Risk management

In order to improve corporate governance, implement risk management for business operations, and carry out risk management for uncertainties that may threaten the Company’s operations, the Company’s Sustainability Committee and Board of Directors approved the “Risk Management Policy and Procedures” in August 2023, which mainly include risk management policies and culture, risk management organization structure and responsibilities, risk management processes, risk information disclosure, and risk management aspects in order to effectively control the risks generated from business activities, and to report to the Sustainability Committee and the Board of Directors at least once a year on the status of the operation of risk management in the current year.

Risk Management Implementation Status (2025)

The Sustainability Office holds regular annual “Risk Management Meetings” to communicate risk information with various operating units and collect and integrate their risk management reports. Furthermore, in response to the implementation of IFRS S2, a new “Climate-Related Risk Management Meeting” has been established starting from 2025. The results and status of the aforementioned risk management operations are reported to both the Sustainability Committee and the Board of Directors. The most recent report was presented to the Board of Directors on October 30, 2025.

Implementation Status (October 1, 2024 – September 30, 2025)

To foster a corporate culture and business strategy that prioritizes risk management, Sitronix has established a comprehensive risk management system driven by the collective participation of all employees. Together, we adhere to the “Risk Management Policies and Procedures.” Risk management training is conducted at least once a year. In 2025, this training was assigned to 406 employees (including contract staff), with 371 completing it, achieving a completion rate of 91%.

The top five risk factors evaluated during the “Risk Management Meetings” are listed in the table below:

No. Risk Factor Annual Risk Description Existing Measures New Countermeasures Goal
1 Product Functionality and Specification Alignment Risk Product features generally meet customer needs, and new issues are resolved in a timely manner. Product managers engage directly with customers and maintain thorough communication to understand product requirements and R&D logs. Provide support by dispatching appropriate R&D personnel to interface with customers and deeply understand their needs. Conduct annual monitoring, shorten product validation timelines for customers, improve product stability, and reduce customer complaints.
2 Interest Rate, Exchange Rate, and Inflation Risks • The USD to TWD exchange rate depreciated sharply this year (from 32.785 to 29.3). Due to our extremely low USD asset allocation, we maintained net foreign exchange gains.
• Derivative financial instruments were utilized concurrently to hedge exchange rate risks and increase yields. 		Monitor foreign exchange positions on a daily basis and adjust foreign currency holdings dynamically. Monitor macroeconomic trends on a daily basis and remain highly adaptable to changing conditions. Reduce exchange rate risks and improve investment yields.
3 Volatility Risks in Short-term Markets such as Financial Instruments Financial assets measured at fair value through profit or loss primarily consist of Convertible Bonds (CB) and Credit-Linked Notes (CLN). CBs allow participation in equity upside with downside protection, while CLNs aim to earn interest income and are immune to market risk. Review market conditions on a daily basis and dynamically increase or decrease positions. Invest in relatively stable targets, keeping the total investment amount below approximately 35% of total capital. Reduce investment risks and improve yields.
4 Climate Change Transition Risk – Mitigation Commitments and Net-Zero Emissions Due to the expansion of office space boundaries verified by a third party, the baseline year and carbon reduction targets are being re-established. • Monitor the development of internal carbon pricing.
• Evaluate the feasibility of green power procurement.
• Replace malfunctioning T5 fluorescent tubes with energy-saving LED lamps.
• The Hsinchu headquarters replaced two malfunctioning chillers with high-efficiency models, prioritizing energy efficiency ratings (one of which is a Taiwan Energy Efficiency Level 1 model).
• Formulate the Group Greenhouse Gas External Inventory Plan for 2024–2026. 		• Align with Corporate Governance Evaluations to establish internal carbon pricing regulations.
• Conduct a new greenhouse gas emission external inventory in 2024; as the inventory boundary has shifted, new baseline years and short- to medium-term carbon reduction targets (2030) must be re-established. 		• Set a target for net-zero carbon emissions by 2050.
• Continuously comply with the carbon reduction policies of competent authorities.
5 Military Conflicts, Trade Wars, Civil Wars, Embargoes, Economic Sanctions, Tariff Barriers, Political Regimes Changes, Religious Conflicts, Ethnic Conflicts, and Financial Crises Risks The “probability” of occurrence has increased this year due to the following events:
1. The Russia-Ukraine war continues, and the outbreak of the Israel-Hamas military conflict triggered shipping crises.
2. The US initiated a trade war, expanding export controls to specific industries, tariff barriers, and new tariffs that impact the supply chain and long-term demand. 3. The world entered an election year, and the introduction of new policies increased uncertainty.
4. Geopolitical tensions in Taiwan escalated due to US isolationist policies. 		Diversify suppliers and customer bases. • Expand into new markets (e.g., TDDI) to enhance operational resilience.
• Review macroeconomic conditions in major markets (US, Europe, China) during monthly executive meetings and monitor feedback from external investors. 		• Reduce the impact of geopolitical shocks on operations.
• Adapt dynamically to changes in the external env

Climate-Related Risk Management Matrix

No. Type Risk Factor Description of Risk Issues Measures Taken Goal
1 Physical Risk Extreme Weather Events Extreme weather events such as typhoons, torrential rain, high temperatures, flooding, and droughts affect office operations and safety. • Refer to data from the National Science and Technology Center for Disaster Reduction to confirm the hazard potential of each operating location; none are directly situated in areas prone to flooding, landslides, or tsunamis.
• Upon receiving typhoon or torrential rain warnings, cooperate with the building management committee to conduct relevant flood prevention tasks.
• Possess remote office system capabilities and experience. 		Maintain business operations under the premise of ensuring employee personal safety.
2 Physical Risk Unstable Energy Supply Unstable energy supply indirectly caused by extreme weather conditions from climate change impacts telecom operators, IT equipment, or server room operations. • Equiped desktop computers with Uninterruptible Power Supply (UPS) systems.
• Implemented backup mechanisms for server room equipment and wiring, and data is backed up off-site.
• Maintained the effectiveness of the ISO 27001 system, including compiling Business Continuity Management (BCM) procedure documents, conducting Business Impact Analysis (BIA), Recovery Time Objective (RTO) and asset risk assessments, and regularly executing disaster recovery drills to practice restoration plans. 		Minimize system recovery time in the event of an actual incident to restore operations quickly.
3 Physical Risk Unstable External Supplier Energy Supply Unstable energy supply indirectly caused by extreme weather conditions from climate change disrupts supply chain production and delivery punctuality, which may also increase emergency supply chain costs. • The procurement department maintains close daily contact with external suppliers to monitor potential delivery delays in real time.
• Periodically review supplier delivery smoothness, understand if production incidents have occurred, and implement improvements or preventive measures (e.g., prioritizing suppliers that utilize green power in response to unstable energy supplies) to include risk into procurement volume considerations.
• Diversify suppliers across multiple sources and regions, and establish product inventories and supply-demand models within the production system to maintain a stable supply chain. 		Fulfill all order requirements.
4 Transition Risk Stakeholder Requirements Stakeholders (such as competent authorities, brand customers, investors, etc.) demand disclosure of carbon emission information, emission reduction progress, and net-zero targets. • Align with external requirements to complete customer questionnaires and competent authority ESG digital platforms, compile annual reports and sustainability reports, and proactively participate in ESG questionnaires from international assessment institutions (e.g., S&P Global Corporate Sustainability Assessment), such as disclosing the company’s carbon emissions.
• Evaluate the feasibility of procuring renewable energy. 		Meet stakeholder requirements within the scope of the company’s feasible capabilities.