Risk Management - Hon Hai Technology Group

Hon Hai Precision Industry Co., Ltd. (“Hon Hai”) places considerable emphasis on risk management and corporate governance, actively adhering to the relevant requirements outlined in the “Risk Management Best-Practice Principles for Taiwan Stock Exchange and Taipei Exchange listed Companies” and the “Corporate Governance Evaluation System” by the Taiwan Stock Exchange. Hon Hai has established a comprehensive corporate risk management framework, developed and implemented risk management systems, ensuring that business operations comply with relevant legal requirements. There are corresponding measures in place to effectively manage and respond to risks, protect investors’ interests and maintain market stability. Hon Hai is committed to continuously improving risk management and corporate governance to ensure sustainability and long-term development of the company.

Risk Management Policy

In August 2024, Hon Hai’s Board of Directors approved the Group’s “Risk Management Policy,” which aims to further enhance Hon Hai’s capability in managing and responding to risks. The approval of this policy reflects Hon Hai’s emphasis on risk management and underscores its commitment to risk management.
The “Risk Management Policy” clearly defines the following:

· Purpose and Objectives of Risk Management

It provides clear direction and guidance for risk management at Hon Hai, ensuring effectiveness and alignment of risk management activities with Hon Hai’s strategy and operational objectives.

· Sources and categories of risks

Hon Hai categorizes risk events into the following six (6) segments:

Strategic Risk (S)

This refers to risks arising from changes in business strategies /plans, their implementation, or alterations in the external business environment, which may impact Hon Hai’s long-term objectives.

Operating Risk (O)

This is defined as risks caused by Hon Hai’s daily operations, or other risks that may affect Hon Hai’s efficiency, productivity, reputation, etc., including information risk.

Human Resources Risk (H)

This involves various potential threats and challenges related to human resource management within Hon Hai.

Compliance Risk (C)

This pertains to risks resulting from changes in law and regulations, non-compliance with laws, integrity, and regulations or internal policies and procedures, as well as any legal actions/disputes.

Financial Risk (F)

This refers to risks that arise from transactions, financial activities, or the use of financial instruments or other risks that affect Hon Hai’s finances.

Emerging Risks (E)

This refers to risks that arise due to changes in society, science and technology, politics and economics, or the natural environment, which have significant uncertainty and potential impact. This includes environmental and sustainability risks, climate change or epidemic risks and the like.

· Organizational Structure of Risk Management

Define the allocation of responsibilities for risk management, including the roles and duties of all levels of management and relevant departments in risk management.

· Risk Management Procedure

Establish a systematic procedure to ensure that Hon Hai can continuously and proactively identify and manage the risks that it faces.

· Risk Management Activities:

accordance with the organization-formulated strategies and procedures, validate the effectiveness of the risk management activities, and achieve the objectives of risk management.

Through the “Risk Management Policy”, Hon Hai has demonstrated its commitment to establishing a comprehensive and effective risk management system, strengthening/enhancing its capabilities in the assessing and identifying risks. It is used to formulate management strategies for different types of risks, establish effective supervision and control measures, and ensure the effective implementation of risk management strategies. Hon Hai also emphasizes training in risk management, advocates a risk management culture, and enhances the awareness and capabilities of all employees regarding risk management.

Organizational Structure of Risk Management

In 2025, to advance the Group's corporate governance objectives and enterprise risk management (ERM) strategy, Hon Hai Technology Group continued to strengthen and refine its risk management framework, enhancing the effectiveness and transparency of its risk governance practices. Key initiatives include:

· Enhancing the Risk Management Framework

In alignment with the Group's “Risk Management Policy” and its “Risk Management Governance Structure, Roles and Responsibilities,” the Group provides regular updates to the “Risk Management Advisory Committee” and the “Audit and Risk Committee” on the progress and implementation of risk management initiatives. Responsibilities across all levels and business units are clearly defined to ensure effective execution and continuous enhancement of risk management efforts.

· Advancing Risk Reporting and Information Disclosure

The Group continues to build a clear and comprehensive risk disclosure framework that supports informed and forward-looking decisions by senior management and the Board.

· Strengthening Risk Culture and Training

The Group promotes risk awareness through ERM workshops, compliance briefings, and training programs, enhancing employees' ability to identify, assess, and respond to risks and fostering a strong risk management culture.

· Promoting the Application of Risk Information

After completing preparatory work in late 2024, the Group launched its Key Risk Indicator (KRI) program in the second half of 2025 to establish early-warning and monitoring mechanisms and enhance overall risk management efficiency.

