Status of Operations and Implementation
■ Status of Operations and Implementation
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.
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Status of Operations and Implementation：
In 2022：
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Establish the TCFD team and formulate specific work plans and timetables, to keep promoting the implementation of TCFD work items, including: specific quantitative scenario analysis of financial impact, corresponding strategies, mitigation and adaptation measures, and metrics and targets for financial climate resilience.
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Introduce and keep intensifying the climate change risk management, conduct the scenario analysis of physical and transition risks and the quantitative calculation of potential financial impact.
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Conduct carbon inventory of the investment and financing positions (excluding green energy loans/green bonds/sustainability bonds/social responsibility bonds) in public companies listed in Taiwan.
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In response to the COVID-19 pandemic changes, from the Top-down aspect, SinoPac Holdings monthly and irregularly conduct simulation of various stress scenarios. From the Bottom-up aspect, the 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.
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With the target of the "data governance" structure and "data granulation", Continue to conduct structural adjustment of risk information. Expect to strengthen risk parameters with AI tools to build intelligence tracking or early warning mechanism, and plan to use the "data visualization platform" to construct a visualized "integrated risk management system".
In 2023：
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The TCFD team formulates specific work plans and timetables and keeps promoting the implementation of TCFD work items, including: specific quantitative scenario analysis of financial impact, corresponding strategies, mitigation and adaptation measures, and metrics and targets for financial climate resilience.
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Introduce and keep intensifying the climate change risk management, conduct the scenario analysis of physical and transition risks and the quantitative calculation of potential financial impact. Adopt the "Advanced Resilience Verification" method by the Association of Banks' Climate Risk Practice Manual to assess whether the operations and transition strategies are resilient based on the potential impact on the capital adequacy ratio of financial holdings.
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Conduct a carbon inventory of the investment and loan positions on December 30, 2022 with the methodology published by the Partnership for Carbon Accounting Financials (PCAF). The coverage rate increased from 9.4% to 79.72% (the value included in the inventory as a percentage of the total value of investment and loan positions).
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Compile independent TCFD reports based on TCFD recommended disclosure framework (governance, strategy, risk management, and metrics and targets)，and obtain The maturity model for the Climate-related Financial Disclosures of "Level-5+: Excellence" grade from BSI conformity check.
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In response to the COVID-19 pandemic changes, from the Top-down aspect, SinoPac Holdings monthly and irregularly conduct simulation of various stress scenarios. From the Bottom-up aspect, the 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.
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With the target of the "data governance" structure and "data granulation", Continue to conduct structural adjustment of risk information. Expect to strengthen risk parameters with AI tools to build intelligence tracking or early warning mechanism, and plan to use the "data visualization platform" to construct a visualized "integrated risk management system".
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■ Credit, Market, Operation, and Liquidity Risk Management
SinoPac Holdings and its subsidiaries have established management and assessment mechanisms for four major types of risks including credit risks, market risks, operational risks, and liquidity risks to effectively identify, assess, monitor, and manage all types of risks. The risk division reports the risk management implementation status and improvement suggestion monthly to the board of directors and quarterly to the risk management committee. In the highly risk-exposed event, appropriate measures should be taken immediately and reported to the board of directors. In addition to rigorous compliance with credit risk management regulations, SinoPac Holdings is also aware of the potential impact of ESG trends on the finance industry and loan businesses. SinoPac Holdings thus actively responds to international standards, incorporates ESG indicators into the credit analysis and implements more comprehensive management of hidden risks in loan businesses.
■ Emerging Risk Management
SinoPac Holdings established the "Emerging Risk Management Guidelines" and implemented management mechanisms for the identification, measurement, monitoring, reporting, and mitigation measures for emerging risks accordingly. Since 2019, the Company has referenced related reports on emerging risks published by external institutions each year to identify emerging risks. The Company also compiles feedback from subsidiaries, identifies emerging risks at the group level, and establishes mitigation plans to prepare in advance.
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Emerging Risk Identification Procedures
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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 emerging risks of the Group. Among them, two major long-term potential risks, namely "Potential risks of the adoption of new technologies in operations (e.g., generative AI)" and "geopolitical conflicts" have more significant impact on SinoPac Holdings and the Company formulated related mitigation and management measures.
■ Climate Risk Management
Please refer to "Task Force on Climate-Related Financial Disclosures (TCFD)" and "2022 TCFD Report" for more details.