Evergreen has drawn up a risk management policy to ensure the integrity and implementation of the risk management system and to enhance the division of risk management work, ultimately ensuring the achievement of our operation goals.

The "Risk Management Policy" formulated by the company was approved by the board of directors in 2020 as the highest guiding principle of the company's risk management. The risk management organization structure is that the Project division supervises the various responsible departments to implement risk management policies, monitor management processes, transmit risk management information and handle risk management related issues, and the Audit Department performs risk management audits on the operation of risk management policies to ensure effective operation of risk management policies.

The company's risk management scope includes exchange rate risks, cash flow and fair value interest rate risks, price risks, credit risks, liquidity risks, legal risks, marine accident risks, risk of crew injury and cargo safety risks.

The company reports to the board of directors on the implementation of risk management on December 24, 2020.

Financial risks

The Company's financial risk management is conducted by the Finance Division in accordance with the policy set by the Board of Directors. Through close collaboration with the operating units, the division is responsible for identifying, evaluating, and avoiding financial risks. The Company's daily operations are affected by a number of financial risks, including market risks (including exchange rate, interest rate, and price risks), credit risks, and liquidity risks. The Company's risk management policy focuses on unpredictable events in the financial market and seeks to alleviate the potential adverse effects on the Company's financial position and financial performance.

Risk type Description Mitigation actions or countermeasures
Exchange rate risk Risks mainly come from transaction risks and accounting risks. Adopt forward foreign exchange contracts to hedge risks and manage exchange rate risk arising from future business transactions and assets and liabilities recognized.
Cash flow and fair value interest rate risk Interest expenses may increase due to rising interest rates. Loans taken out at floating interest rates expose the Group to the cash flow interest rate risk. Part of such risk is offset by cash and cash equivalent held at floating interest rates.
Price risk The risk mainly comes from the impact of the uncertainty of market prices on the Company's financial products
  1. Investment in equity instruments: Diversify the investment portfolio based on the limits set by the Company.
  2. Fuel procurement: A task force conducts market observation to increase the hedge ratio in a timely manner.
Credit risks The Company may be affected by any customer's inability to pay the accounts receivable as per transaction terms or by any financial instrument counterparty's inability to fulfill contractual obligations.
  1. Evaluate customer credit quality based on financial position, past experience, and other factors.
  2. The limits on individual risks are set by the Board of Directors based on internal or external ratings and monitored regularly.
  3. Engage in transactions only with financial institutions with good credit ratings.
Liquidity risks The Company has financial liabilities with different maturities (including accounts payable, lease liabilities, and long-term loans). If the assets are difficult to realize or have insufficient liquidity to pay financial liabilities due, the Company will be exposed to liquidity risks. Monitor the forecast of liquidity requirements to ensure that there are adequate funds to meet operational needs.
Ship-related risks

The Marinetech Department is responsible for identifying risks related to ships, and has formulated and implemented the measures below to improve management and control measures:

  1. Monitor complaints, unqualified items, and resource problems that may have a negative impact on the system.
  2. Examine the effectiveness of the system through an internal audit process.
  3. Review system performance through a management review process.

The Marinetech Department identifies the risks of various tasks on board, and sends them to managerial personnel for review before execution by the fleets. In the case of any execution difficulty, they can take additional control measures before reporting back to the Company. There is no grievance channel for "risk control" but an emergency contact list and a safety reporting mechanism. There are dedicated mailboxes and points of contact for each item above.

As for sea shipping, the Marinetech Department draws up an annual two-way drill plan every year, and conduct onshore and on-board drills as required by laws and regulations. The identification of emergencies is defined by the SE manual, including but not limited to fire, casualties, earthquakes, bomb threats, and other threats that may cause emergencies at the site of the Company.

The potential risks on board include collision, stranding, fire, personnel overboard, serious injury to the crew, oil spills, failure of important machinery and equipment, flooding, and damage to the hull. The on-board notification process is as follows: Notify the person in charge of the Marinetech Department, collect relevant reports, and let designated person (DP) determine whether to form an emergency response team, contact relevant units, take relevant contingency countermeasures, and establish an effective communication mechanism with the ship until the case is closed.

