|Metrics and Targets||
|Risk category||Risk Impact||Countermeasure and Potential Financial Effects|
|Transformation Risk||Policies and Laws||Greenhouse Management Act is getting stricter. If GHG emission control is launched in the future, carbon prices will increase the operational costs of the company.||To improve energy efficiency, TTY will continuously implement its energy-saving and carbon-reduction plan and install energy-saving facilities. TTY will also continually improve processes to reduce the environmental impact via source controls and terminal prevention equipment reinforcement.
According to data from PTC, if nuclear power is replaced by renewable energy and fuel coal is replaced by gas in the future, power generation costs per degree will increase by 45.45% in year 2025. Taking the average power price of NTD$2.6 per degree in year 2018, power generation costs per degree will increase by NTD$1.182 in year 2025.
With outsourced power of 13,000,000 degrees in year 2020, TTY estimates that an additional NTD$15,400,000 will be expensed annually in the future.
|Technological Risks||The economic system has gradually turned to supporting low-carbon, highly efficient technology improvement and innovation, which may affect the competitiveness of the company and likely increase procurement, production and distribution costs to meet demand and depth as required by customers.||Evaluate the comprehensive impact to climate change related policies to make short- to mid-term operational plans. The roof placement is now in progress to effectively reduce building temperatures and lowering carbon emissions from overall product processes, gradually moving toward green transformation.
1. The estimated expenditure of equipment replacement is NTD$20 million in year 2022.
2. The estimated expenditure is NTD$3 million for the installation of heat insulation materials on the roof and windows of factory to reduce building temperature.
|Market Risks||To corresponding with climate change risk and carbon emission control requirements, new business models have gradually been created and enterprises are required to create carbon assets management capabilities to adapt to this trend. The inventory costs of TTY were increased to avoid risks of supply chain disruption due to unstable supply of raw materials.||To enhance the ability to assume climate change risk, TTY has created new revenue opportunities and market expansion through the establishment of environmental protection related mechanisms and carbon emission control measures. Meanwhile, inventory costs will increase along with the increase of safe inventory levels. With inventory of about NTD$940 million in year 2021, NTD$9.4 million inventory costs will increase by an additional 1% each.|
|Reputation Risks||Climate change might affect the image that customers and social groups have in terms of how committed the company is to the low carbon transformation. If the company produces high carbon emissions or great levels of pollution, it may not win tenders, lose orders, experience a decrease of revenue or even damage the company’s reputation.||To develop more environmentally friendly products and services, TTY not only continuously improves wastewater and waste recycling rates, and manages environmental sustainability activities to build a green enterprise culture from the inside out, but also evaluates its investment in green energy and low carbon logistic development to reduce the carbon footprint of company products, and enhance its industrial competitiveness in line with market demand.|
|Physical Risk||Immediate Risks||Climate change may cause a typhoon, flood, draught and other extreme climate events, resulting in damage to assets, supply chain disruption and other immediate financial impact.||Reinforce water resource management and ensure the safety of plant equipment to maintain uninterrupted operations. In response to draught in Taiwan, TTY has completed a list of water suppliers but costs have increased. With 141,500 degrees of water consumption in year 2021, TTY may need to pay an additional NTD$140,000 for water purchases annually; an additional cost of NTD$1 per unit.
Revenue will also be affected if materials and finished products cannot be delivered due to a typhoon and floods. To avoid this situation, warehouse leases in different locations will be evaluated and rent will be increased accordingly.
|Long-term Risks||Global rising temperatures and the gradual shortage of water, electricity and fuel resources may cause discontinued factory operations, resulting in rising operational costs or penalties due to delivery delays.||Evaluate the use of regional energy and resources consumption and arrange off-peak production as needed. Prepare the BCP to actively find new suppliers and create a list of emergency power generators and water suppliers to ensure stable materials and energy resources supplies, and enhance the ability of TTY to respond and adapt to disasters accordingly.|
|Type of Opportunity||Opportunity Explanation||Countermeasures and Potential Financial Effects|
|Resources Use Efficiency||Increase energy use efficiency to reduce mid- to long-term operational costs and achieve carbon reduction goals.||Evaluate the installation or replacement of low energy consumption equipment, establish power and water reduction goals, and increase resources efficiency. It is estimated to reduce operational costs by about NTD$400,000 annually.|
|Products and Services||Update the method and frequency of providing products, which may improve customer satisfaction while also achieving carbon reduction goals.||Introduce low carbon transportation by adjusting the supply method and frequency. In addition to maintaining customer relationships, it is estimated to reduce operational costs by about NTD$100,000 annually.|
|Duration||Improve the ability to adapt to climate change to managing climate change related risks and seizing the opportunities.||The Risk Management Center convenes all sessions to identify climate change related risks and opportunities and plans for climate change risks management strategies. The Operation and Project Management Department establishes the climate governance material principles to trace progress and effects and reinforce the risk response ability of the company.|