Risk Management

Strategy Formulation

SCG Packaging defines the objectives and risk appetite in managing risks clearly so that overall risk management is exercised on an enterprise-wide basis.

Structure and Accountability in Risk Management

The organizational structure of risk management of SCG Packaging is illustrated below:

Integrated Risk Management Organization Structure

The Audit Committee, on behalf of the Board of Directors, establishes risk management policies and oversees the risk management process and practice of the Company. The Audit Committee also evaluates the risk management system to ensure efficiency, effectiveness, and compliance with established guidelines. Internal Audit Office The Company’s Internal Audit is responsible for conducting an audit of the first line (operating units) and the second line ( management level, risk management and compliance, and other supporting functions) to provide assurance on the efficiency and effectiveness of risk management. Internal Audit Office also reports the outcomes to the Audit Committee as well as provides consultation and communicates the Audit Committee’s opinions and recommendations to the first line and functions that are being audited for improvement. SCG Packaging’s Risk Management Committee SCG Packaging’s Risk Management Committee consists of the Chief Executive Officer who serves as the Committee Chairman, the Chief Operational Officer of each business unit, the Chief Regional Officer and the Chief and the Chief Financial Officer. The Risk Management Committee has the following core responsibilities:

(1) Determine risk management structure and assign accountabilities for risk management;

(2) Consider and approve risk management strategies, framework, and plans;

(3) Review the risk profile and track the risk management practices of the entire organization.

Risk Management Process

SCG Packaging’s risk management framework is applied in three primary areas: strategic risk management, investment project risk management, and operational risk management. The risk management process comprises as follows:

(1) Risk/opportunity identification;

(2) Risk assessment;

(3) Risk response including defining the key risk indicators and key performance indicators, which are the leading and lagging indicators, in order to anticipate risk events and to manage risk levels to be in line with the targets.

(4) Risk reporting to SCG Packaging’s Risk Management Committee before presenting a report to the Audit Committee on a quarterly basis.

The risk management of the following issues shall be assessed.

(1) Safety, Health and Environment Risk

(2) Compliance Risk

(3) Intangible Risk

(4) Hazard Risk

(5) Input Risk

(6) Process Risk

(7) Financial Risk

(8) Business Risk

Building a Corporate Risk Culture

SCG Packaging recognizes that risk culture is a critical component of risk management. SCG Packaging has, therefore, set measures as follows:

• assigned top executives to communicate the significance of risk management (tone at the top)and be role models in risk management. This includes establishing practical guidelines on the common risk language, risk appetite, common risk assessment systems;
• assigned and accountability of each risk owner;
• encouraged each company to include risk management as part of the agenda in major meetings;
• designated risk management as a component of training and development programs for employees;
• encouraged experience sharing across departments and companies to continually communicate the benefits of risk management

SCG Risk Appetite Statement

Key Risks, Business Opportunities, and Risk Management Strategies