ESG Report 2022-2023 - Flipbook - Page 23
HIGHLIGHTS
INTRO
ESG MANAGEMENT SYSTEM
PRIORITY AREA
APPENDIX
Hankook Tire & Technology ESG Report 2021/22
23
Risk Management
Risk Management
In line with mounting uncertainties in the business landscape,
Financial risks
employ currency hedging to use financial instruments within
operate the Global Cash Management System for integrated
In 2021, the global economy initiated the recovery cycle along
the approved limits to address the currency exposure that has
fund management across all our regional headquarters and local
already occurred.
subsidiaries, and have secured credit lines at financial institutions
Hankook Tire & Technology is further bolstering its risk
management and emergency response activities. We engage
in systemic monitoring and the prevention of a wide array of
financial/non-financial potential risks, work on multiple fronts to
establish a business continuity management system and have
prepared our fire/emergency responses.
with the development and dissemination of COVID-19 vaccines.
The supply of immense liquidity across countries, however,
in alignment with cash pooling to preemptively brace for
sustained inflationary pressure, which increased volatility in the
Liquidity risk
real economy which also elevated the price of raw materials and
We take a global perspective in managing the borrowing,
gave way to a shortage in freight space. Amid such challenging
liquidity, and short/long-term cash flow of our global
Emerging risks
conditions, Hankook Tire & Technology flexibly responds to
headquarters and overseas subsidiaries. We regularly forecast
Natural rubber shortage ― Around 90% of the natural
external factors through continuous risk management. We
our future cash flow to preemptively manage global liquidity
rubber produced globally is used to manufacture tires. This
monitor and continuously manage our financial costs and F/
and take a more conservative stance in liquidity management
makes rubber an extremely critical material for Hankook Tire
X position to minimize any risk of exposure to abrupt market
when faced with turbulent and quickly shifting financial market
& Technology. While the global tire market is expected to
changes. We also engage in internal/external communications
conditions to strengthen the stability of our financial structure.
continuously expand, the production of natural rubber remains
to swiftly share market information to promptly identify
We also adopt integrated liquidity management systems, such
steady. In particular, natural rubber takes more than six to seven
fluctuations in the financial market and assist management with
as cash pooling, to control liquidity across various localities.
years to reach the production phase and this hinders a flexible
efficient decision-making.
Cash pooling allows for the real-time sharing of funds between
response to short-term consumption increases. Furthermore,
companies facing fund shortages with those who have a surplus,
more than 80% of natural rubber is produced in just three
Currency risk
and helps minimize liquidity risks and reduce the burden of fund
major countries. This significantly impacts the reliability of
In line with our worldwide broadening of sales operations,
operations and financial costs. We take a step further to actively
natural rubber sourcing as issues in these nations (environment,
additional liquidity-related risks.
we are now dealing in 31 foreign currencies, including the
USD and the euro. To minimize relevant risks, we deal in local
Hankook Tire & Technology’s Risk Management System
currencies for current transactions on imports and exports
for sales operations and in making financial transactions on
deposits and borrowings. In accordance with the principle of
matching currency denominations for collections and payments,
we diversify currency risks and minimize our F/X positions.
Risk Management
Risk Monitoring
Jeongdo Management
Committee
Audit Committee
If our F/X positions exceed the set limit in spite of our best
efforts, they are managed in conformity with our currency risk
Audit Team
management guidelines that stipulate the definition of currency
risks, responsible employees, management procedures, and
hedge ratios. The Financial Risk Management Committee meets
on a quarterly basis to develop region/currency-specific F/X
risk response strategies. While we adopt natural hedging that
matches foreign currency assets with foreign currency liabilities
as the fundamental currency management principle, we also
Financial risks
Non-financial risks
Business risks
Operational risks
Currency risk
Liquidity risk
Internal accounting
Environment
Climate change
Supply chain management
New business
Industrial innovation
Employees
Safety
R&D
Compliance management
Internal Control Team