Risk Management

Although the Company has not yet established a Risk Management Committee, the audit unit prepares an annual audit plan based on risk assessment results and submits it to the Audit Committee and the Board of Directors for approval. The Company's annual audit projects cover eight major cycles of the Company's operations: sales and collection, purchase and payment, production, R&D, payroll, investment, financing, real estate, plant and equipment, as well as information security and various management control operations. A total of 87 audit projects were conducted in 2024. The results of the sampling audit of each project showed no violations of internal control regulations. In addition to submitting the audit report to the Chairman, the Audit Director will also present it to the Board of Directors. If the audit unit discovers any major violations or the company is at risk of significant damage, it will immediately prepare a report for review in accordance with regulations and notify the independent directors.

The company's risk assessment unit annually analyzes industry risk trends and holds regular risk management meetings with various departments. This process identifies potential operational risks across various dimensions, categorizes risk factors, and reviews the company's current response strategies and current status. This ensures that all potential risks remain within reasonable control and do not pose significant financial, reputational, or production impacts. In fiscal 2024, KUEN LING identified two major operational risks: climate change and cybersecurity. The table below outlines the company's management policies and response strategies for these risks.

Covering	Ways to deal with risks
Climate risks	1. Unstable water and electricity supply has impacted production and increased operating costs: With the goal of reducing annual water consumption per person by 12L, water consumption will be adjusted and water-saving devices will be installed. 2. Typhoons, floods, and droughts affect production, leading to financial losses and reduced revenue: (1) Establish a complete water monitoring mechanism to ensure that production is not affected by water shortages or water outages. (2) Implement emergency response training to reduce disaster losses. 3. As temperatures rise, electricity consumption increases, which in turn increases costs and carbon emissions: (1) Encourage people to turn off lights and keep devices off during non-working hours. (2) Develop an energy-saving electricity plan, setting a target of reducing electricity consumption by 7kWh/year per 10,000 yuan of output value. 4. Greenhouse gas emissions and carbon reduction equipment installation: promote paperless office and recycle paper.
Information security risks	1. Guideline establishment: The company's internal regulations stipulate that information security inspection controls are the guidelines for information security risk management. 2. System Development: In accordance with the information security risk management framework, the company has established intrusion prevention systems, email anti-spam systems, and endpoint anti-virus systems to gradually improve information security protection. 3. Off-site backup and disaster recovery mechanism: Regularly conduct off-site data backup system and disaster recovery mechanism drills to ensure data accuracy.

Covering

Ways to deal with risks

Climate risks

1. Unstable water and electricity supply has impacted production and increased operating costs: With the goal of reducing annual water consumption per person by 12L, water consumption will be adjusted and water-saving devices will be installed.
2. Typhoons, floods, and droughts affect production, leading to financial losses and reduced revenue: (1) Establish a complete water monitoring mechanism to ensure that production is not affected by water shortages or water outages. (2) Implement emergency response training to reduce disaster losses.
3. As temperatures rise, electricity consumption increases, which in turn increases costs and carbon emissions: (1) Encourage people to turn off lights and keep devices off during non-working hours. (2) Develop an energy-saving electricity plan, setting a target of reducing electricity consumption by 7kWh/year per 10,000 yuan of output value.
4. Greenhouse gas emissions and carbon reduction equipment installation: promote paperless office and recycle paper.

Information security risks

1. Guideline establishment: The company's internal regulations stipulate that information security inspection controls are the guidelines for information security risk management.
2. System Development: In accordance with the information security risk management framework, the company has established intrusion prevention systems, email anti-spam systems, and endpoint anti-virus systems to gradually improve information security protection.
3. Off-site backup and disaster recovery mechanism: Regularly conduct off-site data backup system and disaster recovery mechanism drills to ensure data accuracy.

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