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#Self-Regulation #Risk Identification & Management

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.


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 management procedure
  • STEP 01 Identification and assessment

    Determine priorities by identifying and assessing risks

  • STEP 02 Control and response

    Establish a site-centered crisis response plan that enables an immediate response

  • STEP 03 Action(Recovery) and reporting

    Take post-crisis recovery measures and report internally

  • STEP 04 Monitoring and prevention

    Prevention and response through case-based trainings using monitoring

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.

Business risk
Business risk
Category Impact on business Responsible team Actions taken
Business expansion and increased competition Changes in industrial and competitive structures due to intensifying market competition and expansion into new business areas Management Support Division, TL Division and Service Division
  • · Strengthen the income portfolio
  • · Lead technology innovation by improving the UI/UX and increasing R&D capabilities
  • · Ensure the competitiveness of new businesses through open innovation and other channels
Information Security Due to the nature of the industry operated and managed based on IT systems, there are potential negative business impacts such as data manipulation, hacking, and legal liabilities arising from inadequate internal information management, which may result in decreased competitiveness. TL Division
  • · Build a digital management framework based on the company's own systems
  • · Strengthen the database access control system
  • · Conduct employee training about information security and data management
Content Impact of harmful content on brand image User Communication Department, Advertising Department and Social Media Business Division
  • · Establishment of Media Response System
  • · Identify risks in real time through content monitoring and the user reporting
  • · Run a partner management team and train partners on sustainability
Financial risk
Financial risk
Category Impact on business Responsible team Actions
Investment Concern about financial losses arising from performance that fails to meet investment plan goals due to poor investment decisions or changes in the business environment Management Support Division
  • · Improve investment efficiency and respond preemptively to risks via a management system
  • · Review large-scale investments at the corporate level
  • · Strengthening management through progress checks on major ongoing investments
Finance Exposure to market, credit, liquidity, and other risks resulting from expanding our global activities and other areas of business Management Support Team
  • · Identify and evaluate financial risks through the collaboration with relevant teams
Social/environmental risk
Social/environmental risk
Category Impact on business Responsible team Actions taken
Application and interpretation of law Financial losses and damage to the corporate image from non-compliance with laws and regulations resulting in business suspension, fines, or other penalties Management Support Division
  • · Compliance with relevant laws such as the Personal Information Protection Act and the Act on Consumer Protection in Electronic Commerce
  • · Establish guidelines and implement self-regulation through consultations with government agencies to adapt to the changing industry landscape, including interpretations of applicable laws and regulations
Human rights Loss of viewers or financial loss due to content that is harmful to young people or inappropriate behavior inside the company or partners (BJs) Management Support Division and Social Media Business Division
  • · Establish the Declaration of Human Rights to foster people-centric management principles
  • · Raise awareness of employees, partners and BJs via training on human rights and ethics
Energy management Various regulations on energy use as a result of expanded global management related to domestic and overseas energy consumption TL Division
  • · Establishment of an energy-saving server construction plan

Content Risk

AfreecaTV conducts preventive training on content risks to raise awareness among its employees. Furthermore, to prevent the recurrence of past risk factors, we have established response measures, including a reporting system and monitoring. Through thorough checks and management, AfreecaTV aims to create a healthy environment and ensure that users can enjoy the bidirectional communication services with peace of mind. We are committed to making every effort to foster a sound environment.

  • Preventive training

    AfreecaTV provides beneficial information and important reminders to its BJs through webtoons and easy-to understand video-based education. This helps prevent potential risks during broadcasts by offering a friendly and approachable format for guidance. We aim to assist BJs in mitigating risks in advance and ensuring a safe broadcasting environment.

  • Report System

    AfreecaTV minimizes risks by providing rewards to users for reporting content that violates laws or policies, or that may cause harm to others. This incentivizes users to directly report any problematic content, contributing to risk reduction efforts.

  • Monitoring

    We have established a 24-hour monitoring team internally to respond in real-time to harmful content during concurrent broadcasts.

  • Follow-up Procedure

    Through post-evaluation of inappropriate content, we take appropriate measures such as temporary or permanent suspensions and initiate legal procedures to raise awareness and prevent recurrence. We strive to do our best in this regard.

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.

Social/Human Rights Risk

We strictly comply with relevant laws and regulations, including the Personal Information Protection Act, the Act on Promotion of Information and Communications Network Utilization and Information Protection, and the Act on Consumer Protection in Electronic Commerce. We have also established self-regulatory measures within AfreecaTV and proactively prepared for social risks, anticipating potential changes in new laws or ethical standards, and responding preemptively to such risks. For instance, even before the discussion of legislation to restrict daily payment amounts per user on platforms, we had already set purchase limits on items to prevent excessive spending. In addition, specific limits were applied for minors to ensure responsible operations. Furthermore, the increasing focus on human rights assessments by advanced groups like the EU has heightened the potential for human rights-related risks. In response, we have taken proactive measures, such as the formulation of a human rights declaration and conducting ethical human rights education. Through effective communication with government agencies and related associations, we aim to establish common understanding regarding social and human rights risks related to industry and market changes, reach social agreements through appropriate procedures, and identify and implement suitable preemptive measures for risk identification and mitigation.

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.

Four principles of tax management
Comply with taxation laws and regulations
Adhere to the normal price with partners (BJs, etc.)
Examine tax risks for a preventive purpose and take action
Disclose tax data transparently

Encouraging BJs to Fulfill Tax Duties

Due to online technological advancements, widespread network infrastructure, and an increase in internet and mobile demand, OTT (Over the Top) service platforms have significantly expanded. As a result, individual content creators, such as BJ and others, are generating revenue through various means, including advertising, sponsorship, and lectures, all based on video platforms. In response to this emerging sector, tax authorities are classifying these activities as a new type of industry and strengthening tax management. To encourage and support the continuous and progressive activities of BJ creators, AfreecaTV provides annual announcements in May regarding comprehensive income tax reporting requirements, methods, and important considerations*.

* The job code is ‘940306 (one-person media content creator)’.
** Business income is irrelevant to having a business license.
*** Incurrence of additional taxes and disadvantages in case of failure to report income

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