2023 Coway Sustainability Report

Company-wide Risk Management System

Coway operates a company-wide risk-management system by dividing risks that may arise from business activities into financial risks and non-financial risks; and manages and supervises them through the Committees under the BOD and the business Divisions according to the type and importance of risks. Financial risks related to markets, credit, liquidity, etc. are handled by Finance Department, while non-financial risks, such as regulations, policies, quality, labor, human rights, safety and the environment, are handled by the ESG Committee. The financial and non-financial risk-management organizations operate risk-monitoring systems that periodically identify and inspect risks, and analyze the impact of each risk factor. Key issues derived through such monitoring are reported to the BOD, and follow-up actions are implemented by a company-wide response system, taking into account the potential impact and urgency of the risk.

Risk-Management Reporting Structure

Management of Financial Risk

Financial risk management focuses on the unpredictability of financial markets, identifies, evaluates, and avoids financial risks, and eliminates factors that have a potentially adverse impact on financial performance. The major financial risks managed by the company are divided into market risk, credit risk, liquidity risk and capital risk, respectively.

Market Risk

Market risk (interest rate risk, foreign exchange risk and other price risks) is the risk by which the fair value of a financial instrument for future cash flow will fluctuate due to changes in market prices. The management pays attention to changes in financial indicators, such as exchange rates and interest rates; periodically reviews interest rate trends to monitor risks that may have a negative impact on the company's value; and prepares follow-up arrangements to ensure an appropriate balance between fixed-rate and floating-rate borrowings. Additionally, the company regularly evaluates, manages, and reports risks related to exchange rate fluctuations.

Increase/decrease of foreign currency exchange rate	When increased by 5%	When decreased by 5%
Increase of EBIT	Increase by KRW 6,134 million	Decrease by KRW 6,134 million

Credit Risk

Credit risk is managed at the consolidated company level. Credit risk arises not only from customers, including account receivables held and confirmed contracts, but also from cash, cash equivalents, financial derivatives, and deposits at banks and financial institutions. Coway deals only with banks and financial institutions that have obtained a credit rating of at least “A” from an independent credit-rating agency, and in the case of clients without an independent credit rating, the company evaluates the credit of customers by considering other factors, such as the customer's financial status and past experience, to determine the risk limit.

(Based on the Annual Report for 2023, Unit: KRW 1,000)

Category	Cash and cash equivalents	Accounts receivable	Lease receivable	Other short-term financial assets	Other long-term financial assets
Credit risk	259,741,455	259,093,281	2,660,294,843	27,818,743	24,208,983

Liquidity Risk

Coway manages the credit-tightening risk due to changes in the financial market in advance and analyzes the impact on financing to establish a preemptive response system. In particular, Coway constantly monitors liquidity outlook to ensure that the unused borrowings are kept at an appropriate level, and ensure that the demand for operating cash is satisfied, so that the company will not violate borrowing limits or agreements. When forecasting liquidity, Coway refers to legal or regulatory requirements related to, for example, the consolidated company's financing plan, compliance with agreements, internal target financial ratios, and currency restrictions.

(Based on the Annual Report for 2023, Unit: KRW 1,000)

Category	Within 1 year	Longer than 1 year and within 5 years	Longer than 5 years
Liquidity risk	1,109,346,505	668,651,409	22,015,590

Capital Risk

Coway maintains an optimal capital structure to continuously provide profits to shareholders and stakeholders and reduce capital costs. Like other companies in the industry, the consolidated company manages its capital based on its capital financing ratio.

Management of Non-financial Risks

Coway established the ESG Committee under the BOD to strengthen management and supervision of ESG risks, such as ethics, environment, labor, human rights, and supply chains. Also, Coway established the ESG Council (which holds meetings quarterly) and a working group (which holds meetings as necessary) under the ESG Committee, which will monitor non-financial risks in different areas and report major risks to the ESG Committee regularly (half-yearly).

