The company's entire risk management structure includes board members of each subsidiary, executive management, risk management departments, and each business unit. The company has established a Risk Management Center which is responsible for overall planning and execution. It provides overall direction for the activities of each subsidiary, including the risk management departments of Yuanta Financial Holdings, Yuanta Bank, Yuanta Securities and the risk management divisions of each of the other subsidiary.
In order to establish good risk control and solid business development, the board of directors has approved Risk Management Guidelines for the entire company, designed to implement a more comprehensive risk management control system.
In carrying out the company's risk management framework, an in-depth review of each type of risk is evaluated on an ongoing basis. Risks that the company confronts can be divided into the following categories:
Market Risk
Market risk represents the potential loss in value of portfolios and financial instruments caused by adverse movements in market variables such as interest rates, exchange rates, and change in the value of equity or goods, and can cause the risk of balance sheet and off-balance sheet loss. This kind of risk is managed through the company's risk management system, including establishing limit amounts for each quantifiable risk value (VaR calculations), effectively controlling risk.
Credit Risk
Credit risk is the risk of loss from obligor or counterparty default. The risk management policies of Yuanta have established its own internal rating system to ensure that credit risk exposures are adequately assessed and credit limits are properly established and approved.
Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed processes or systems, human factors, or external events. Yuanta manages these types of risks through maintaining a comprehensive system of internal controls, monitoring business activities by audit professionals, employing experienced staff, and emphasizing the importance of management oversight.
Legal Risk
The nature of legal risk can stem from the scenario of failure to comply with all government regulations. In addition, contractual agreements where items in the contract are inadequate or incomplete may render the contract ineffective or cause loss. Yuanta's Legal Department takes responsibility legal issues and for managing associated risks.
Liquidity Risk
Liquidity risk includes market liquidity risk and funding liquidity risk. Market liquidity risk is the risk of loss arising from potentially being unable to liquidate an asset in a timely manner at a reasonable price. Funding liquidity risk represents the risk of loss arising from being unable to raise funds with appropriate maturity and interest rate characteristics. These risks are managed according to the characteristics of each business, and appropriate measures taken to ensure liquidity objectives are maintained.Yuanta's risk management framework, combined with solid personnel and analytical infrastructure, work to ensure that the risks caused by the wide range and diversity of the company's business activities are effectively controlled.
