| Code | Topic | Timeframe | Exposure level | Description of risk impact scenarios | Potential financial impact caused by the incident | Mitigations | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 10 | Flooding | Short-term (<3 years) |
High | The company's main warehouses and services are mainly locating in Asia, including Taiwan, Hong Kong, China and Singapore, other regions include El Paso and Texas in the United States which are under planning in 2024. Most of the warehouses are exposed to typhoons or heavy rains and floods. It is crucial to evaluate the frequency of typhoons or heavy rains and floods and severity of impact in the said regions. Serious flooding may cause road closures, power outages, flight delays, airport closures, etc., resulting in delivery delays or even supply interruptions. We reference the NGFS scenario to stimulate possible outcomes1. The analysis shows that the economic losses in China, the United States, and Germany will increase more than those in Taiwan and Hong Kong in 2030. | Losses from business interruptions, resulting in reduced sales revenue and increased operating costs (repair or replacement of operating equipment). We mainly focus on analyzing the Group’s main operating warehouses which are Taipei Neihu Tanmei Warehouse and Taoyuan Housheng Warehouse in Taiwan; Shatin Warehouse and U-Freight Warehouse in Hong Kong; warehouses in Shenzhen China; and Singapore Warehouse. If the above warehouses face operation interruption due to flooding, delay in shipping may cause losses in sales or assets. Based on the group's average daily shipping business in 2024 (estimated on a 366-day basis), the estimated losses are summarized as follows:
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Short-term:
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| 16 | Climate Change Triggering Increase in Insurance Cost | Short-term (<3 years) |
Medium | Due to the emergence of extreme weather events due to climate change, the five major U.S. insurance companies, namely Nationwide Insurance, American Family Life Insurance, National Insurance Company, Erie Insurance and Berkshire Insurance, have decided to terminate their underwriting business in natural disaster risk areas, exclude insurance items caused by different weather events, and increase monthly premiums and deductibles. | In the past two years (2023-2024), the cargo insurance costs for Weikeng Group accounted for 0.05% and 0.06% of the Group's sales revenue, respectively. Although insurance costs increased by 48% in 2024, this was primarily due to a 26% growth in sales revenue, which led to higher transportation frequency and increased amounts of inventory for purchases, sales, and stock. Additionally, unexpected heavy rainfall caused by climate factors resulted in water exposure incidents during cargo transportation. This raised the loss ratio for insurance companies, while global insurance markets adjusted premiums due to increased risks associated with climate change. Despite the significant rise in premiums, the ratio of insurance costs to sales revenue only increased by 0.01 percentage points, which remains within the Group's manageable range. | Short-term:
Medium to long-term:
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| 12 | Extreme Temperature Changes | Short-term (<3 years) |
Medium | Due to extreme climate events, examples of situations which may bring financial loss of the Company’s operation or supply chain disconnection (shutdown, delay in delivery of goods or raw materials, etc.) are as followed:
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In 2024, no losses incurred from business interruptions, however, types of financial loss resulted from reduced sales revenue or increased operating costs (repair or replacement of operating equipment) are listed as followed:
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Short-term:
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| 4 | Sustainable Aviation Fuel，SAF | Medium term (3 - 5 years) |
Medium | In response to the goal of net zero, various countries have established regulations related to aviation fuel, including the ReFuelEU Aviation Regulation, the United Kingdom's Sustainable Aviation Fuel Mandate, and Singapore's Sustainable Air Hub Blueprint. Our company's storage centers and shipping ports span across Taiwan, Hong Kong, China, Singapore, and other Asian regions, as well as El Paso, Texas, USA (a cooperation partner has been identified, but operations have not yet commenced). This will lead to an increase in transportation costs for our group. | As the transportation industry is regulated by laws and regulations and needs to introduce carbon reduction measures, the transportation industry is likely to face higher costs when sustainable aviation fuel is more expensive than general fuel, which will affect the billing method of users in the future. At present, the major international express companies that the Company cooperates with have introduced carbon reduction measures, but there is still no significant increase in transportation costs. In the medium to long term, with the assumption that the cost of SAF remains higher, and the courier companies that the Company cooperates with will only increase the usage of SAF sustainable aviation fuel and other carbon reduction measures, which will inevitably increase the Company's air freight costs. | Short-term: Continue to pay attention to the sustainable aviation fuel regulations, and communicate with logistics operators in both directions to ensure the efficiency of air freight costs. Medium to long-term: The product line structure should be adjusted in a timely manner and the transportation flight route should be optimized to maintain the profitability of each product line. |
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| 7 | Transition Demand for Low-Carbon Products and Services | Short term ( < 3 years) |
Medium | In response to global decarbonization and to meet low-carbon technology transformation, where low-carbon products and services are preferred, the company may invest additional capital expenditure in research and development on green technology related product line. If the development fails or the agent line does not progress or deliver performance, the Group's operating efficiency will be affected. | In the short term, R&D costs and machinery and equipment purchase costs will increase. If the market demand for the expanded product line rises, the product portfolio and revenue structure will be optimized in the medium and long term; if the product line does not deliver performance, the Company may face less revenue than anticipated. Weikeng's total R&D expenditure reached NT$ 119,182 thousand in 2024, within which 22.41% was dedicated to green product R&D, which meets the target of no less than 20% of total R&D expenditure. |
Short-term: Proactively engage with upstream and downstream partners to evaluate feasibility of joint R&D projects. Medium to long-term: Continuously cultivate talents related to green product solutions, and ensure we offer employee benefits and salary that are pari passu with the Company’s peers or introduce more attractive compensation packages to retain talents. In addition to the existing remuneration policy (salary + employee remuneration and other welfare plans, etc.), the Company appointed the trust department of Hua Nan Bank to establish the "Employee Stock Ownership Trust Plan" in August 2024, in hopes to help employees’ to form or enhance employees’ savings and investment habits. For each member of the Trust, an aggregated amount of self-withdrawal from monthly salary and an incentive disbursed by the Company with ratio range from 1:1 to 1:1.1 ratio. In December 2024, the Company’s approved the employee stock option plan (issued at a subscription price lower than the current price), has been approved which is scheduled to be issued in 2025Q1-Q2. The above provides the summary of most recent and future talents retaining plans. |
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Note:
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