v3.25.1
Financial Risk Management
 3 Months Ended
Mar. 31, 2025
Financial Risk Management [Abstract]  
Financial risk management
(4)Financial risk management

 

The Group is exposed to various financial risks such as market risk (exchange risk, interest rate risk), credit risk and liquidity risk due to various activities. The Group’s overall risk management policy focuses on volatility in the financial markets and focuses on minimizing any negative impact on financial performance. Risk management is conducted under the supervision of the finance department according to the policy approved by the Board of Directors. The finance department identifies, evaluates and manages financial risks in close cooperation with the sales departments. The Board of Directors provides written policies on overall risk management principles and specific areas such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments, and investments in excess of liquidity.

Market risk management

 

Market risk is the risk of possible losses which arise from the changes of market factors, such as interest rate, stock price, foreign exchange rate, commodity value and other market factors related to the fair value or future cash flows of the financial instruments, such as securities, derivatives and others.

 

aCurrency risk

 

The following table sets forth the result of foreign currency translation into Korean won for financial assets and liabilities denominated in foreign currency of the Group as of March 31, 2025 and December 31, 2024:

 

   March 31, 2025 
   USD   EUR   CHF 
Assets in foreign currency  $1,272,464   $305,601   $591,247 
Liabilities in foreign currency   11,334,006    (172,887)   (208,705)

 

   December 31, 2024 
   USD   EUR   CHF 
Assets in foreign currency  $37,902   $278,766   $582,222 
Liabilities in foreign currency   1,929,368    139,672    160,875 

 

The following table sets forth the impact of strengthening (or weakening) of the Korean won by a hypothetical 10% against each foreign currency on the Group’s after-tax profit (or loss), assuming all other variables remain constant.

 

   March 31, 2025   December 31, 2024 
   Rise   Fall   Rise   Fall 
USD  $(1,006,154)  $1,006,154   $(189,147)  $189,147 
EUR   47,849    (47,849)   13,909    (13,909)
CHF   79,995    (79,995)   42,135    (42,135)

 

bInterest rate risk

 

Interest rate risk refers to the risk that interest income and interest expenses arising from deposits or borrowings will fluctuate due to changes in market interest rates in the future, which mainly arises from deposits and borrowings with floating interest rates. The goal of interest rate risk management is to maximize corporate value by minimizing uncertainty caused by interest rate fluctuations.

 

As of the end of the reporting period, there are no financial instruments subject to a variable interest rate.

 

cPrice risk

 

Price risk is the risk that the fair value of a financial instrument or future cash flows will change due to changes in market prices other than interest rate or foreign exchange rate. As of the end of the reporting period, the Group is not exposed to commodity price risk. Investments in financial instruments are made on a non-recurring basis according to management’s judgment.

Credit risk management

 

Credit risk is the risk of possible losses in an asset portfolio in the events of counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For the risk management reporting purposes, the Group manages the credit risk systematically and pursues value maximization and continuous growth of the Group by efficient resource allocation and monitoring non-performing loans. In order to reduce the risks that may occur in transactions with financial institutions, such as cash and cash equivalents and various deposits, the Group conducts transactions only with financial institutions with high creditworthiness. As of March 31, 2025, the Group believes that there are low signs of material default, and the maximum exposure to credit risk as of March 31, 2025 is equal to the book value of financial instruments (excluding cash).

 

Liquidity risk management

 

The Group constantly monitors its liquidity positions to ensure that no borrowing limits or commitments are breached to meet operating capital needs. In estimating liquidity, we also take into account external laws or legal requirements, such as the group’s financing plan, compliance with agreements, internal target financial ratios and currency restrictions.

 

The Group’s liquidity risk analysis details as of March 31, 2025 and December 31, 2024 are as follows:

 

   March 31, 2025 
           Remaining maturity 
  Book Value   Cashflow by
contract		   Within
a year		   1 year to
3 years		   More than
3 years		 
Financial liabilities  $4,710,699   $4,846,694   $4,558,520   $288,173   $  
Other Payables   8,023,117    8,023,117    8,023,117    
-
    
-
 
Lease liabilities   68,359    81,827    46,028    35,800    
-
 
Total  $12,802,176   $12,951,639   $12,627,666   $323,973   $
-
 
     
   December 31, 2024 
           Remaining maturity 
  Book Value   Cashflow by
contract		   Within
a year		   1 year to
3 years		   More than
3 years		 
Borrowings  $2,297,411   $2,423,008   $1,840,406   $35,048   $547,555 
Other Payables   1,538,643    1,538,643    1,538,643    
-
    
-
 
Lease liabilities   80,848    93,537    48,980    44,558    
-
 
Total  $3,916,903   $4,055,188   $3,428,028   $79,605   $547,555 

 

Capital risk management

 

Capital includes issued capital, share premium and all other equity reserves attributable to the equity holders of the Group. The primary objective of the Group’s capital management is to maximize the shareholder value.

 

The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group uses the debt ratio as a capital management indicator. This ratio is calculated by dividing total liabilities by total equity, and total liabilities and total equity are calculated based on the amounts in the Group’s consolidated financial statements.

The group’s debt ratio as of March 31, 2025 and December 31, 2024 are as follows:

 

   March 31,
2025		   December 31,
2024		 
Net borrowings (A)        
Borrowings  $4,710,699   $2,297,411 
Lease liabilities   68,359    78,113 
Less: cash and cash equivalents   (1,595,697)   (341,543)
    3,183,361    2,033,981 
Total equity (B)   132,282,477    143,208,215 
Debt ratio (A / B)   2.4%   1.4%