산일전기 SANIL

Sanil Electric operates an enterprise-wide ethics and risk management system centered on the Board of Directors, the ESG Committee, and the CEO. Through a three-lines-of-defense internal control framework comprising operational departments, dedicated internal control functions, and the auditor and internal audit department, the Company identifies and manages financial and non-financial risks and strengthens the effectiveness of internal controls through independent audits and monitoring.

Ethics and Risk Management Implementation Governance Structure & Roles

Third Line of Defense for Internal Control Second Line of Defense for Internal Control First Line of Defense for Internal Control

Board of Directors

Auditor

ESG Committee

CEO

Internal Accounting Control (IAC) Officer

Ethics and Risk Management Department

Dedicated Internal Accounting Department

Internal Audit Department

Process/Control Owners

Each Operational Department

Board of Directors	Top-level decision-making authority for Ethics and Risk Management. Exercises final oversight and approval of internal control operations.
Auditor	Auditing directors and management regarding the execution of duties and compliance with the Ethical Management. Evaluating the operational status of internal control systems and internal accounting control systems.
ESG Committee	Establishing foundational policies for ESG Risk Management. Deliberating on mid- to long-term performance, targets, and non-financial Risk Management status.
CEO	Overall establishment and operation of the Ethics and Risk Management system. Exercises final approval of enterprise-wide risk response strategies and provides responsible management leadership.
Ethics and Risk Management Department	Managing the enactment and revision of the Ethical Management and Code of Conduct. Administering the Ethics Pledge and conducting training for all executives and employees. Operating the Ethics Hotline and grievance channels, and investigating reported cases.
IAC Officer	General management, design, and operational status checks of the internal accounting control system. Regular reporting on operational status to the Board of Directors and auditor.
Dedicated Internal Accounting Department	Supporting the design and operation of the internal accounting control system and conducting effectiveness evaluations. Establishing and monitoring control processes to prevent financial risks.
Internal Audit Department	Auditing compliance with regulations across enterprise-wide business processes. Operating a continuous reward and discipline system to prevent fraud and violations.
Process/Control Owners	Identifying risks and designing and managing control activities within relevant operational processes. Verifying the operational application and implementation of internal control guidelines.
Each Operational Department	Complying with risk management guidelines by job function across areas such as Quality Management and Sales. Practicing ethical compliance and monitoring potential risks within each department.

Sanil Electric operates its policy framework based on its Ethical Management and Code of Conduct. In 2026, the Company established a Compliance Management Policy and Tax Policy to strengthen its risk management framework. Based on these policies, the Company has enhanced the implementation of control policies and management processes across key areas, including risk management, internal control, compliance monitoring, and internal whistleblowing. Through these efforts, Sanil Electric is progressively building an integrated internal control system grounded in its ethical values.

Audit and Evaluation Process

Corrective Measures and Link to Compensation

Establishing improvement plans for identified deficiencies and monitoring the implementation status on a continuous basis.

Linking results to performance evaluations and compensation policies to encourage responsible management practices among executives and employees.
Follow-up Management

Upon the occurrence of material fraud, the matter is immediately reported to the Board of Directors, and facts are investigated with the assistance of external experts. Establishing improvement plans for identified deficiencies and monitoring the implementation status on a continuous basis.

Implementing measures to strengthen internal controls and prevent recurrence.

Ethics and Risk Management Process

Codification and Training: Codification of the Ethical Management and sector-specific policies.

Conducting Ethics and Risk Management training for all executives and employees.

Reflecting ethics commitments in Ethics Pledges and supplier contracts.
Identification and Inspection: Identifying sector-specific risks and opportunities from information gathered through various channels.

Registering identified items in the 'Risk/Opportunity Ledger' and assigning responsible departments.

Conducting compliance evaluations and internal control inspections.
Regular Monitoring and Reporting: Formulation, approval, and execution of response plans by designated departments, incorporating implementation details, schedules, responsibilities, and effectiveness evaluation methods.

Continuously operating internal reporting systems and anonymous channels to detect anomalies or fraud through internal control monitoring.
Evaluation and Corrective Action: Conducting independent internal audits by the full-time auditor, addressing identified deficiencies, and reflecting findings in future plans.

Evaluating execution results and incorporating implications into future management strategies.

Sanil Electric manages financial and non-financial risks in an integrated manner through the Board’s ESG Committee. The risk management process covers identification, assessment, monitoring, and response, with risk management also viewed as an opportunity to strengthen business competitiveness. For financial risks, the Company focuses on factors that directly affect cash flows and asset values. For non-financial risks, the Company proactively manages potential risks across its supply chain and operations through regulatory compliance and the fulfillment of social responsibilities.

