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 market risks, operational risks, financial risks, operation and strike risks, cargo safety risks, sanction risks, credit risks, climate change, pandemic risks, information security risks, spare parts procurement risks, ship docking risks and fuel procurement risks management.
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||
|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.||
|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.|
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:
- Monitor complaints, unqualified items, and resource problems that may have a negative impact on the system.
- Examine the effectiveness of the system through an internal audit process.
- 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||
|Marine accident risk||Protection of safety of maritime navigation to achieve the goals of personnel, ship, and cargo safety||
|Risk of crew injury||Protection of employees' safety and health to reduce the occurrence of occupational diseases||
|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.||
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:
Risk and Opportunities Related to Climate Change
|Issue||Changes in domestic and foreign regulations||Increased customers' awareness of environmental protection|
|Type of Risk||Transition risks||Transition risks|
|Duration of Impact||Short- / Medium- to long-term||Short- / Medium- to long-term|
|Object of Impact||Fleet operation and management||Customers|
|Impact strength||Low / Medium / High||Low / Medium / High|
|Negative Impact and Financial Impact||Increase in additional equipment installation costs and fuel costs||Environmentally-friendly equipment modification increases operating 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.||Adopting eco-friendly and efficient equipment to reduce energy expenditure and improve the efficiency of both customers and the Company.|
|Management methods and countermeasures||Install SOx scrubbers in the fleet or switch to low-sulfur fuel oil||Enhance the innovative functions used by Evergreen Marine's Internet and EDI to reduce carbon emissions during operation|
|2020 performance||The entire fleet complied with IMO's 2020 sulfur limit regulations||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 policies and equipment requirements||Increased frequency of extreme weather|
|Type of Risk||Transition risks||Physical risks|
|Duration of Impact||Medium- to long-term||Short / medium / long-term|
|Object of Impact||Company assets, such as engines, generators, and boilers of self-owned ships||Evergreen Marine / Suppliers|
|Negative Impact and Financial Impact||
1. 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.
2. Increase in the operating costs
1. 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.
2. Rising container costs may impact operating costs
|Potential opportunities and financial benefits||Corporate environmental image will be enhanced to attract customers with higher environmental awareness||
1. Issue green bonds to purchase eco-friendly equipment
2. Use energy efficient equipment to reduce energy consumption
3. Promote innovative functions such as Internet and EDI to improve work efficiency
|Management methods and countermeasures||Install eco-friendly SOx scrubbers to meet the requirements of environmental protection regulations as required by law.||Extend the service life of containers|
|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.||The service life of the Group's containers were changed from 10 years to 13 years.|