Risk Management

We create a sustainable future where people, society and the environment will coexist.

Policy

SK ecoplant has established a proactive response system for each risk type. We minimize related damage by operating a risk inspection process not only for new projects and investments, but also for ESG management. Further, risks exceeding a certain range are reported to the CEO and BOD. Key risk issues are reported, along with the CEO’s annual performance, twice a year to the BOD.

Risk Management Organization
리스크 관리 조직도에 관한 이미지 입니다. 자세한 설명은 하단 내용을 참고하세요.
CEO 및 이사회
CEO 산하 조직 및 Corporate Strategy 센터 (전사의 리스크 관리 컨트롤 타워)
사업 - 마케팅, Operation
투자 - 투자 후 운영

1. Business

To complete projects successfully, the Risk Management Group comprehensively manages issues and potential risks in detail throughout all stages of a project. Through the Quality Gate (QG) process, the Project Issue Review Council improves and innovates the project management system from a company-wide perspective, acting as a de facto control tower for the project’s operations.

Marketing Stage

During the marketing stage, the commencement of a project and its size are determined after the company identifies as many potential project risks as possible, develops hedging measures, and conducts a comprehensive feasibility review. From initial bidding to contract winning, separate processes are operated based on project type, size, and method, and project risks are holistically identified and reviewed through constant communication with related divisions based on the Risk Breakdown Structure (RBS) set up per project stage. Key risks are selected through causal analysis of the detected individual risks and reported, in advance, to decision makers in every stage of decision making. Furthermore, each BU and relevant divisions continuously work together until the end of the marketing stage in order to minimize the size of the risk, with the aim of reducing risk-related impacts to zero.

Operation Stage

Through a review and evaluation of the company-wide operation management organizations, we pre-verify the adequacy of the project budget in advance, and control and manage through our budget management system. As for risks which might occur during a project, we utilize analytical tools for monitoring while reviewing the causes and sizes of impacts promptly if a risk occurs.. We then identify and implement an optimal recovery plan as soon as possible via an internal decision-making process. Moreover, we hold a closing report process after the completion of a project, where lessons learned are identified and reflected in order to prevent recurrence of the same risks.

[Decision-making process for each Quality Gate stage]
  • QG 0

    Preliminary
    collection of data on
    projects

  • QG 1

    Selection of projects
    for participation

  • QG 2

    Decision on
    requirements for
    project participation

  • QG 3

    Project contract and
    bidding outcome
    analysis

  • QG 4

    Establishment of
    project
    implementation plan
    and kick-off
    preparation

  • QG 5

    Project
    implementation

  • QG 6

    Project completion

2. Investment

Investment Stage

SK ecoplant’s Investment Review Committee performs comprehensive reviews of investment plans to examine ESG risks, strategic relevancy, and economic feasibility. Through an investment review process, each responsible group reviews the project plan’s comprehensive risks to develop appropriate response measures. As ESG risk is managed in an integrated manner from the initial stage, our level of risk is reduced by identifying ESG threats in advance. Further, the potential for creating social value is measured, in consideration of ESG controversies. Members of the committee are briefed on ESG risks and hedging plans devised from this process, and investment is made only for those approved by the committee after two rounds of voting. If the size of an investment exceeds 5% of the owner’s capital in the immediately preceding business year, contract signing and subsequent investments are carried out after a final decision by the BOD.

[Investment Screening Process]
  • ESG Review and due diligence

    Conduct due diligence, including ESG
    risks, after approval by the CEO

  • 1st Investment Review Committee

     

  • 2nd Investment Review Committee

    Top Mgmt. (CEO, CFO, Head of the ESG
    Center, Head of the Corporate Strategy
    Center)

  • BOD
[Operational Stage after Investment]

After an investment decision is made, we detect and assess industry-specific core risks to stabilize business operations. Risks are reported to the C-level (CEO and CFO) to facilitate mitigation, while the Corporate Planning Division leads efforts to identify business-specific elements, such as incinerators and landfills, as well as analyze the rate of progress in terms of the project plan, variable factors, etc. In addition, the expected occurrence of a risk is reflected in the estimated year-end profit and loss, while mid- and long-term items for value enhancement are identified to establish plans for improvement.