Risk type Description Mitigation actions or countermeasures
Legal risks Changes in domestic and international regulations, such as those related to low-sulfur fuel and carbon emissions
  1. To reduce SOx emissions, the Company has installed SOx scrubbers as listed below and purchased low-sulfur fuels to comply with environmental protection regulations.
  2. The new design is in line with the concept of ship optimization and the Energy Efficiency Design Index (EEDI) of the International Maritime Organization (IMO). The ship design is based on the concept of ship optimization to improve propulsion efficiency while aiming to achieve equivalent ship speed without reducing engine performance and to reduce fuel consumption, thereby achieving emission reduction.
  3. Continuously monitor and measure the carbon dioxide emissions of the fleet and work to reduce the emissions by 1% or more as compared to that in the prior year. The medium- and long-term target of the on-board environment is to reduce CO2 emissions by 40% from the level in 2008 by 2030.
  4. Continuously improve the efficiency of fuel consumption on board by replacing old ships with new ones.
Marine accident risk Protection of safety of maritime navigation to achieve the goals of personnel, ship, and cargo safety
  1. The Company issues a notice requesting the fleet to fill out the ship safety compliance checklist on a regular basis. In addition, MAT checks the implementation status on board on a regular basis through regular internal/external audits and self-inspections.
  2. Comply with the procedures as in the SE manual to develop and implement a ship safety management system.
  3. Convene a safety management review meeting to inspect the performance of safety and environmental issues.
  4. Continuously improve the safety and environmental management skills of onshore and on-board personnel, including organizing onshore emergency drills to get prepared for safety-related emergencies.
  5. Send notices and case studies prepared by MAT to the fleet to prevent further losses in the aftermath of an accident.
Risk of crew injury Protection of employees' safety and health to reduce the occurrence of occupational diseases
  1. Assess all known risks related to ships, crew, and the environment to establish appropriate protective measures; provide safe operating procedures and work environment for on-board operations; maintain effective communication among all employees of the Company; as such, everyone can properly understand their own safety and the environment in which they are.
  2. Make appropriate arrangement of/adjustment to manpower allocation so that the crew can maintain sufficient rest for working shifts as per the Maritime Labor Convention (MLC).
  3. Send notices and case studies prepared by MAT to the fleet to prevent the same accident from recurring in the aftermath of an accident.
Cargo safety risks Incorrect filing and concealment of dangerous goods, including any dangerous goods not declared as dangerous goods, any dangerous goods declared as non- dangerous goods, and the class of danger and UN number for dangerous goods not declared or declared incorrectly or falsely.
  1. Personnel training and awareness-raising activities:
    • Customers: Reduce customer incorrect filing and concealment of dangerous goods through continuously educating customers on the importance of honest filing by sales and booking personnel. Sales personnel need to visit customers from time to time to know whether the chemicals produced by each customer belong to dangerous goods, to manage the contents and packaging of customers' shipments from the source, thereby preventing customers from concealing or falsely declaring their products. Meanwhile, we will strengthen the awareness- raising activities regarding the norms and responsibilities for the dangerous goods.
    • Employees in all aspects of the Company: Offer education and training to allow employees to have a basic understanding of laws and regulations related to dangerous goods, thereby improving the overall quality and alertness of relevant personnel.
  2. Dangerous goods transportation safety management:
    • Establish a standard management system for dangerous goods: Set out restrictions on the contracted transportation of dangerous goods (list of restricted goods).
    • Strengthen the dangerous goods system: Review and screen data through computer systems. For details, please refer to Chapter 1.4.2 of the Annual Report.
Risk Management and Response Measures for Climate Change

Climate change is a global issue. As a guardian of the green earth, Evergreen keeps track of issues related to climate change and formulates environmental protection policies. Advanced marine technology is developed for fleet to maximize its load-ability and satisfy energy conservation targets, and dedicate efforts towards environmental protection together with suppliers.

Under the increasing threat of climate change, Evergreen identifies the opportunities and challenges brought about by climate change and extreme weather referring to the Task Force on Climate-related Financial Disclosures (TCFD). Furthermore, in response to severe weather that affect ship safety, such as rough sea conditions, typhoons, sea fog, sea ice and extremely low atmospheric pressure, are included in Evergreen's "risk management" assessment system. To set up disaster prevention plans, monitor the performances of preventive measures, and eventually reduce the risk of climate change, and seize potential opportunities, the relevant budgets are made.

In response to the possible impact of climate change, Evergreen has established the following operating procedures based on the four core elements, namely, governance, strategy, risk management, and indicators and goals:

