Business Risk Control

In addition to assessing the risks that may arise in daily operations at any time and implementing preventive measures, each unit will conduct regular risk identification and implementation management every year, and evaluate and review risk matters. If there are major risk matters, will be summarized by general manager and reported to Board of Directors. In the process of operation and management, we prevent and control possible risks, formulate relevant early warning measures, and control various risks arising from business activities within an acceptable range.

1. The scope of risk management

The company actively integrates and manages all strategic, operational, financial and hazardous potential risks that may have an impact on the operating environment, corporate governance and profitability, and uses risk management to immediately assess the impact of risk events on the company's operations when they occur and adjust the management and control mechanism. Also pay attention to the potential risks and opportunities that climate change poses to the company now and in the future, and take response measures on climate-related issues when necessary.

2. Organizational structure of risk management

The company formed a working group based on the existing organizational structure to make the command and dispatch, self-assessment and execution of the risk management organization more efficient. The organization and responsibilities are described as follows:

(1) Audit Committee and Board of Directors: The company's audit committee reviews the effectiveness of the internal control system to ensure the effective implementation of the company's internal controls and supervises the control of existing or potential risks of the company; the Board of Directors approves the overall risk management policies and major decisions. .

(2) Audit department: Based on the company's "internal control system" and annual audit plan, it regularly reviews whether the operational activities of each unit are implemented, promotes each unit to conduct self-evaluation of the internal control system every year, and provides timely improvement suggestions. Regularly report to the Board of Directors on the implementation of risk management every year.

(3) Management department: Responsible for promoting, supervising and coordinating the implementation of risk management operations by each execution unit, fully understanding the risk status, formulating improvement countermeasures and implementing improvement measures for extremely high and high security threat projects, and ensuring that adequate resources are available to respond risks involved.

(4) Execution unit: Each department of the company is a risk management execution unit based on its tasks and responsibilities. It considers the scope, nature and operation of the work, and fully understands the risks that the business under its jurisdiction may face. Each execution unit should assess possible risks at any time during daily operations risks and implement management to help the company control the risks involved within the acceptable range.

3. Operation

In order to effectively manage various risks arising from the company's operations, the company's Board of Directors is the highest risk management unit, responsible for approving risk management policies and authorizing the management to be responsible for daily risk management operations. After various policies and systems are approved by the Board of Directors, the management department is responsible for promoting, supervising and coordinating the execution of risk management operations by each execution unit, fully understanding the risk status, ensuring that adequate resources are available to respond to the risks involved, and reporting to the Board of Directors every year the risk management execution status. The identified risks and execution situations in 2023 are explained as follows:

Evaluation Items Operating Situation
1. The impact of interest rate, exchange rate changes and inflation on the company's profit and loss

1. Interest rates: The interest expenses incurred by the company and its subsidiaries mainly come from bank financing for short-term operating turnover. In 2021 and 2022, interest expenses were NT$1,164,000 and NT$1,150,000 respectively, accounting for only 0.04% of the current net operating income. In the first half of 2023, interest expenses were NT$406,000, accounting for only 0.06% of the current net operating income which shows that the interest expenses of the company account for a small proportion in the overall financial report and the impact of interest rate changes on the profits and losses of the company is limited. The company usually plan financial costs carefully and maintain close communication with cooperative banks to prevent potential risks caused by interest rate fluctuations in capital costs.

2. Exchange rate changes: The main business activities of the company and its subsidiaries involve foreign currency transactions, so there is foreign currency exchange rate risk. In order to effectively avoid foreign currency asset impairment and cash flow fluctuations that may be caused by exchange rate changes, the company and its subsidiaries actively monitor exchange rate trends and predict capital needs and adjust foreign currency allocations at any time to reduce the impact of exchange rate fluctuations on the company's profits and losses. In 2021 and 2022, the company incurred exchange losses of NT$5,757,000 and exchange gains of NT$10,758,000 respectively, accounting for 0.18% and 0.37% of revenue respectively. In the first half of 2023, the company incurred exchange gains of NT$1,345,000. Accounting for 0.18% of revenue, it shows that exchange rate fluctuations have not had a significant impact on the company's overall profits and losses.

3. Inflation: The operating income and operating costs of the company and its subsidiaries are less affected by inflation. In the past, profits and losses have not been significantly affected by inflation. We will continue to pay close attention to inflation in the future to make appropriate adjustments to the company business strategy.

