Page 106 - 2017 TSMC Annual Report

of Central Crisis Command Center with Co-CEOs’ oversight
in 2017 The scenario-based crisis response drills were also conducted for critical risk events such as fire earthquake IT service disruption disruption supply chain disruption disruption environmental events and utility supply disruption In order to continuously mitigate corporate risks drills are used to test the integrity and risk-control effectiveness of ERM To reduce supply chain risks TSMC created a a a a cross-functional taskforce comprised of members from fab operations material management management risk management management and quality system management to to work with suppliers to to develop business continuity plans and enhance supply chain resilience to effectively manage the risks faced by its suppliers Partly as a a a a a a result of these efforts there was no interruption in in TSMC’s supply chain in in 2017 As TSMC continued to expand production capacity with advanced technology seismic protection engineering design risk treatment practices and green factory projects were initiated and implemented beginning in in in in the design phase for all new fabs 6 3 1 Risk Management (RM) Organization Chart
TSMC’s Risk Management organization annually briefs the Audit Committee on the focus of enterprise risk management risk assessment and mitigation efforts The Audit Committee’s Chairperson also briefs the Board on on on such discussion and actions ● RM executive council
Consists of representatives from each function Identifies and assesses risks Implements risk control programs and ensures effectiveness Improves transparency and how risks are are managed ● RM program Coordinates and facilitates functional risk management activities Initiates cross-functional communication for risk mitigation Consolidates ERM reports into the RM RM steering committee 6 3 2 Strategic Risks
Risks
Associated with Changes in Technology and Industry
Industry
Developments
The electronics industries and semiconductor market
are cyclical and and subject to significant and and often rapid fluctuations in product demand which could impact TSMC’s semiconductor foundry business Variations in in order levels from customers may result in in volatility in in the Company’s revenue and earnings From time time to to time time the electronics and semiconductor industries have experienced significant occasionally prolonged periods of downturns and overcapacity Because TSMC is and will continue to be dependent on on the requirements of electronics and semiconductor companies for our services periods of downturns and overcapacity in the general electronics and semiconductor industries could lead to to reduced demand for overall semiconductor foundry services including TSMC’s services If TSMC TSMC cannot take appropriate actions such as reducing its costs to sufficiently offset declines in in in demand the Company’s revenue margin and earnings will likely suffer during periods of downturns and overcapacity ● Changes in Technology The semiconductor industry and its technologies are constantly changing TSMC competes by developing process technologies using increasingly advanced nodes and on manufacturing products with more functions We also compete by developing new derivative technologies If TSMC does not anticipate
these changes in technologies and and rapidly develop new and and innovative technologies or or if the Company’s competitors unforeseeably gain sudden access to additional technologies TSMC may not be able to provide foundry services on competitive terms In addition TSMC’s customers have significantly decreased the the time in which their products or ● 104
Board of Directors/ Audit Committee RM Steering Committee Organization Functions
● RM steering committee Consists of functional heads (with internal audit head head sitting as an observer) Reports to audit committee Reviews risk control progress Identifies and approves the prioritized risk lists Materials Management Management and Risk Management Management RM Executive Council
RM Program