Risk Management

Forcelead has established “Risk Management Policy and Procedures,” approved by the Board of Directors on November 29, 2023, that define various risks according to the company’s overall operational policies, prevent possible losses within acceptable risk ranges, and serve as reference for formulating business strategies, aiming to reasonably ensure achievement of company strategic goals, increase shareholder value, and achieve optimal resource allocation principles. Forcelead has established a five-step risk management procedure that includes: risk identification, risk analysis, risk assessment, risk response, and monitoring and review mechanisms. This framework enables the Company to clearly understand the scope of each risk and to implement appropriate measures to ensure that risks are effectively managed. It also allows for the efficient allocation of limited resources toward key risk management activities, reporting operations to the Sustainability and Risk Management Committee and the Board of Directors at least once annually.

Important Risk Factors and Control Mechanisms:

Risk Identification Risk Response, Supervision, and Review
Risk Type Risk Factors Current Control Mechanisms 2024 Implementation Summary Future Additional Control Mechanisms Monitoring Frequency Goal
Strategy 1. Industry Changes
  1. Monitor industry technology development and product demand, regularly track latest industry dynamics, assess operational impact to formulate response strategies.
  2. Enhance R&D capabilities and apply for patents to protect intellectual property.
  3. Expand diverse markets to respond to industry changes.
  1. Focus on new market applications, accelerate product timeline introduction through resource integration.
  2. Continuously update and enhance network and computer-related information security protection measures and equipment to ensure intellectual property safety.
  3. Internally enhance awareness and protection of intellectual property rights, reducing risks of infringing external intellectual property rights.
  1. Strengthen intellectual property management, ensure core technologies and product designs are protected by patents.
  2. Track customer demand changes, conduct customer relationship management, and flexibly adjust product design and market strategies..
 Quarterly
  1. Avoid legal risks and financial losses from potential intellectual property disputes.
  2. Diversification strategy to avoid excessive product concentration in single technology or market.
  • 2. Technology Changes
    		•
    1. Strengthen cooperation with system manufacturers, improve future technology outlook, avoid disconnection from technology trends.
    2. Strengthen cooperation with module manufacturers and panel manufacturers, grasp existing mass production technology trends while understanding competitor dynamics to promptly adjust product development direction.
    3. Increase own R&D capabilities, improve product development processes and automation to enhance efficiency, save R&D personnel costs, shorten development timelines, and increase product completeness.
    1. Regular visits (more than quarterly) to system manufacturers to understand future technology evolution trends and discuss how to assist system manufacturers in improving technology requirements.
    2. Regular visits (more than monthly) to panel and module manufacturers to grasp existing technology requirements and how to meet customer needs in terms of cost and production stability.
    3. Continuously introduce appropriate product development tools, including PERC, Totem, Composer software, to increase automation ratio, improve efficiency, and enhance completeness.
    1. Regularly review whether communication frequency needs to be increased.
    2. Continuously review design process improvement effectiveness and make appropriate adjustments.
    		 Monthly
    1. Ensure normal company system operations.
    3. Business Model Changes
    1. According to “Supplier Management Procedure,” evaluate, audit, and counsel suppliers to achieve competitive product quality strategic objectives.
    1. In 2024, conducted supplier evaluations and audits quarterly according to schedules set by Quality Assurance Department, implemented supplier grading system to maintain product quality objectives.
    2. As of August 21, 2024, supplier evaluations totaled 42 cases: Q1: 17 companies/Q2: 25 companies, evaluation results A-grade: 42 cases/B-grade: 0 cases/C-grade: 0 cases.
    3. As of August 21, 2024, supplier audits totaled 12 companies, all audits passed.
    1. All new suppliers must sign the “Supplier Code of Conduct Commitment.” Only those meeting and passing evaluation standards can become qualified suppliers.
    		 Quarterly
    1. Through clear management mechanisms, eliminate unqualified suppliers to avoid breach losses from partner companies due to deteriorating conditions or other factors preventing them from fulfilling obligations, achieving supply chain production and quality stability management goals.
    4. Important Domestic and Foreign Policy and Legal Changes (Trade Protectionism)
    1. Monitor relevant important policy development trends and collect regulatory changes as basis for adjusting company-related operational strategies, regularly assign professional personnel to receive relevant training, consult relevant professionals or institutions when necessary to promptly respond to market changes and take appropriate measures.
    1. Signed intellectual property and legal consulting service contract with Invention Intellectual Property Office, providing company regulatory consultation and recommendations at any time.
    2. Signed audit contract with Deloitte Taiwan, providing company financial and tax regulatory consultation and recommendations at any time.
    1. Current control mechanisms operating smoothly; will adjust accordingly if adjustment needs are identified in the future.
    2. Understand all directors’ educational backgrounds and professional expertise, arrange director training courses of 6+ hours annually as required by regulations.
    3. Monthly enhancement of insider trading violation and trading blackout period information dissemination to company insiders.
    		 Quarterly
    1. Understand important domestic and foreign policy and legal changes (trade protectionism) and respond correctly.
    2. Understand stakeholder issues and voluntarily issue corporate Sustainability Reports.
    Operational 5. Customer and Supply Chain Management
    1. Capacity shortage situations affecting product delivery schedules.
    2. Natural disasters such as earthquakes and typhoons affecting product delivery schedules.
    1. According to Production Management Procedures, review product inventory rhythm weekly, negotiate capacity preparation with outsourcing based on FCST monthly, coordinate next year’s capacity with various segments based on BP annually.
    2. Immediately organize damage assessment when disasters occur, communicate optimal remuneration plans with customers.
    1. Expand backup capacity for high-volume products to different FABs and backend processes.
    		 Daily
    1. Exclude natural and man-made disasters, meet customer delivery schedules.
    Financial Management 6. Interest Rates, Exchange Rates, Inflation
    1. Forcelead will continue to monitor inflation’s impact on procurement costs, track upstream supply chain cost changes at all times, and take appropriate cost stabilization measures when necessary to reduce impact on company operations.
    1. Closely monitor inflation and raw material price increases, estimate cost increases, purchase in advance, increase inventory to mitigate cost increase impacts; conversely, predict price declines and reduce inventory accordingly.
    1. During inflation, pre-purchase materials at appropriate times to reduce initial impact. Long-term negotiations with customers for price adjustments or product upgrade solutions.
    		 Weekly
    1. Reduce inflation’s impact on raw material prices.

    • The most recent Board report date was December 18, 2024.