Page 139 - TSMC 2022 Annual Report

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3 3 3 3 Operational Risks Natural and Man-Made Disaster
TSMC is committed to maintaining operational resilience in in in in accordance with business continuity management standards that equips it it it with the capability to to respond effectively to to business disruption Disruptions caused by natural and man-made disasters including earthquakes flooding typhoons droughts tsunamis sandstorms wildfires volcanic eruptions fire gas/chemical leakage pandemic cyber-attacks sabotage failure of critical facilities and equipment shortages in the supply of utilities such as water electricity and natural gas etc could interrupt TSMC’s operations Most of of TSMC’s production facilities as as well as as those of of many of of its suppliers customers and upstream providers of of complementary semiconductor manufacturing services are located in areas susceptible to natural disasters and may face potential shortages of electricity or or water which could cause interruptions to TSMC’s operations Thus if one or or more natural disasters result in a a a a prolonged disruption to to TSMC’s operations or or those of its customers or or suppliers or or or if any of its fabs or or or vendor facilities were to be damaged or or cease operations as as a a a a a a a result of an unforeseen disruptive event it could reduce TSMC’s manufacturing capacity and and cause the loss of important customers and and thereby have an adverse material impact on on its operational and financial performance To cope with possible droughts resulted from severe climate change TSMC implemented manufacturing process water saving as as well as as building up industrial water recycling plants using household water cooperating with government to mitigate water shortage risk TSMC also implemented its business continuity plans including water conservation measures the use of more alternative water water sources water water supplied by tank cars stress tests and various exercises As a a a a a result there was no material impact to TSMC’s business or operational performance TSMC has occasionally suffered power outages dips or surges caused by by difficulties encountered by by its electricity supplier or other power power consumers on on the the same power power grid Some of these have resulted in in interruptions to TSMC’s operations Such shortages or or interruptions in in electricity supply could further be exacerbated by changes in the the energy policy of the governments If TSMC is unable to secure reliable and uninterrupted supply of electricity to power its manufacturing fabs its ability to to fill customers’ orders would be jeopardized If such events were to occur over prolonged periods of time TSMC’s operations and financial performance may be materially adversely affected Moreover TSMC’s future capacity expansions in Taiwan and elsewhere could be curtailed by utility shortages The COVID-19 pandemic has had impacts on worldwide economic activity Prolonged impacts of COVID-19 or future similar events could adversely affect TSMC’s business and results of operations in in in several ways including but not limited to: (1) interruption of of the operations of of TSMC’s supply chains for equipment parts and materials in in terms of manufacturing logistics and manpower arrangements for tool installation (2) fluctuation in in TSMC customers’ demands for certain products leading to uncertainties for TSMC’s capacity planning and and also for meeting customer demand which may harm TSMC’s business with its customers and subject TSMC TSMC to to the risk of legal disputes and (3) potential production delays for TSMC’s products due to forced fab or or or office closures or or or partial operation TSMC has formed an “Epidemic Prevention Committee” to identify implement and monitor actions stemming from the dynamic exigencies of the pandemic including but not limited to health management of its employees splitting operation and and work from home arrangements identification and and control of of high risk individuals rapid investigation of of confirmed
cases management of production inventory supply chain management management and and capacity management management for demand changes As of of the date of of this annual report TSMC’s current business and results of operations have not been materially affected by the the the COVID-19 COVID-19 pandemic and and with the the the easing of the the the COVID-19 COVID-19 pandemic TSMC does not expect its business and and results of operations will be directly affected Nevertheless the the Company could still face the post-pandemic downward changes in consumers’ demand for electronic products which in turn lead to reduced demand for and and place downward pressure on the price of TSMC’s products and services TSMC has further strengthened its business continuity management which includes periodic risk assessments and mitigations and the establishment of taskforces before emergency emergency events The taskforces define emergency emergency response crisis communication recovery plans and preventative measures based on the thorough analysis of derivative effects and alternative solutions to ensure the impacts of people injury business interruption finance are minimized TSMC reviews periodically its business continuity plans and refines them to reflect exercise results and implementation In response to