· Aligning with International Standards and Best Practices

The Group benchmarks against international standards such as ISO 31000 and adopts leading industry practices to enhance its governance framework and maintain global competitiveness.

Organizational Structure of Risk Management

Note:

· Board of Directors

As the highest governance unit for risk management.

· Audit and Risk Committee

The Audit and Risk Committee is responsible for handling issues related to risk control and supervising overall implementation.

· Risk Management Promotion and Enforcement Unit

The Risk Management Promotion and Enforcement Unit includes the Risk Management Advisory Committee, representatives of the Risk Management Enforcement Team, and the Central Risk Management.

· Daily Operation Team for Risk Management

The Daily Operation Team for Risk Management is responsible for managing daily risks.

Risk Management Procedures

Hon Hai’s Risk Management Procedures include five (5) major processes: Risk Identification, Risk Analysis, Risk Evaluation, Risk Response, and Risk Oversight and Examination.

Hon Hai categorizes risk events into six (6) segments, including Strategic Risk, Operational Risks (including information Risk), Human Resources Risk, Compliance Risk, Financial Risk, and Emerging Risk (including environmental and sustainability risks, climate change or epidemic risks).
The analysis and measurement standards for risk incidents are divided into two segments: “degree of impact” and “probability of occurrence”. Hon Hai proposes appropriate quantitative or qualitative metrics based on its risk features as the basis for risk analysis.

Risk Identification, Analysis and Evaluation

In 2025, the Central Risk Management (CRM) unit conducted a risk assessment to identify severe risk items, including Compliance Risk, Geopolitical Risk, and Overseas Expansion and Transfer. Based on the assessment results, CRM initiated the risk-specific meeting mechanism on March 26, 2025. The initial focus of these meetings centers on Trade Compliance, with phased progress reviews conducted before gradually expanding to Supply Chain Support Measures. These efforts aim to help Hon Hai establish a systematic management platform and strengthen its trade compliance risk management and training capabilities, enabling the Group to address multiple challenges—including global regulations, tariffs, and regional supply chain restructuring—and to ensure timely and effective responses to an increasingly complex international trade environment.

Risk Management Operation and Enforcement Status

Hon Hai proactively advances the implementation of risk management policies. The main operations and enforcement status in 2025 are as follows:

· Institutionalizing Risk Management Processes and Regularizing Risk Reporting

i. Hon Hai has further strengthened the implementation of its systematic enterprise risk management procedures, which encompass five major steps: Risk Identification, Risk Analysis, Risk Evaluation, Risk Response, and Risk Oversight and Examination. These procedures have been further embedded across the organization, with regular reporting mechanisms established to ensure the sustained effectiveness of risk management.

ii. The Group's Audit and Risk Committee—composed entirely of independent directors—is responsible for addressing risk control–related matters and supervising overall coordination and implementation. The Central Risk Management (CRM) unit reports the status of the Group's risk management operations to the Audit and Risk Committee and the Board of Directors at least once a year, including identified severe risks and corresponding response measures.

· Establishing a Risk-Specific Meeting Mechanism to Strengthen Responses to Severe Risks

In 2025, Hon Hai continued to enhance its trade compliance capabilities by leveraging risk-specific meetings to strengthen its ability to respond to export controls, technology regulations, and trade requirements across various jurisdictions. The Group introduced tools such as system-based compliance monitoring and supply chain on-site audits to ensure alignment with local regulations across global operations. In terms of supply chain risk management, Hon Hai continued to advance supporting measures to address challenges arising from global supply chain restructuring, international trade frictions, and tariff barriers.

· Promoting Risk Management and Advocating Risk Culture Through Education and Training

In 2025, Hon Hai successfully conducted more than ten (10) risk management training sessions, with participation exceeding one thousand (1,000) employees. These training activities significantly enhanced employees’ insight into global risks and effectively transformed theoretical knowledge into actionable strategies. Through structured course designs and extensive case sharing, participants across all organizational levels gained a deeper understanding of the multi-dimensional nature of risks and strengthened their ability to identify, assess, and respond to various risks in their daily operations.

· Hon Hai’s Sustainability Development Team will continue to focus on responding to and managing climate change, advancing issues related to the environment, society and corporate governance through the ESG framework. This will strengthen Hon Hai’s efforts in mitigating the impacts of climate change and adaptation strategies.

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