position. In the event of a geopolitical conflict, it could significantly disrupt Taiwan's energy supply, thereby affecting TCC's ability to secure energy resources. In addition, the South China Sea conflict will affect the import of low-alkali sand, a key raw material for Taiwan's cement plants, impacting the stable supply of low-alkali sand.	Seek a second source of low-alkali sand to mitigate the impact of raw material shortages Plan alternative shipping routes to reduce the impact of South China Sea conflicts on transportation
Talent recruitment and succession \| Society	An imbalance between labor supply and demand may make it challenging for companies to recruit suitable personnel to handle future unpredictability. As demand for transformation and talent in new fields rises, companies need to enhance external talent recruitment and adjust internal functions, thereby increase overall personnel costs	Expand international bases to recruit talent from around the world Continue to optimize salary structure to increase market competitiveness Strengthen campus recruitment to secure top talent early on. Strengthen retention measures, including talent development, employee benefits, and incentive reward systems. Recruit experienced professional to facilitate knowledge transfer.