The Group is exposed to credit risk, liquidity risk and market risk. The Group identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below an acceptable level.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency. The currencies in which these transactions primarily are denominated are USD and JPY, etc.

The Group adopts policies to ensure that its net exposure is kept to a manageable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances in foreign currency cash inflows and outflows. In respect of monetary assets and liabilities denominated in foreign currencies, the Group manages currency risk through continuously managing the position of foreign currencies, measuring the currency risk and, if necessary, using derivatives such as currency forwards, currency swap and others.

Cross currency interest rate swap contracts, USD 580 million (December 31, 2024: USD 500 million) and CNY 380 million (December 31, 2024: CNY 726 million) were entered into to manage currency risk with respect to foreign currency denominated borrowings and USD 1,020 million (December 31, 2024: USD 980 million) were entered into to manage currency risk and interest rate risk with respect to foreign currency denominated borrowings and bonds.

The currency forward exchange contracts entered into to manage foreign exchange risk related to advances received in foreign currency expired during the reporting period, and there is no outstanding balance as of December 31, 2025 (December 31, 2024: USD 750 million).

If the exchange rates for the currencies presented above were to decrease at the end of the reporting period, with all other variables held constant, the effects would be the opposite of those presented above.

Interest rate risk arises principally from the Group’s variable interest-bearing bonds and borrowings. The Group establishes and applies its policy to reduce uncertainty arising from fluctuations in interest rates and to minimize finance cost and manage interest rate risk by monitoring trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Group entered into cross currency interest rate swap contracts amounting to USD 1,020 million (Equivalent to W1,463,598 million) and interest rate swap contracts amounting to USD 250 million (Equivalent to W 358,725 million) and W2,280,000 million in notional amount to hedge interest rate risk with respect to variable interest-bearing borrowings.

As of December 31, 2024 and 2025, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or loss before income tax by the amounts shown below for the respective following 12 month periods. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

The Group’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the default risk of the country in which each customer operates, does not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.

The Group establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.

In relation to the impairment of financial assets subsequent to initial recognition, the Group recognizes the changes in expected credit loss (“ECL”) in profit or loss at each reporting date.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of December 31, 2024 and 2025 are as follows:



(In millions of won)		December 31, 2024		December 31, 2025
Financial assets carried at amortized cost
Cash equivalents	W		2,021,640		1,572,058
Deposits in banks			611		611
Trade accounts and notes receivable, net			2,500,608		2,136,774
Non-trade receivables, net			227,477		145,426
Accrued income, net			22,552		34,987
Deposits			16,747		14,549
Loans			37,143		13,318
Subtotal			4,826,778		3,917,723
Other financial assets
Lease receivables	W		10,063		7,406
Financial assets at fair value through profit or loss
Convertible securities	W		1,470		—
Derivatives			256,251		131,987
Subtotal	W		257,721		131,987
Financial assets at fair value through other comprehensive profit or loss
Trade accounts and notes receivable, net	W		1,123,869		222,410
Financial assets effective for fair value hedging
Derivatives	W		119,098		—
Total	W		6,337,529		4,279,526

Trade accounts and notes receivable are insured in order for the Group to manage credit risk if they do not meet the Group’s internal credit ratings. Uninsured trade accounts and notes receivable are managed by continuous monitoring of internal credit rating standards established by the Group and seeking insurance coverage, if necessary.

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. The Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

The Group has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing.

Meanwhile, the Group has entered into borrowing facility agreements with several banks. These agreements may include financial covenants requiring the Group to meet certain financial performance targets. The Group periodically monitors compliance with these agreements through its internal control procedures to proactively manage liquidity risk.

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of December 31, 2024 and 2025.

(i)

As of December 31, 2024


				Contractual cash flows
(In millions of won)		Carrying amount		Total			6 months or less			6-12 months			1-2 years			2-5 years			More than 5 years
Non-derivative financial liabilities
Borrowings	W		13,412,275		14,453,995			3,730,807			2,609,727			3,941,215			4,146,933			25,313
Bonds			1,137,839		1,185,892			631,539			11,638			416,573			126,142			—
Trade accounts and notes payable (*)			4,156,149		4,156,149			3,884,788			271,361			—			—			—
Other accounts payable (*)			1,720,670		1,723,867			1,404,896			318,971			—			—			—
Long-term other accounts payable			279,774		323,400			—			—			69,090			192,570			61,740
Security deposits received			160,713		189,214			—			808			6,841			181,565			—
Lease liabilities			57,975		60,653			23,948			12,681			13,889			9,423			712
Derivative financial liabilities
Derivatives	W		10,768		11,184			930			3,447			4,495			2,312			—
Cash outflow			—		75,016			21,402			20,467			22,342			10,805			—
Cash inflow			—		(63,832	)		(20,472	)		(17,020	)		(17,847	)		(8,493	)		—
Total	W		20,936,163		22,104,354			9,676,908			3,228,633			4,452,103			4,658,945			87,765

