Risk Management

Risk Management

Risk Management Policy and Mechanisms

SKFH has adopted strategic risk management concepts for evaluation and decision-making. In addition to compliance with related laws and regulations, we also established a comprehensive “Risk Management Policy”, “Risk Management Regulations”, and other integrated risk management rules. We aim to adopt a comprehensive risk management system, management organization, and control measures to keep the risks in operations within a tolerable range to protect assets of the Company and customers, increase value for shareholders, and maximize benefits for customers.
 

To ensure that SKFH attains the goal of “optimization of risks and returns”, SKFH considers the capital adequacy requirements, related laws and regulations, and the nature of their businesses and established integrated or individual risk measurement tools for main risk factors (e.g., market risks, credit risks, concentration risks, liquidity risks, operational risks, and climate-related risk, etc.), We also established related risk control regulations, risk limits, early warning mechanisms, and other related regulations.
 

Limit control management

SKFH and its subsidiaries have established suitable limits on risks and losses in accordance with the characteristics of their business operations and risks. Examples include: market VaR limits (Value at Risk Limit, VaR Limit), limits on expected losses in credit risks, limits on the classification and control of risks concentrated in individual countries, regions, industries, and companies, foreign exchange exposure risk limits, stock stop loss limit management, and control settings for the capital adequacy ratio. We regularly evaluate risk for various items to achieve an optimal balance of risks and returns while ensuring capital adequacy ratio.

 

Early warning mechanisms

The scope and key points for the measurement of risk indicators include the market risks, credit risks, liquidity risks, concentration risks, climate-related risks, and legal risks faced by the companies. SKFH provides risk information at suitable times to provide the management level with references for making decisions. In addition to regular monitoring of changes in related indicators, SKFH also retains related verification traces for determining future risk trends and risk prevention.


 

 

Risk Management Governance Framework

The highest decision-making unit for risk management in SKFH is the Board of Directors, which establishes an Audit Committee subordinate to the Board of Directors. The Audit Committee is composed of independent directors and is responsible for supervising the effectiveness of group-wide risk control. To implement risk control and management operations, SKFH has also established the Risk Management Committee and a dedicated risk management department responsible for risk management for SKFH as a whole. In addition, we have also adopted three lines of defense in our internal controls to ensure the effectiveness of our risk management mechanisms.

First Line -Business operations and management units

SKFH and its subsidiaries have established risk management personnel in each operational unit. These personnel are responsible for the risk identification, analysis, evaluation, and response of their respective units, serving as the contact for regularly reporting risk management information, reviewing the effectiveness of risk management in their respective units, and also acting as promoters for the implementation of business continuity management system to shape a comprehensive risk management culture.

Second Line - Compliance and risk management units

SKFH has established the Risk Management Committee and a dedicated Risk Management Department, responsible for the overall risk management of the company. The Risk Management Department is responsible for planning and implementing risk management mechanisms, identifying, assessing, and monitoring overall operational risks. It is also responsible for regularly reporting risk management reports to supervisors at all levels, preparing integrated risk assessment reports, and convening meetings of the Risk Management Committee every quarter to review risk control status, discuss recent risk issues, and report to the Board of Directors.

Third Line - Audit unit

SKFH has established an audit system and an Audit Office under the Board of Directors in accordance with the "Implementation Rules of the Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries." The Audit Office, consisting of a Chief Auditor, department head, and seven audit personnel, is responsible for auditing the internal control operations of SKFH and its subsidiaries. The functions of internal audit include checking the efficient utilization of every resource and ensuring that "ALL" operational activities are carried out according to established plans and achieve expected goals. The audit procedures maintain an independent and objective stance, conducting internal audits on an annual basis. They provide timely recommendations for improving risk management, operational processes, and internal control mechanisms to various business units. They also track the progress of addressing significant deficiencies identified in both internal and external audit reports to ensure the effectiveness of the internal control system.