Risk Management

Companies face numerous risks during its operation, including economic recession, regulatory changes, a more competitive market, damage to company reputation, and interrupted operation. Innolux has established a risk management mechanism to periodically review related financial, legal, climate change, water resources, supply chain, information security, and occupational safety and health risks.
Financial Risk Management
We are specialized in and focus on the manufacture, sale, and development of panel-related products and do not engage in investments of high risk and high leverage. Faced with the rapidly changing macro environment, risk identification and control and improvement of responsiveness have become essential to business operations and management. To effectively reduce operational risks and achieve sustainable development, the Financial Department takes hedging measures based on its authority after assessment, analysis, and drawing up of the risk management strategies to deal with the risks in the macro environment (domestic and overseas economic conditions and financial market changes) and the internal environment (organizational operations and strategic development), with the Audit Office constantly supervising the internal control and legal compliance. After implementing hedges, the Financial Department will disclose related information by law and submit the results to the Audit Committee and the Board for review.
At INX, we categorize financial risks into credit risks, market risks, liquidity risks, asset and business interruption risks, and business investment risks.
Credit risk (A) Set a credit line and the method(s) of transaction based on the credit ratings of customers, constantly assess the payment performance of customers, and implement collections.
(B) Analyze the status of customer operations and the industrial trends regularly, make alerts, and take countermeasures to control credit risks and ensure operational performance.
Market risk (A) After assessing the foreign exchange risks and interest rate risks, the Financial Department establishes hedging strategies and implements hedging transactions. Hedging should aim at avoiding foreign exchange risks on substantial positions, with a focus on undertaking financial products with simple structures and high liquidity.
(B) The Financial Department also balances assets and liabilities in natural hedging for substantial positions generated by foreign currencies and undertakes products for hedging exchange rate risks for risk exposure positions to hedge risk from exchange rate volatility. To prevent interest rate volatility in the market from affecting financial costs of the floating interest liabilities raised for operational needs and investments, the Financial Department undertakes products for hedging interest rate risks at appropriate times to lock in interest rate risks.
Liquidity risk In addition to maintaining high liquidity in fund allocations, channels for short-term and long-term financing are expanded constantly to diversify funding sources, hedge systemic liquidity risks from occurrences in the financial market, and raise funds from the capital market to strengthen the capital structure
Asset and operation interruption risk To prevent natural disasters or accidents from causing property damage to plants, equipment and goods, and business interruption risks, different types of insurance are purchased after assessing the management costs, premium expenses, and risk self-retention costs of various risks to transfer related risks.
Business Investment Risk Carefully assess the targets of strategic investments, constantly review, supervise, and manage re-investments, assess the benefits of medium-term and long-term investments, and timely dispose of non-core investment items to reduce business investment risks.
Tax Risk Management
With integrity as the bedrock, we conduct business in compliance with local laws across the
world, and our tax policy is as follows:
•Conform with tax regulations; accurately calculate, declare and pay taxes; and maintain normal
•Timely assess the impacts in all aspects of changes in local and international tax laws and
  regulations and draw up countermeasures.
•Disclose tax data from public information in the financial statements and annual reports to
  maintain information transparency.
•Maintain good relations with tax authorities, capture tax information circulation, and constantly
   improve tax expertise.
Tax Risk and Countermeasures
Tax Risks Countermeasures
When engaging in transnational investments and operations, the difference in tax laws and tax systems of different countries may affect the group’s tax costs. Analyze each tax case in conformity with local tax regulations, accurately calculate taxes, and effectively improve the operational performance of organizational resources.
In transnational operations, the tax authority of each country is in charge of the comprehensive tax data and information from respective countries. Without capturing the whole tax data or information of a host country, we may be unaware of any tax risks. Actively gather information regarding the changes and reforms of local and international tax regulations, assess their impacts, and draw up countermeasures quickly.
Information Security Risk
Innolux is committed to protecting the confidential information of the company, our clients, suppliers, and employees, as well as company intellectual property which is the key of the competitive advantage. This is to ensure the overall benefit of the company, our clients, employee, and shareholders, and to maintain company competitiveness.