SOOP ESG2022

Risk Management

The rapidly changing business environment and increasing complexity of social structures are resulting in unpredictable risks, both internal and external. Such risks can pose a threat to the growth and survival of the company, but adequate management can turn them into growth opportunities. AfreecaTV focuses on practical and predictable management at the operational level, analyzing risks from various perspectives, and proactively addressing them to ensure the soundness of its financial structure. In addition, we actively identify factors that could present opportunities among the risks, aiming to enhance its business competitiveness.

Self-Regulation

AfreecaTV strives to protect users' fundamental right to freedom of expression on the internet. However, we are also mindful that freedom of expression should not be abused to infringe upon the rights of others. Therefore, we carefully manage the balance between freedom of expression and the protection of human rights. As part of this effort, we comply with relevant laws and regulations related to the promotion of information and communication networks and information protection. In areas where the application or interpretation of the law is not clear or explicit, we implement self-regulation through consultations with key government agencies. In addition, we engage in ongoing discussions with government departments and relevant organizations to establish appropriate legislation and guidelines that are relevant to the rapidly changing industry. We will continue our efforts to ensure users' freedom of expression while enhancing our responsibility for the protection of human rights. We aim to be a media channel that fosters mutual respect and understanding.

Identification of Key Risks

We analyze risks that may arise from stakeholders from various perspectives and proactively respond to ensure the stability of business operations. To achieve this, we prioritize the selection and systematic management of key risks related to the business environment. We continuously enhance our risk management capabilities to address these risks effectively.

Strengthening Risk Management

AfreecaTV has established a comprehensive enterprise risk management system to ensure sustained market competitiveness and proactively prepare for potential risk factors. Furthermore, we first identify and evaluate risks; then we establish step-by-step procedures, which state follow ups and subsequent prevention activities, until the risk is fully mitigated. The risk management process is overseen by the Board of Directors, and efforts are made through efficient decision-making by the CEO to minimize potential losses due to risks.

Risk Identification and Response

We identify and manage both financial and non-financial risk factors in advance to promote AfreecaTV’s sustainable growth. The risk management areas are broadly categorized into business, financial, and social/environmental areas. For each risk, we assess its impact on the business and create a systematic response activity list tailored to the specific risk characteristics. In addition, AfreecaTV continuously improves its risk management system to effectively respond to sudden internal and external risks such as COVID-19 and conflicts. Identified risks are addressed at the organizational level to ensure comprehensive risk management.

Financial/Investment Risk

AfreecaTV manages potential financial risks that may arise in the future to prevent any related issues and maintain a sound capital structure, thereby maximizing shareholder value. To achieve this, we have established internal organizations and processes for effective response and risk management. Within the Board of Directors, we have developed decision-making rules based on investment amounts to validate the efficiency of large-scale investments and continuously monitor market and environmental changes to detect relevant risks. These risks are assessed and managed through consultations with relevant departments to ensure the effectiveness of investments from a medium to long-term perspective. Furthermore, we have implemented internal control management regulations to comply with legal requirements and enhance operational efficiency. In response to the growing importance of internal accounting management systems, we are making every effort to improve internal regulations and processes to enhance the reliability of accounting information.

Environmental Risk

In response to the increasing regulatory demands for greenhouse gas reduction and heightened environmental responsibility both domestically and internationally, we are making efforts to promptly address potential environmental risks. As part of these efforts, we are preparing for the establishment of eco-friendly servers to proactively respond to the evolving data environment amid the COVID-19 pandemic. Furthermore, we are actively considering environmental aspects for the establishment of our in-house IDC, which is scheduled for completion in 2025.

Tax Management

AfreecaTV recognizes tax compliance as a significant contributor to securing customer benefits, maximizing shareholder value, and enhancing national finances. We view tax risk management as a proactive condition for ESG Management and actively strive to comply with tax regulations. To achieve this, we respect the tax principles of tax authorities and faithfully fulfill our corporate tax payment obligations as responsible taxpayers.

Tax Risk Response and Management Procedures

The key principle of AfreecaTV's tax risk response is 'strict compliance with tax laws'. We proactively promote a transparent tax culture by diligently and honestly providing the requested evidence and supporting documentation to tax authorities when required. We do not engage in any practices that involve using tax havens or tax structures without commercial substance to avoid taxation. Instead, we faithfully fulfill our tax obligations in all countries where we operate. As a global company, we thoroughly understand and analyze the differences in tax laws and the intentions behind tax regulations in each country to prevent potential tax disputes proactively. For instance, we adhere to the arm's length principle in transactions between related parties domestically and internationally, ensuring that normal pricing principles are applied, and pricing policies are established and continuously monitored to avoid any tax-related issues. In addition, we provide transfer pricing documentation to tax authorities in accordance with the country-specific tax reporting requirements.

• Identify

  • Legal and regulatory internal review
  • Categorization of risk types
• Negotiate

  • Identify the counterparty
  • Negotiate fair-trade prices, etc.
• Enquire

  • Enquire tax authorities in advance
  • Authoritative interpretation
• Consult

  • Consult with experts from outside the company
  • Delegate response activities

Tax Policy and Transparent Disclosure

AfreecaTV contributes to social and economic development through corporate growth and diligently complies with tax reporting and payment obligations in accordance with the law. To achieve this, we have established principles for tax policies and strictly adhere to domestic tax laws and tax standards of relevant countries. Moreover, we actively cooperate with the tax policies of the relevant countries and maintain a transparent relationship with tax authorities. Furthermore, we provide regular tax information to both internal and external stakeholders through business reports, enhancing tax transparency. In addition, we ensure compliance with tax reporting obligations by undergoing final reviews by internal and external tax experts.