ESG Committee Meeting Record

Category	Date	Major agendas	Reporting characteristics
1st meeting	May 2023	Report on the results of the previous year’s ESG evaluation grade Interim report on strategic ESG tasks for 2023 Report on results of materiality assessment for the 2023 Sustainability Report	Report Report Report
2nd meeting	December 2023	Decision on Coway’s internal carbon-price standards Decision on renewable-energy credit (“REC”) handling method Report on strategic ESG task plan for 2024	Approval Approval Report

Category	Date	Major agendas
1st meeting	May 2023	Establishment of ESG strategies and goals Establishment of diversity and inclusion policies Expansion of ESG evaluation of the supply chain
2nd meeting	July 2023	Review of the 2023 sustainability report by the working group Progress of ESG technology tasks carried out by Environmental Technology Institute Status of and plans for response to conflict minerals
3rd meeting	September 2023	Plan for advancement of Task Force on Climate-related Financial Disclosure (“TCFD”) disclosure Human Rights Impact Assessment Plan (Draft)
4th meeting	December 2023	Result of establishing the Scope-3 management system Biodiversity activity strategy (draft) Improvement-task implementation for 2024

Management of Major Risks

Coway is identifying major internal and external risks to respond to the rapidly changing business environment. The company analyzes the business impact of identified major risks, establishes mitigation measures, and promotes strategic response plans. The major risks selected by Coway in 2023 were environmental risk and security risk, respectively, and the working groups (Environment and Safety Certification Team and Information Security Team) that manage these 2 topics are improving management stability through preemptive responses.

Emerging Risk

Category	Environmental risk	Security risk
Risk	The burdens on companies are increasing as global ESG regulations are strengthened. In particular, environmental regulations are 1 of the important issues that companies must comply with for the sustainable development of future generations. This is a topic which can actually become an opportunity for well-prepared companies.	Information security risks can cause loss or damage to a company as they exploit vulnerabilities that can act as a sustainability risk for the company. As the No. 1 company in the rentals industry, and a company that holds a large volume of customers’ personal information, Coway needs to actively avoid the related information-security risks.
Impact on business	Increase in corporate carbon tax due to increase in carbon emissions Decrease in brand value and customer trust due to inadequate management of greenhouse gas emissions Attrition of customers due to decline in customer trust	Leakage of customer information due to hackings from outside Leakage of key technical information and data
Response status	Declared carbon-emission reduction goal for 2030 (50% reduction from that of 2020) Declared the goal of achieving carbon neutrality (Net Zero) by 2050 Monitored the latest regulations of countries through the Environmental Regulation Information Management System (ERIMS)	Established guidelines on prevention of leakage of personal information and important data Conducted mock training on personal-information leakage Continued to collect security-incident information through internal information leak monitoring Renewed ISO 27001 certification and acquired ISO 27701 certification

Management of Tax Risks

Coway continuously monitors changes in tax-related regulations and policies to proactively identify and manage tax-related risks.

Tax Policy

Coway faithfully implements the national tax policy and strives to fulfill its social responsibilities. The company also is committed to strictly complying with all relevant regulations and laws, and will make its best efforts to maintain fair and transparent relationships with its stakeholders and the community.

01Compliance with Laws and Regulations
Coway prohibits income transfers that exploit differences in the structures of tax laws and tax treaties between countries, and the company does not use tax havens to reduce tax burdens. By doing so, Coway contributes to the establishment of a sound tax culture and economic development in the country where its business is located.
02Obligations to Pay Tax
Employees of Coway dealing with taxation must comply with the tax laws and regulations of the host country, and ensure that Coway fulfills its obligations to file and pay relevant taxes based on the principle of good faith.
03Response to Risks
When applicable laws, such as established regulations and precedents, are enforced or amended, Coway makes decisions considering its business activities, and responds thereto after reviewing possible risks.
04Communication and Cooperation
When requested by the tax authorities of each country, Coway provides supporting evidences to clarify the facts in a timely manner, and makes active efforts to resolve the issue.
05Information Disclosure
When disclosing tax-related accounting information, Coway does so transparently by: Having an independent agency verify the information; making available the independent auditor’s audit report through the electronic disclosure system of the Financial Supervisory Service; and having the Sustainability Report verified by an independent third party.