The Board of Directors plays a key role in helping the Company identify and manage economic risks. The risk management organization periodically briefs the Audit Committee on the ever-changing risk environment facing TSMC, the key points of the Company’s enterprise risk management, and risk assessment and mitigation efforts. The Audit Committee’s Chairperson also reports to the Board of Directors on the risk environment and risk mitigation actions to be taken.

TSMC and its subsidiaries are committed to proactively and cost effectively integrating and managing strategic, operational, financial and hazardous risks that represent potential negative consequences to operations and financial results. TSMC operates an enterprise risk management (ERM) program based on both its corporate vision and its long-term, sustainable responsibility to both industry and society. ERM seeks to provide the appropriate management of risks on behalf of all stakeholders. The Company maintains a risk map that assesses likelihood and impact severity of risk events on the Company’s operation, and is used to identify and prioritize risk controls and implement various controls and treatment strategies in response to risks as they are identified.

The TSMC risk management organization is composed of RM Steering Committee, RM Executive Council, RM Program and RM Task Force. The risk management framework including risk identification and assessment, risk control and mitigation, risk response, risk monitoring and reporting is applied to identify and prioritize risk controls, implement various controls and risk treatment.

 

Scope of Risk Management

Strategic Perspective

  • Regulatory change and compliance
  • Government policies
  • Changes in technology and industry
  • Technology development and competition
  • Demand and capacity expansion

Operational Perspective

  • Sales and purchasing concentration
  • Information security
  • Intellectual property rights
  • Recruitment of qualified personnel
  • Corporate image

Financial Perspective

  • Interest rate, foreign exchange, inflation, deflation and taxation
  • External financing
  • High-risk and/or highly leveraged investments; financial derivative transactions
  • Strategic investments

Hazardous Events

  • Earthquakes and natural hazards
  • Fire or chemical spills
  • Climate change
  • Utility supply

 

Organization Functions

Risk Management Organization Functions

 

The Implementation in 2020

In the fourth quarter of 2020, the risk management organization briefed the Audit Committee on the ever-changing risk environment facing TSMC, the focus of the Company's enterprise risk management, and risk assessment and mitigation efforts. The Audit Committee's chairperson briefed to the Board of Directors on the risk management and risk mitigation actions to be taken.