operating procedures based on the four core elements, namely, governance, strategy, risk management, and indicators and goals
Analysis and Management of Risks and Opportunities Related to Climate Change
Issue: Changes in domestic and international regulations
Responsible units: Business Operations Dept., Marinetech Dept., Shipbuilding Dept., Supply Dept., and Maintenance Dept.
Type of Risk Transition risks
Duration of Impact Short- / Medium- to long-term
Object of Impact Fleet operation and management
Impact strength Low / Medium / High
Negative Impact and Financial Impact Increase in additional equipment installation costs and fuel costs.
Potential opportunities and financial benefits The new environmental protection regulations will lead to an increase in the investment cost of new ships, thereby replacing weaker carriers. For Evergreen Marine, this may reduce competition, and building an eco-friendly fleet can enhance the Company's positive image and increase potential future profits.
Management methods and countermeasures Install SOx scrubbers in the fleet or switch to low-sulfur fuel oil.
2020 performance The entire fleet complied with IMO's 2020 sulfur limit regulations.
Issue: Increased customers' awareness of environmental protection
Responsible units: Service Div., Asia Dept., and Finance Div.
Type of Risk Transition risks
Duration of Impact Short- / Medium- to long-term
Object of Impact Customers
Impact strength Low / Medium / High
Negative Impact and Financial Impact Environmentally-friendly equipment modification increases operating costs.
Potential opportunities and financial benefits Adopting eco-friendly and efficient equipment to reduce energy expenditure and improve the efficiency of both customers and the Company.
Management methods and countermeasures Enhance the innovative functions used by Evergreen Marine's Internet and EDI to reduce carbon emissions during operation.
2020 performance Performance of promotion of cloud bill of lading in Taiwan: The use of the cloud service in 2020 increased by 39% as compared to that in 2019.
Issue: Changes in energy policy and equipment requirements
Responsible units: Shipbuilding Dept., Marinetech Dept., Supply Dept., and Maintenance Dept.
Type of Risk Transition risks
Duration of Impact Medium- to long-term
Object of Impact Company assets, such as engines, generators, and boilers of self-owned ships
Impact strength Medium
Negative Impact and Financial Impact
  • The use of low-sulfur fuel oil is likely to increase the probability of equipment damage and shorten the maintenance cycle for the normal operation of the equipment.
  • Increase in the operating costs.
Potential opportunities and financial benefits Corporate environmental image will be enhanced to attract customers with higher environmental awareness.
Management methods and countermeasures Install eco-friendly SOx scrubbers to meet the requirements of environmental protection regulations as required by law.
2020 performance Ships without modified SOx scrubbers adopted low-sulfur fuel oil in compliance with regulations, and 2,083,816mt of low-sulfur fuel oil was purchased.
Issue: Changes in energy policy and equipment requirements
Responsible units: Shipbuilding Dept., Marinetech Dept., Supply Dept., and Maintenance Dept.
Type of Risk Physical risks
Duration of Impact Short-/Medium- to long-term
Object of Impact Evergreen Marine / Suppliers
Impact strength Medium
Negative Impact and Financial Impact
  • It may cause damage to containers on board and onshore, and lead to an increase in the cost of raw materials, a decrease in production capacity, and interruption of the supply chain.
  • Rising container costs may impact operating costs.
Management methods and countermeasures Extend the service life of containers.
2020 performance The service life of the Group's containers were changed from 10 years to 13 years.
Issue: Increased frequency of extreme weather events
Responsible units: Business Operations Dept., Business Operations Dept., Finance Div., and Logistics Div.
Type of Risk Physical risks
Duration of Impact Short-/Medium- to long-term
Object of Impact Evergreen Marine / Suppliers
Impact strength Medium
Negative Impact and Financial Impact Due to inland snow, floods, hurricanes, and suppliers' changes in transportation routes, the transportation time is lengthened and fuel costs are increased.
Management methods and countermeasures
  • Maintain close contact with all suppliers and ask them to propose a new route for our review, thereby providing customers with real- time information.
  • Set standards for rough sea conditions for cancellation of maritime navigation, select high-risk ships in daily inter-departmental meetings through timely ship position monitoring, and cooperate with Japan's Weather News Information (WNI), adopt weather information and navigation suggestions provided by WNI, as well as work with on- board, on-shore, and WNI personnel to jointly develop and set out countermeasures to monitor the effectiveness of the measures for cancellation of maritime navigation.
2020 performance
  • In 2020, maritime navigation was cancelled in response to a total of 23 typhoons. WNI provided suggestions to 187 ships regarding maritime navigation cancellation, and no damage was suffered caused due to typhoons.
  • The route to avoid sea ice and iceberg was updated daily as a reference for navigation route planning. In 2020, there was damage caused by sea ice.
  • In 2020, no collision occurred due to sea fog.
  • From January 2020 to December 2020, there had been 60 explosive cyclogeneses formed in the North Pacific waters; the Company had provided suggestions to a total of 217 ships to avoid the routes in the area. There had been 56 explosive cyclogeneses formed in the North Atlantic waters; the Company had provided suggestions to a total of 37 ships to avoid navigation to avoid the routes in the area.
  • During this period, Ever Liberal suffered cargo damage near Japan. In response to the current weather situation, WNI has upgraded the route risk assessment system and paid more attention to the risk indicators, such as Synchronous/Parametric rolling in the routes.
Issue: Response to the government's promotion of green energy policy and development of green bonds
Responsible unit: Finance Div.
Type of Risk Market opportunity
Duration of Impact Medium-/Long-term
Object of Impact None
Impact strength None
Negative Impact and Financial Impact Complying with environmental regulations will enhance the Company's environmental image, improve energy efficiency, and reduce energy costs.
Management methods and countermeasures Compare the cumulative execution amount with the account statement every month, confirm that there is no fund paid for the purpose other than the project, track the execution progress, and confirm the flow of the bond payments.
2020 performance
  • The Company issued a green bond of NT$2 billion on June 27, 2018, which was certified by the third-party certification agencies, namely DNV GL and PwC Taiwan.
  • The funds will be used to support the relevant capital expenditures for the purchase and installation of protection equipment for eco-friendly marine fuel. By installing such equipment, we reduced the SOx emissions during ship navigation, thereby reducing air pollution and alleviating the impact on the environment.
  • The Company planned to start the installation in the third quarter of 2018 and will complete the installation in the second quarter of 2021. After the equipment is fully replaced, it is estimated that around 17,927 tons of SOx emissions will be reduced each year. As of the end of 2020, 65.66% of the installation project was completed. The actual cumulative expenditure amounted to NT$1,433,394,000, which was for the purchase of equipment for eco-friendly fuel oil.