Emerging Risks & Response Strategies

Emerging Risks & Response Strategies

The Enterprise Risk Management (ERM) is a vital key to an effective corporate management efficiency to ensure operational continuity. For a constant management of the risks with potential impacts on CHT operation, product, and services, Chunghwa Telecom relentlessly establishes a corporate culture of discovery, management, as well as prevention and mitigation of risks by all personnel to ensure business stability and a sustainable operation.

	Emerging Risk 1	Emerging Risk 2
Name	Taiwan becoming a lone island due to operation and communication disruption arising from geopolitical stability	Difficulties in recruiting and retaining talents in emerging technologies due to the flexible work style and the population trend of aging society and low birthrate in Taiwan
Description	The Russian-Ukrainian war led to stringent geopolitical risks worldwide. Taiwan is especially geopolitically vulnerable. Aside from the higher gas prices caused by the Russian-Ukrainian war that led to the possibility of rising energy costs, the US-China trade war also plunged economic development into uncertainty, affecting international enterprises’ willingness to invest in Taiwan. Most of the transnational corporations investing in Taiwan and the local TWSE-/TPEX-listed companies are the corporate clients of CHT. When the cross-strait relationship goes sideways, conflicts arise from geopolitical factors, the communication infrastructure in Taiwan might be destroyed massively and result in business disruption for CHT, posing the risk of Taiwan becoming a lone island of communications.	5G and AI are expected to be the most important emerging innovative technologies in the decade to come. The above-mentioned emerging technical talents may be employed by companies worldwide via remote working. The flexible work style and the population trend of aging society and low birthrate in Taiwan further exacerbate the competition for talents. Meanwhile, the Company is seeing the phase of massive employee retirement. The present compensations provided by the Company may not be competitive enough to rival with international enterprises and well-known tech companies in Taiwan, which may result in the risk of difficulties in recruiting and retaining talents for emerging technologies.
Impact	CHT mainly operates in Taiwan. In the face of the stringent cross-strait relationship, the corporate investment and market decision-making have been disturbed by geopolitics. It shall pose risks of uncertainty to CHT operation. Aside from cost increase, revenue decrease, and influence on investors’ decision-making, in the worst scenario, if wars broke out in the Taiwan Strait, the critical infrastructure operated by CHT might become primary targets. Either destruction of physical telecom facilities or massive network attacks will result in communication and operation disruption. With severe damage, Taiwan may become a lone island of communications, leading to operation disruptions of enterprises and national institutions nationwide.	The operational strategies of CHT set eyes on development of emerging technologies like cloud services, cybersecurity services, AI, and IoT. Also, it needs to recruit numerous talents in emerging technologies to cope with the massive number of employees to be retired. In addition, the remote working internationally, the low childbirth rate in Taiwan, and the higher salary offered by tech giants in Taiwan may lead to CHT’s obstacles to recruit/retain talents in emerging technology and technologies, resulting in risks of uncertainty in human capital. The inability to increase its attractiveness to talents in emerging technologies will impact the operation and business development of CHT in the mid-to-long-term, affecting the profitability and sustainable operation of CHT.
Mitigating actions	To avoid operation disruption of telecom facilities arising from wars or conflicts due to geopolitical instability, leading to the risk of Taiwan being a lone island of communication, we mitigate and prevent such via mechanisms as follows: Infrastructure and network resilience improvement: Network vulnerabilities check, emergency backup design enhancements, rerouting with multiple marine cables, and using microwaves and satellite communications as the second and third lines of defense Utilization of emerging technologies to maintain network security: Strengthening network resiliency and improvement of overall network reliability, combined with big data and smart network management Regular exercise and protection plan: participation in the “National CIP Designated Exercise for Critical Infrastructure” organized by the government of Taiwan to engage scenario exercises for new forms of mixed attacks to reduce impacts and losses due to relevant disasters	To recruit, draw and retain outstanding workforce, well-rounded talent recruitment/employment/cultivation/retention designed at the Company: Diversified recruitment channels (agile recruitment for permanent vacancies, industrial-academic cooperation programs/projects, etc.) Corporate website image and social media marketing brand Tailored talent training program (on-the-job training, short-term development, and retiree rehire for education) Reward directions for secondary function programs and certifications for practice Design of incentives and benefits better than the industrial standards that offers flexible work locations and hours; provision of childcare benefits better than the statutory standards and other benefit systems