Corporate Governance and Risk Management

Kaori has implemented a business integrity policy with the Board of directors' approval and developed its own accounting policies and internal control system to enforce business integrity. Internal auditors have been assigned to audit compliance on a regular basis. Kaori has clearly stated its core values of innovation, quality, responsibility, and honor in external communications and established business integrity policies that all directors, senior managers, employees, and the controller must obey when carrying out their duties. The Company has established the "Business Integrity Code of Conduct," "Business Integrity Procedures and Behavioral Guidelines," relevant "Ethical Conduct Guidelines," "Investor Relationship Management Policy," and "Risk Management Policy" in accordance with the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies."

Building an Integrity Culture

Kaori upholds“innovation, quality, responsibility, and honor”and recognizes integrity as the core of its corporate culture. By implementing a set of ethical behavior guidelines, the Company enforces values such as fair trade, avoidance of improper gains, protection of business secrets, human rights, and compliance in all aspects of business operations. The Company has implemented rigorous preventive and disciplinary measures to enforce high ethical standards among employees and prevent violations when engaging in business activities. Misconduct reporting channels have also been set up, and any employee that violates the behavioral guidelines will be disciplined according to the Work Rules. 

In addition to tracking yearly internal control self-assessments conducted by various departments and making adjustments to policies and laws that affect corporate operations, Kaori also reiterates the importance of corporate governance and ethics to employees from time to time. Employees who commit violations of the law, safety rules/regulations, employment contracts, or commercial ethics will be subject to legal consequences and disciplinary measures. These violations will also be considered in employee performance evaluations as part of our efforts to build a culture of integrity within the organization.

Complete Grievance Systems, Channels, and Investigation Procedures

Employees are required to report, using the following channels, any violations of laws, policies, or contract terms or any attempts to exploit the vested authority for improper gains against the Company's interests：

• Physical Mailbox
  No. 5-2, Jilin North Road, Zhongli District, Taoyuan City 32030 Kaori Heat Treatment Co., Ltd. - Special Assistant's Office
• E-mail：csr@kaori.com.tw

Investigation Procedures

Kaori complies with regulations by regularly collecting and compiling relevant business-related laws and regulations for identification. If there are any new or revised regulations, the responsible departments immediately review whether the current business practices and operations are in compliance. Additionally, they assist in communicating and promoting these regulations to all departments. To protect the legal rights and interests of the Company, the Company periodically holds legal courses and produce legal materials to enhance employees' legal knowledge.

The Company's compliance with corporate governance, environmental, economic, and social regulations, including relevant important legal sources, internal policies, or procedures, as well as any violations in the past two years (2022–2023), are detailed in the table below:

Cybersecurity management measures and implementation effectiveness

Kaori is well-aware of the challenges that risks may pose to business operations. To minimize the influence of the external environment, managers of various business segments within the Company have identified and defined risks that are relevant to operations, so that they can be properly managed to ensure continuity. By taking risk identification, risk assessment, risk management, and risk response measures, Kaori aims to minimize potential risks and even turn them into opportunities. The PDCA cycle has been incorporated into risk management to facilitate real-time corrections and improvements and thereby protect the interests of the Company, employees, shareholders, customers, and suppliers.

Risk Management Policies and Approach

• Policy: Comply with laws and regulations related to finance, environment, labor, and safety and health to ensure the normal operation of the Company and the interests of shareholders. 
• Goal: Effectively monitor and manage various risks to reduce the impact in the event they occur. 
• Commitment: Utilize due diligence and early warning communication methods to implement the Company's established codes, ensuring the protection of stakeholders' interests. 
• Management Measures: 

1. We implemented the Risk Assessment Procedures in accordance with the ISO 9001 Quality Management System, ISO 14001 Environmental Management System, and ISO 27001 Cybersecurity Management System.
2. In response to the possible impact of climate change on the business environment, we have formulated management measures to reduce corporate risks.

Risk Analysis Outcome and Response/Management Strategies For 2023