Risk Management
The risks faced by enterprises are getting more diverse and complex. With the threats of globalization, geopolitical conflicts, diseases, and climate change, how to comprehensively grasp and manage major risks that have major impact on operations and profitability has become a crucial issue.
Shih Wei Navigation makes detailed lists of the opportunities and risks faced by the shipping industry and the corresponding strategies and actions taken based on our niches for every relevant department and unit targeting at the opportunities and risks in accordance with the scope of work. Risks related to ship operation are handled in accordance with relevant policies and procedures of International Safety Management (ISM).
The board of directors serves the highest guiding unit for risk management proposals. Every year after the compilation of the Sustainability Report completes, the Report is submitted to the board of directors. The content of the Sustainability Report includes risk management and climate risk management (see 3.3 Climate Change Adaptation and Climate Risk Management for details). On November 10, 2022, the Administration Department reported to the board of directors the promotion status of sustainable development and future strategies, planning, goals, and management approaches, which would be supervised by the board of directors. It is scheduled to promote the introduction of the risk management system in 2023. In the future, we hope to establish a task force on Risk Management to fully grasp and integrate various risk management issues in a systematic manner.
Risk Identification
In accordance with the principle of materiality and by referring to the TCFD suggestions, five major risk aspects were constructed, and 26 risk topics were identified. Coping strategies targeting at high risks were proposed. For detailed information concerning climate risk, please see Chapter 3).
Strategy Risk | Financial Risk | Operating Risk | Compliance Risk | Climate Change Risk |
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Strategic risk | Credit risk | Major labor safety incident | More stringent environmental regulations | Carbon tax/fee Cap and trade |
Increase ship utilization | Liquidity risk | Navigation risk | Policies and regulations that restrict the carbon emissions | Rapidly changing customer trends |
Investment risk | Market risk | Safe transport of goods | Increased insurance costs | |
Use green financing | US dollar collapse | Transnational operation, deficiency found by port state control | The exacerbation of extreme climate change intensifies the impact of weather and ocean phenomena on Earth | |
Replace and update existing ship equipment | Operational impact of COVID-19 or other infectious diseases | Sea level rise | ||
Talent recruitment and turnover risk | ||||
Information security risk | ||||
Reputation risk | ||||
Damage to the Company’s rights and interest for violation of integrity management behavior | ||||
Rising prices of oil and raw materials caused by intense geopolitics |
High Risks and Countermeasures
Major Risk Items | Significance and Impact | Coping Strategies |
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Navigation risk |
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Transnational operation, deficiency found by port state control | Port State Control is a regulation formulated by the IMO that requires all countries to inspect foreign ships to verify whether the ship and the status of its equipment meet the requirements of international regulations to ensure the safety of the ship operation. |
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Operational impact of COVID-19 or other infectious diseases |
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Rising prices of oil and raw materials caused by intense geopolitics |
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Carbon tax/fee Cap and trade | Net zero emission by 2050 has become an international trend. IMO will have to adjust its carbon reduction strategies and set more stringent ones while relevant laws and regulations at home and abroad will follow the measures. In the face of EU’s upcoming Carbon Border Adjustment Mechanism (CBAM), the operating costs will inevitably increase. |
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The exacerbation of extreme climate change intensifies the impact of weather and ocean phenomena on Earth | Extreme weather causes failed weather forecasting, which increases the risk of sea navigation or becomes the cause of speed claim. |
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