Risk Management Mechanism

The purpose of risk management is to protect and enhance the value of the company, to have a structured and systematic assessment of the existing and potential risks that may be faced, and to make timely corresponding decisions in line with the company's operating goals and strategies, thereby contributing to continuous improvement. As a global industry leader, Advantech has always paid attention to and promoted major strategies and operational risk management.

Advantech has formulated risk management policy and business continuity plan to prepare for possible business interruption risks, goodwill or various emerging risks, to define operation procedures when risks occur to minimize the possible impact and impact when risks occur, and to achieve follow-up correction and management.

In addition, in response to various related risks, Advantech strives to provide transparent and timely message delivery and communication to stakeholders who may be affected.

Recent Enhancement

In view of the rapid changes in the global industry, international situation, and the wave of digitization, as well as the impact of the COVID epidemic and information security incidents, Advantech believes that it is necessary to strengthen the existing risk management mechanism. Therefore, at the end of 2020, we re-examined risk management governance structure, composition and operation of the risk management team, as well as the risk management processes, so that to promote in a more systematic and structured manner from 2021.

The board of directors and the audit committee are the highest governance entity for risk management, the risk management team is responsible for implementing risk management processes and monitoring of risk mitigation execution quarterly, while the accountable managers are responsible for formulating response measures and actual implementation of risk mitigation approach.

Major processes of Advantech risk management may refer to below:

2021 Risk Map
Risk Management Policy and Procedures (include governance and organization structure)
2021 Risk Management Scope and Operation Update

Time Forum Report/Discussion Agenda
2021.1.20 Risk Mgt Team Risk items count and summary
2021.3.5 Board Meeting Risk mgt. mechanism enhancement proposal
2021.4.15 Risk Mgt Team Risk Mgt Policy and Procedures, single production site risk, etc.
2021.4.29 Board Meeting Approval of Risk Mgt Policy and Procedures
2021.4.29 Audit Committee Single production site risk
2021.7.30 Audit Committee Material shortage and related mitigation, cyber security calendar
2021.10.15 Risk Mgt Team Cyber security risk management, Business Continuity Plan revision, etc.
2021.10.29 Board Meeting Risk mgt scope and operation update
Cyber security risk management
Emerging Risk

Risk Item Paradigm Shift related to Industrial IoT Platform
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Talents Shortage for IoT Industry and Advantech's transformation
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Description of the Risk Emerging risk derived from IoT industry paradigm shift:
  • The future of IoT industry opportunities are in application, consulting and services
  • Customer shift focus from IoT platforms to IoT-enabled applications
Advantech businesses are transforming from Phase I IPC related product to Phase II IoT Platform and Phase III IoT solutions and services
There is risk that new talent competition and shortage are both significant.
Impact to Advantech Advantech launched IoT platform called WISE-PaaS, which has gradually gained market awareness, however the risk still bring the following impacts:
  • Competition is more intense
  • Falling short of customer expectations
  • Not fast enough to catch up market changes
  • Hardware engineer shortage owing to unbalanced supply and demand
  • Innovated talents shortage in Phase II & III businesses such as AI and cloud expert, SW engineers, go-to-market veteran, etc.
  • Talent development needed to shorten the gap between Supply and Demand
Mitigation actions
  • Formation of solution BUs
  • Encouraging close partnerships
  • Investment in IoT solution providers
  • IoT solution ready systems
  • Recruit talent for IoT services
  • Building and growing an online sales business
  • Establishment of Advantech Service+
  • Establishment of EBO (Emerging Business Opportunities) Team
  • Establishing Sustainability & Development Committee & Talent Lab Committee
  • Talent recruiting program: college recruiting, Elite Champion, referral, etc.
  • Talent development program: Elite LEAP Workout, Elite mentoring Program, training & certification, etc.
  • Establishing digital HR: enhance HR three-pillar model via upgrading HR information system
Information Security Risk Structure
  • Information Security Policy
  • A cross-departmental Information Security Governance Team is directed by the general manager of the company, which is promoted by the quality control and information security team, and coordinated information security issues of information technology, physical environment, product information, supply chain, and regulatory compliance.
  • The Information Security Governance Meet is held every six months and regularly reports the progress to the Risk Management Committee.

Organization Chart of the Information Security Governance Team

  • Information Security Team
    • Planning the security strategy and guidelines for the company's overall information architecture.
    • Establish and maintain the information security protection mechanism of the IT environment of the company.
    • Notification and handling of IT information security incidents.
  • Factory Security Team
    • Plan and implement information security management procedures in the factory.
    • Establish and maintain the company's OT environment information security protection mechanism.
    • Notification and handling of OT information security incidents.
  • Product Security Team
    • Plan and implement various control measures in the product safety development life cycle.
    • Respond to information security issues related to processing products.
  • Supply Chain Security Team
    • Identify information security risks in the production supply chain.
    • Plan and implement various control measures for related risks.
  • Supply Chain Security Team
    • Identify information security risks in the production supply chain.
    • Plan and implement various control measures for related risks.
  • Compliance Team
    • Assist and ensure that the company's operations and products meet the requirements of information security and privacy protection laws and regulations.