2. Policies for engaging in high-risk, high-leverage investment, capital lending to others, endorsement guarantees, and derivatives transactions, and the main reasons for profit or loss

1. The company and its subsidiaries adhere to a sound and pragmatic business philosophy and, except for the company's core business areas, have not been involved in high-risk or high-leverage investment activities.

2. The main objects of capital loans and endorsement guarantees of the company and its subsidiaries are related parties within the company's consolidated entity. These loans and guarantees are all for short-term capital deployment needs and are handled in accordance with the internal regulations and relevant laws of the "Procedures for Fund Lending" and "Procedures for Endorsement and Guarantee". The company will regularly evaluate and flexibly adjust relevant risk management strategies based on its own and its subsidiaries' operating conditions and changes in market trends.

3. The company and its subsidiaries do not conduct any derivatives transactions.

3. The impact of major policy and legal changes at home and abroad on the company's financial business

The daily operations of the company and its subsidiaries are carried out in compliance with relevant domestic and foreign government laws and regulations. As of the date of publication of the public statement, important domestic and foreign policy and legal changes have not had a significant impact on the company's internal operations and financial business. In the future, the company's management will still always pay attention to important domestic and foreign policy and legal changes, and when necessary, consult experts in relevant fields and develop countermeasures to meet the company's operational needs.

4. The impact of corporate image change on corporate crisis management:

1.In terms of corporate governance, the company adheres to the principle of integrity and fulfills its corporate social responsibilities. The company abides by various laws and regulations promulgated by the competent authorities and protects employee welfare and shareholder rights.

2.In 2014, the company obtained the AEO (Authorized Economic Operator, Safety and Quality Certification Enterprise) certification from the "Keelung Customs Office of the Ministry of Finance and Customs". It has improved various safety mechanisms and strengthened the overall supply chain security. In addition to reducing the rate of cargo sampling and providing customers with the convenience of simplified customs clearance and rapid release, it also develops overseas agents with the same qualifications to not only enhance the corporate image, but also substantially enhance the competitiveness of business promotion.

3.In addition, an internal control system is established in accordance with the "Regulations Governing Establishment of Internal Control Systems by Publicy Companies" issued by the Financial Supervisory Authority of the Executive Yuan to implement the company's self-supervision mechanism to enhance the company's sound and effective operations. At the same time, we continue to strengthen corporate governance to respond to various possible corporate crises; we also comply with legal requirements and disclose all major information in a timely manner. A crisis response mechanism has been established to standardize the reporting and handling procedures for major incidents. Relevant business units will respond quickly to various crises based on the business they manage, establish immediate impact assessments and communication channels, and propose perfect response measures in the shortest possible time.

4.At the same time, in order to enhance employees' professional skills and gather centripetal force, in addition to focusing on business operations, the entire company has also long-term participated in and sponsored social welfare activities, and is committed to maintaining a good image of the company, especially the Taipei company's donation to the social welfare organization First Foundation In addition to a total of more than NT$3 million, it has also enthusiastically supported the Aili Development Center of the First Foundation in the past ten years. Every year, in addition to donating necessary materials and participating in charity activities, it seeks more than thirty voluntary colleagues accompanying the students of the development center on walks, games and charity sales.

5.Since its establishment, the company and its subsidiaries have not experienced changes in corporate image or corporate crisis due to major deficiencies.

5. Expected benefits and possible risks of mergers and acquisitions

The company plan to acquire ITI Temperature Logistics Co., Ltd. in 2024, and are expected to provide pharmaceutical logistics services in the future. Pharmaceutical logistics has its own professionalism and uniqueness, and complies with the regulations on medicine in various countries around the world, and control are becoming increasingly strict, so it will be another business opportunity for logistics companies to enter this market and provide exquisite services that are different from other general logistics companies. However, because the threshold for pharmaceutical logistics is high and a huge amount of investment is required to achieve economies of scale, the company will evaluate their risks in detail, clarify integration strategies and rely on professional support, and at the same time ensure the smooth realization of mergers and acquisitions through strengthened communication and management strategic goals to ensure the company's long-term and stable development.

6. The impact of technological changes (including information security risks) and industrial changes on the company’s financial business and countermeasures

Due to the continuous changes in science and technology and the introduction of new technologies, such as the development trends of AI, big data, etc., in order to comply with the relevant laws and regulations of domestic and foreign government agencies, in the future, we will continue to increase security personnel, internal demand development and maintenance and operation monitoring based on demand. Investment in equipment, etc. Strengthen anti-hacking externally, implement information security management measures internally, and make the safety and uninterrupted operation of the company our top priority.