Corporate Governance

Risk management

The Company is engaged in derivatives trading, and its risk management scope and risk management measures to be adopted are as follows:

  1. Credit risk management: The object of the transaction is limited to financial institutions and futures brokers with a good reputation and the ability to provide professional information.
  2. Market price risk management: The possible losses arising from future market price fluctuations of derivatives are uncertain. Therefore, the stop loss setting should be strictly adhered to after the position is established.
  3. Liquidity risk management: To ensure the liquidity of trading commodities, the financial products with higher liquidity are mainly selected. The financial institutions entrusted with transactions must have sufficient equipment, information, and trading capabilities, and can conduct transactions in any market.
  4. Cash flow risk management: To ensure the stability of the Company’s working capital turnover, the Company’s source of funds for derivatives trading is limited to its own funds, and its operating amount should consider the funding needs of the forecast cash receipts and payments in the next three months.
  5. Operational Risk Management:
    1. Should strictly abide by the authorization limit and operating procedures, and include internal audit operations to avoid operational risks.
    2. Traders engaged in derivatives and confirmation, delivery, and other operators shall not concurrently serve each other’s roles.
    3. Risk measurement, supervision, and control personnel shall belong to different units from the above-mentioned personnel and shall report to the board of directors or to senior executives who are not responsible for transactions or position decision-making.
  6. Legal Risk Management:
    1. Any contract documents signed with financial institutions should use international standard documents as much as possible to avoid legal risks.
    2. Non-standardized documents signed with financial institutions should be inspected by professionals from foreign exchange and legal or legal counsel before they can be formally signed.
  7. Commodity risk management:
    Traders should have complete and correct professional knowledge about the derivative products to be traded and require financial institutions to fully disclose product risks to avoid losses caused by the misuse of derivative products.

Regular evaluation method and abnormal situation handling

  1. The position held by the financial unit engaged in the derivatives exchange shall be assessed at least once a week, but if it is necessary for the business to conduct hedging transactions, it shall be assessed at least twice a month, and the assessment report shall be submitted to the senior executive authorized by the Board of Directors.
  2. Supervise the transaction and profit and loss situation and take necessary countermeasures when any abnormality is found. Authorized senior executives shall report to the board of directors immediately to decide whether to terminate the relevant transaction contract.

Internal audit system

The Company’s internal auditors should regularly understand the adequacy of the internal control of derivatives transactions and audit the transaction department’s compliance with the processing procedures for derivatives transactions on a monthly basis and prepare audit reports. If any major violations are found, they should be notified in writing to each independent director.

Create a reference book

When the Company engages in derivative commodity transactions, it shall establish a “reference book”, and the types, amount, date of approval of the board of directors, and matters that should be carefully evaluated shall be posted in the reference book.