Risk Management

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Risk Management Structure

SinoPac Holdings has adopted an appropriate set of risk management organizational structure, management standards, control mechanisms, risk management report system, and a sound risk management culture to integrate the management of crucial risks and review and amend management mechanisms or measures when necessary. The Company establishes comprehensive risk regulations and limits to prevent the occurrence of material risk incidents to attain the optimal balance between profitability and risk management. SinoPac Holdings' Risk Management Policy was approved by the Board of Directors in 2009 and the latest amendment was approved by the Board of Directors on December 20, 2019. The Policy includes the development of a risk management environment and culture for each subsidiary as well as integrated management regulations and limits for various risks, the authorization and operating guidelines for each business unit, and the identification, measurement, assessment, and management of risks. The risk management unit or personnel of SinoPac Holdings and its subsidiaries are required to regularly report risk management status and improvement recommendations to the Board of Directors. In the event of material risk exposure, suitable actions shall be taken immediately and reported to the Board of Directors. SinoPac Holdings also conducted risk assessments and created risk response measures for credit, market, operation, asset and liability, reputation, legal, compliance, strategy risks, and other risks associated with business operations including emerging risks and climate change risks. They are used to identify the related risks at the group level and formulate response measures to be reported to suitable management levels. The risk management Division of SinoPac Holdings reports risk management status and improvement recommendations to the Board of Directors on a monthly basis and quarterly to the Risk Management Committee. In the event of material risk exposure, suitable actions shall be taken immediately and reported to the Board of Directors.

Framework of Risk Management

To effectively manage the risks arising from the operations of SinoPac Holdings and its subsidiaries, the Board of Directors serves as the highest supervisory unit in charge of approving the risk management policy and risk appetite or limit and giving the management authority for daily risk management. Based on its authority, the management should supervise risk management activities, evaluate the performance of risk management, and make sure that each risk management officer works professionally and in line with the code of ethics.

The Risk Management Committee has been set up under the Chairman, who serves as the convener of the committee, to be in charge of deliberating on the risk management policy, organization, system, and risk limit, reviewing overall risks, supervising risk management activities of SinoPac Holdings and its subsidiaries, and coordinating efforts to manage major risk incidents.

The Risk Management Division has been set up under the President to be in charge of developing the risk management policies, guidelines, and systems for SinoPac Holdings and its subsidiaries. In addition to implementing the risk management policies, guidelines, and systems approved by the Board of Directors, the Risk Management Division is responsible to regularly evaluate the performance of SinoPac Holdings and its subsidiaries in terms of risk management.

Based on its authority, the management assigns a controlling unit or personnel to be responsible for the risk management of its business to ensure that all risks are properly monitored.

 

Status of Operation

To effectively manage the risks arising from the operations of SinoPac Holdings and its subsidiaries, the Board of Directors serves as the highest supervisory unit in charge of approving the risk management policy and risk appetite or limit and giving the management authority for daily risk management. The Risk Management Division takes in charge of developing the risk management policies, guidelines, and systems for SinoPac Holdings and its subsidiaries. In addition to implementing the risk management policies, guidelines, and systems approved by the Board of Directors, the Risk Management Division is responsible to regularly evaluate the performance of SinoPac Holdings and its subsidiaries in terms of risk management.

  • Status of Operations:

         In 2020:

•Establish mechanisms for identifying emerging risks and introduce the TCFD framework to identify financial risks caused by climate change. Establish the Guidelines for the Management of Climate-Related Risks and Opportunities" to facilitate the identification, measurement, and monitoring of climate-related risks and opportunities and formulate response measures and reports.
•Optimize the risk information integration system, continued to use the "data granulation" structure and the "data governance" structure to build risk information integration database.
•In response to the Global COVID-19 pandemic, the "credit and market risk enhancement mechanism" and "liquidity risk response countermeasures" were formulated, and rolling adjustments were   made with the changes in the epidemic.
•Established an external penalty event database system for financial holdings to actively learn and improve from mistakes in the industry, and save the time and manpower for auditing, legal compliance, and risk management units collecting punishment information.

         In 2021:

•Continue to improve emerging risk and climate change risk management mechanisms, and complete scenario analysis on both climate-related physical risks and transition risks, and provided results  on climate change risk analysis in the risk management report quarterly and submitted it to the Risk Management Committee and the Board of Directors.
•In response to the Global and local COVID-19 pandemic, based on the two aspects of Top-down, SinoPac Holdings and Button-up of its subsidiaries have formulated a strengthening mechanism and countermeasures for the three risk pillars of market, credit, and liquidity, and will be adjusted in a rolling manner as the pandemic changes.
•Optimize the risk information integration system, continued to use the "data granulation" structure and the "data governance" structure to build risk information integration database. Also, SinoPac Holdings planned to use the "data visualization platform" for self analysis and development, with AI tools to strengthen risk parameters and built intelligence tracking or early warning mechanism to construct a visualized "integrated risk management system".

Credit, Market, Operation, and Liquidity Risk Management

Emerging Risk Management

Climate change and population structure changes may cause material impacts on the overall business environment. Effective identification and assessment of emerging risks (potential risks in the next 3 to 5 years) and formulation of response measures have become important tasks for financial institutions. SinoPac Holdings thus established the Emerging Risk Management Guidelines and the according management mechanisms for the identification, measurement, monitoring, reporting, and mitigation measures for emerging risks. Since 2019, the Risk Management Division of SinoPac Holdings has referenced related reports on emerging risks published by external institutions each year. The Division compiles feedback from subsidiaries, identifies emerging risks at the group level, and plans mitigation measures for the management to implement advanced preparation and response.

  • Emerging Risk Identification Results

SinoPac Holdings compiles the emerging risks submitted by the subsidiaries and considers the possibility of occurrence and the level of impact to identify the Group's emerging risks in the next 3 to 5 years. Among these risks, the two major risks including “asset bubble burst” and “climate change” have more significant impact on SinoPac Holdings and the Company formulated related mitigating actions.