Financial Risk Response Activities and Management Measures

Category	Risk Item	Main Risk Content	Response Activities & Management Measures
Market	Foreign exchange risk	Fluctuations in the value of foreign currency assets and liabilities due to exchange rate volatility as the export share expands	Currency netting management. Hedging through derivative instruments (e.g., forward contracts) and continuous monitoring of foreign exchange exposure.
Finance	Liquidity and internal accounting control	Rising financial costs from interest rate fluctuations and risks of short-term cash supply-demand imbalances	Optimizing debt maturity structure through short- and long-term diversification. Upgrading cash flow forecasting systems and maintaining adequate liquidity reserves.
Credit	Counterparty credit risk	Potential financial losses arising from non-performance of contracts by major clients and partners	Granting credit limits based on counterparty credit ratings and conducting regular evaluations. Operating an Early Warning system to detect signs of insolvency.
Tax	Tax risk	Cross-border tax law differences and transfer pricing issues arising from global business expansion	Conducting tax risk assessments in collaboration with external auditors and proactively responding to BEPS regulations.

Non-Financial Risk Response Activities and Management Measures

Category	Risk Item	Main Risk Content	Response Activities & Management Measures
Environment	Climate Change Response	Regulatory risks arising from the introduction of CBAM and the strengthening of Scope 3 disclosure requirements	Third-party verification of GHG emissions. Managing product carbon footprints based on LCA. Participating in CDP. Accelerating the renewable energy transition. Formulating a carbon neutrality roadmap.
Social	OHS, and human rights	Potential decline in corporate reputation from serious accidents and human rights violation risks within the supply chain	Advancing the OHSMS in alignment with ISO 45001. Conducting human rights impact assessments for internal and supplier entities, and upgrading grievance channels.
Operation	Supply chain management	Instability in raw material supply and the potential spillover of ESG risks from suppliers	Diversifying core component supply chains. Enacting a Supplier ESG Code of Conduct and operating supplier ESG evaluation and consulting programs.
Ethics	Compliance, reputation, and Information Security	Potential loss of stakeholder trust resulting from anti-corruption violations or information security breaches	Strengthening internal control systems. Conducting employee security training and establishing integrated OT/IT security systems. Operating the Ethics Hotline system.

Sanil Electric operates an Ethics Hotline accessible not only to employees but also to external stakeholders, including customers and suppliers. The Hotline allows anonymous reporting and grievance handling, and the Company maintains a whistleblower protection system to safeguard confidentiality and prevent any disadvantage or retaliation against whistleblowers. The Ethics Hotline is also available in Korean, English, and Japanese to improve accessibility for global stakeholders.

Reporting Channel Operation and Reportable Issues

Category	Main Content
Reportable Issues	Violations of the Company's Code of Conduct, Ethical Management, and internal regulations (including internal accounting control regulations) / Duties-related illegal acts or crimes by employees (including embezzlement, breach of trust, fraud, theft, bribery, entertainment, and accounting fraud) Improper use of official positions to exert undue influence over employees or external stakeholders (including solicitation, mediation, and coercion) Other cases with potential risk of the above occurrences.
Channel Diversification	Ethics Hotline: Accessible through the Company website and internal intranet (Groupware) Other Channels: Suggestion boxes, email, fax, mail, and telephone, ensuring broad and convenient accessibility.
Operational Principles	Real-name Reporting Principle: Whistleblowers are in principle requested to provide personal details. Anonymous Reporting Guarantee: Anonymous reports are accepted where the content is substantive and the probability of factual accuracy is sufficiently high.

1) Excluding those on leave, business trips, sick leave, or maternity leave who are expected to submit upon return

Strict Whistleblower Protection and Reward System

Category	Main Content
Confidentiality	Disclosure of the whistleblower's identity or any information that could reasonably infer their identity is strictly prohibited. Disciplinary or appropriate corrective actions are taken against employees who violate this obligation.
Prohibition of Retaliation and Reinstatement	All forms of disadvantageous treatment, including dismissal, transfer, or disciplinary action based on reporting, are strictly prohibited. If disadvantages occur, the dedicated officer directly investigates and implements active protective measures, including status restoration.
Liability Mitigation	Even if the whistleblower is found to bear some degree of fault in the reported matter, disciplinary action is reduced or waived in recognition of the voluntary report. Active internal cleanup activities are encouraged

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