Sustainability Risk Management

  • Fubon Financial Holdings has instituted a robust risk management structure and sound risk management policies and regulations. In a report issued on Nov. 23, 2017, Taiwan Ratings Corp. noted that “Fubon Financial Holdings’ enterprise risk management is adequate and its risk controls strong” .
  • Continued to enhance management of emerging risk and climate change risk; in 2017, reports were presented to the Fubon Financial Holdings management team on the emerging risk topics of "Technological Risk: Data Fraud or Theft" and "Economic Risk: Asset Bubbles in Major Economies" and associated response measures as well as potential risks and opportunities caused by climate change.

Sound Risk Management Structure and Policies

Fubon Financial Holdings has established a sound risk management framework consisting of the Board of Directors, an Audit Committee, a Risk Management Committee under the chairman of the board, a Personal Information Protection Committee and a Risk Management Division. The board is responsible for overseeing the effective implementation of risk management systems and control mechanisms. The Audit Committee assists the board in supervising risk management practices.

The Company has formulated comprehensive risk management systems, policies, and rules encompassing the entire spectrum of risk management systems including market risk, credit risk, country risk, operational risk, asset and liability risk, liquidity risk, insurance risk, reputation risk, emerging risk, and climate change risk which are consistently followed by subsidiaries, ensuring that various types of risk are effectively identified, measured, monitored, and managed.


Risk Management Model of Three Lines of Defense

The Company has adopted a risk management model which consists of three lines of defense, implemented comprehensive risk management, established relevant risk indicators, risk monitoring points, and an early-warning mechanism. In addition, the Company has formulated limit controls based on risk attributes and adopted a dual qualitative and quantitative approach to regularly evaluate various risks and also actively monitors and manages various types of significant risks, and risk management reports are presented to the Risk Management Committee, Audit Committee, and Board of Directors on a regular basis.


Enterprise Risk Management (ERM)

Fubon Financial Holdings adopts an integrated enterprise risk management framework. The scope of risk management encompasses various risks including market risk, credit risk, country risk, operational risk, asset and liability risk, liquidity risk, insurance risk, reputation risk, emerging risk, and climate change risk. Fubon Financial Holdings’ enterprise risk management is adequate with strong risk controls.


Enhancing Management of Emerging Risk and Climate Change Risk

Emerging Risk Management

The types of emerging risk and their frequency of occurrence are continuously increasing around the world. As a result, effectively identifying and assessing emerging risk and formulating response measures have become important issues for financial institutions to tackle. Each year, Fubon Financial Holdings references the Global Risks Report published by the World Economic Forum (WEF), examines and revises emerging risk assessment and management forms, and provides this information to subsidiaries so they can perform annual emerging risk assessments and establish corresponding risk response measures. The Company applies a bottom-up approach based on the emerging risk management procedures to compile emerging risks facing subsidiaries and establishes a list of emerging risks facing Fubon Financial Holdings. After conducting a thorough assessment, emerging risks are screened to determine those which could have an impact on Fubon Financial Holdings, risk response measures are formulated, and reports on these findings are presented to the management team.

In 2017, reports were presented on emerging risks facing Fubon Financial Holdings including “Technological Risk: Data Fraud or Theft” and “Economic Risk: Asset Bubbles in Major Economies”, and suitable risk response measures were formulated.

Risk Type Risk Impact Mitigation Measures
Technological Risk Data fraud or theft Data fraud or theft could result in data and personal information leaks, affect the Company’s information security and even trigger a corporate reputation crisis.
  • Advanced persistent threat (APT) prevention systems introduced to detect and prevent unknown malicious threats from the outside.
  • Big data analysis performed on data obtained through the information security management system to detect and reduce the risk of data fraud or theft.
  • Employees’ online behavior and data traffic volume are continuously analyzed; real-time reporting and blocking of suspicious actions help prevent data theft.
  • Steps taken to ensure that anti-virus software can prevent malware attacks; software added to personal computers to detect malware.
  • Encryption and content filtering mechanisms used in systems protecting e-mail and information security to prevent the leakage of personal information.
  • Social engineering prevention drills held regularly; information security/personal information training and controls strengthened; and simulations of emergency responses to personal information breach conducted.
Economic Risk Asset bubbles in major economies Asset bubbles in a major economy can lead to increased turmoil in financial markets (stocks, bonds, forex ), bringing the Company added risk and greater fluctuations in gains and losses, affecting its financial stability.
  • Sovereign credit ratings used to classify country risk, set country risk limits, and regularly monitor risk exposure levels.
  • Monitoring scope of financial markets expanded, off-hours real-time financial market warning mechanism extended to 24/7 coverage.
  • Forward-looking model created to estimate volatility of stocks, interest rates, exchange rates and products on a daily basis.
  • Diversified investment strategy adopted; various risk warning indicators and risk limits put in place and regularly monitored.
  • Value at risk, stress tests and other risk management mechanisms used regularly and results reported to the board of directors.

Climate Change Risk Management

The Global Risks Report 2017 published by the World Economic Forum (WEF) named climate change risk, which has been listed for several years in a row, as one of the top five risks that are likely to occur and can potentially have a significant impact.

Fubon Financial Holdings has formulated “Climate Change Management Principles” with an aim to actively promote measures on environmental protection, energy conservation, and carbon reduction, reduce greenhouse gas emissions, and promote green financial services to curb and adapt to the impacts of climate change. In addition, the Company established climate change risk management procedures and mechanisms in 2017, and incorporated them into its management principles. In addition, potential market condition changes induced by catastrophic events (e.g. earthquake, natural disaster) were added to scenario settings to simulate the impact of such events on equity risks, interest rate risks, and exchange rate risks. Stress tests were performed accordingly.

In 2017, the subsidiaries of Fubon Financial Holdings assessed potential risks posed by climate change and business opportunities, examined the risks caused by climate change, and proposed counter measures. In 2018, the subsidiaries went on to list the potential impact of each climate change risk on the Company (e.g. financial impact) as well as the plans and methods for the future. The subsidiaries assessed the effects of climate change in depth, and proceeded to strengthen and enhance climate change management on an ongoing basis.