3. ESG Risks

SK ecoplant reflects environmental, social, and governance risks in our business direction through analyses of the business environment, investor groups, and business strategy and performance, and identify and respond to the potential threats and opportunities to our business. With our business reorganized to focus on the environmental sector in 2020, climate change risks were reclassified as a major issuet. The company We reviews not only physical risks, but also those of the transition risks in terms of climate change when selecting and investing in projects. When a risk arises and the possibility of occurrence is recognized, it is reported in the following order: dedicated risk management organization → risk management leader → C-Level. Depending on the type of risks, a daily, monthly, quarterly, and semi-annual reporting system is ready to take onrespond to all types of risk. As safety requires constant risk management, real-time monitoring and subsequent responses are performed implemented through the Safety Control Center placed under the direct control of the CSO, which serves as an integrated crisis control tower in case of emergencies requiring ay in need of company-wide response.

Goal

As the scope of available projects expands greatly due to our transition to a more environment and energy-centered business portfolio, new risks of various forms may arise in new areas. We therefore plan to achieve zero unexpected risks by building and operating a systematic risk management system, while setting a long-term goal of constant value enhancement of the management system’ to establish a company-wide culture of ESG management.

Performance

1. Establishment of an Investment Review Process

Starting with the acquisition of EMC, Korea’s leading environmental solution provider, in 2020, SK ecoplant witnessed a dramatic increase in the number of investment items to be reviewed in terms of our transition to an environmental and energy company – which began in full force in 2021. We have therefore established an investment review process suitable for investment decision making. To make decisions on investment, a comprehensive review of strategic relevancy, economic feasibility, and ESG risks is conducted through a preliminary review and approval of investment plans, as well as a two-stage screening by the Investment Review Committee. 23 investment plans have been reviewed through this new process, and deals were closed for 12 in 2021.

2. IT-based Risk Management

To manage project risks for each stage, we operate an IT-based Quality Gate (QG) system. The QG system is revised on a regular basis every year, in line with domestic and overseas changes in the business environment and management strategic directions. The system identifies projects’ potential risks in advance and verifies feasibility at each stage, supporting decision-makers in making final decisions on project participation. Over the past three years, 160 out of 190 projects at the marketing stage have been promoted after reviews conducted by our risk management system.

3. Development of a Project Risk Management System (e-PM)

In 2021, we strengthened our project risk monitoring capabilities and developed e-PM, an IT-based risk pre-identification system. Through this, we further enhanced efficiency in risk management through visualization of key indicators and integrated data management. All 144 projects currently ongoing are registered and managed in the system.

e-PM, an IT-based Risk Pre-identification System
리스크 사전 식별 IT 시스템 e-PM에 관한 이미지 입니다. 자세한 설명은 하단 내용을 참고하세요.
기존 System
  • 조달
  • 안전
  • 품질
  • 프로젝트 정보
  • 원가
신규 System
  • 리스크
  • 공정

Real Time

  • ① 프로젝트 Operation System
  • ② 데이터베이스
  • ③ 모니터링 포털

Visual Planning

프로젝트
  • Management
  • 사업-Function
  • Standardize project data scattered around the operation system to conduct comprehensive analyses, and save them into a database that acts a source for issue and risk detection
  • Utilize data stored in the database to develop management indicators and conduct monitoring via the portal

4. Major ESG Risk Factors and Responses

ESG 경영 리스크 및 대응 현황 테이블 (리스크 요인, 비즈니스 현황, 위기, 기회, 대응현황)
Risk factors Business impact Risk Opportunity Response
E Eco-friendly market expansion Increased demand for green buildings More investment opportunities in eco-friendly projects Achievement of G-SEED certification, acquisition of SAMKANG M&T and TES, and entry into the Southeast Asian market for carbon credits
Climate Change CO2 target management system Higher demand for low-carbon products Declaration of Net Zero by 2040 Introduction of ESG reviews to the investment review process
Waste Reinforcement of global waste import and export regulations Increased importance of resource circulation Promotion of waste-to-resource project 99% recycling rate in 2021
S Safety and health and accident prevention Enhanced legal penalties for serious accidents High mortality rate due to the nature of the construction industry Operation of a Safety Council under the ESG Committee Introduction of a Safety Control Center
Biz.Partner Enhanced penalties under the Fair Transactions in Subcontracting Act Biz. Partners’ financial instability Development of a Biz. Partner ESG management support model
Recognition in the Win-win Growth Index for five consecutive years
Security Prevention of internal data leaks Prevention of hacking attacks Appointment of CISO and CPO Acquisition of ISO certification related to information security
G Compliance Financial and non-financial sanctions for violations such as bribery and embezzlement Ethical education for staff, and& supervision·improvement of violations for supervision & improvement Operation of an in-house Compliance Office
Securing Expertise Non-transparent decision making Directors lacking in ESG expertise Establishment of an ESG Committee Appointment of directors with expertise in finance and ESG
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