Beginning from the first half of 2010, POSCO strengthened the risk management process for growth-investment projects, securing the operational foundation for the ERM (Enterprise Risk Management) system, which includes establishing risk management policy and protocol while setting up the risk management organization. With global risks becoming more diverse, permanent and complex that affect POSCO's business performance such as steel, finance, marketing, raw materials, banking, and emerging markets in order to respond proactively and effectively to changes in the business environment. In 2014, we expanded the risk management system from POSCO to the Group level, building the "basis for Group companies' risk management system." The scope of monitoring was also expanded from steel to non-steel sectors. Through these measures, we aim to resolve the information unbalance between the head office and group companies while fostering risk related communication within the group for the early detection and response to risks.
In 2015, we will operate a system for constant checking for keyrisk elements that hinder the Group from achieving its manage-ment targets, focusing on risk mitigating activities to increase our corporate value.
In general, risks are easy to measure and manage, while crises occur suddenly due to external factors and are difficult to respond to. The safety and hazard prevention departments at each Works take charge of disasters or crises, maintaining a safe and accident-free operation.
POSCO's risk management system revolves around business risks and non-business risks. Among the business risks, internal risks in the aspect of the company's business are managed based on the affiliates' financial risk management indices, while external risks in the aspect of external conditions are managed based on the composite risk index for each industry group. Distinguishing and responding to business risks are conducted jointly by the Value Management Office and each affiliate company. Meanwhile, the Audit Office coordinates non-business risks relating to ethics, compliance and reputation under the risk self-prevention system (RMS).
Beginning from 2015, we plan to operate the risk management system in a way that POSCO, the affiliate companies and POSCO Research Institute all participate. When group affiliates prepare the monthly risk index, POSCO's Value Management Office conducts management and control activities such as compilation and feedback. The climate change risk and opportunity factors are organically connected to the company-wide management system to be analyzed in various angles and the results are reflected in the medium to long-term management strategies. The POSCO investment guideline mandates that when making decisions on investments, businesses that are expected to entail environmental risks such as greenhouse gas should undergo the agreement process with related departments.
POSCO Research Institute monitors the composite risk index and conducts non-scheduled preliminary inspections on major affiliates' business risks. Major issues that are drawn from the risk management activities will be regularly reported to the management level or submitted to the POSCO Group CEOs Meeting for discussion, to strengthen the execution power of the risk management system. When the Group's risk management system settles down we can expect sustainable growth by (1) reducing potential loss by proactive response and (2) efficient risk management.