(*) As of December 31, 2024, it includes W1,187,450 million of payable to credit card companies for utility expenses and others paid using business credit card for purchases.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

(ii)

As of December 31, 2025


				Contractual cash flows
(In millions of won)		Carrying amount		Total			6 months or less			6-12 months			1-2 years			2-5 years			More than 5 years
Non-derivative financial liabilities
Borrowings	W		12,141,044		12,946,309			2,537,318			1,236,157			4,624,773			4,548,061			—
Bonds			523,094		538,548			198,654			213,751			126,143			—			—
Trade accounts and notes payable (*)			3,307,687		3,307,687			3,307,687			—			—			—			—
Other accounts payable (*)			1,461,014		1,462,662			1,432,529			30,133			—			—			—
Long-term other accounts payable			218,683		248,238			—			—			67,441			180,797			—
Security deposits received			138,384		147,478			480			4,109			142,864			25			—
Lease liabilities			59,678		62,604			23,122			14,889			10,342			14,095			156
Derivative financial liabilities
Derivatives	W		9,553		7,157			3,027			2,416			1,792			(78	)		—
Cash outflow			—		325,920			18,751			13,131			292,017			2,021			—
Cash inflow			—		(318,763	)		(15,724	)		(10,715	)		(290,225	)		(2,099	)		—
Total	W		17,859,137		18,720,683			7,502,817			1,501,455			4,973,355			4,742,900			156

(*) As of December 31, 2025, it includes W704,529 million of payable to credit card companies for utility expenses and others paid using business credit card for purchases.

ii) Supplier Finance Arrangement

Supplier finance arrangements are characterized by one or more finance providers offering to pay amounts that the Group owes its suppliers and the Group agreeing to pay finance providers according to the terms and conditions of the arrangements at a date later than, when suppliers are paid. These arrangements provide the Group with extended payment terms, or the Group’s suppliers with early payment terms, compared to the related invoice payment due date.

The carrying amounts of financial liabilities from supplier financing agreement as of December 31, 2024 and 2025 are as follows:


		December 31, 2024				December 31, 2025
(In millions of won)		Trade accounts and notes payable		Other Accounts Payable		Trade accounts and notes payable		Other Accounts Payable
Liabilities under supplier finance arrangement
Purchase Card (*1)	W		778,535		366,853		474,781		219,697
Electronic Trade Receivable-Secured Loan (*2)			90,328		164,741		53,667		142,872
Liabilities under supplier finance arrangement of which the supplier has received payment from the finance provider
Purchase Card (*1)	W		778,535		366,853		474,781		219,697
Electronic Trade Receivable-Secured Loan (*2)			2,443		2,952		2,138		12,465

(*1) The Group pays the settlement amount to the card company on the end date of credit term according to the card agreement. The Group uses purchase cards in agreement with the supplier, the amount paid to the card company is for the purchase of goods or services incurred in the normal course of business, with no change in the underlying purpose of the transaction, and the payment deadline to the card company falls within the normal business cycle of one year or less, and no collateral is provided in connection with this agreement. Therefore, it is classified as trade accounts and notes payable and other account payable and presented as operating and investing activities in the cash flow statement.

(*2) The Group enters into supplier financial agreement with financial institutions to streamline the payment process and offer early payment terms to suppliers. Under the supplier financial agreement, if a vendor that supplied goods or services to the Group transfers its account receivables to the financial institution within the payment due date, the Group pays the amount to the financial institution. There is no change in the original debt recognized as trade accounts and notes payable or other account payable because the supplier financial agreement does not result in a substantive reduction of the Group’s payment obligation or a change in payment terms.

There were no material business combinations or foreign exchange differences that would affect the liabilities under the supplier finance arrangement.

Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders. The Group is also responsible for complying with certain financial ratios as part of capital maintenance conditions imposed externally. To fulfill this responsibility, the Group regularly monitors these financial ratios and takes proactive measures when necessary.

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The fair values of financial assets and liabilities, together with the carrying amounts as of December 31, 2024 and 2025 are as follows:


		December 31, 2024				December 31, 2025
(In millions of won)		Carrying amounts		Fair values		Carrying amounts		Fair values
Financial assets carried at amortized cost
Cash and cash equivalents	W		2,021,640	(*1)			1,572,058	(*1)
Deposits in banks			611	(*1)			611	(*1)
Trade accounts and notes receivable, net			2,500,608	(*1)			2,136,774	(*1)
Non-trade receivables, net			227,477	(*1)			145,426	(*1)
Accrued income, net			22,552	(*1)			34,987	(*1)
Deposits			16,747	(*1)			14,549	(*1)
Loans			37,143	(*1)			13,318	(*1)
Financial assets at fair value through profit or loss
Equity instruments	W		120,501		120,501		124,316		124,316
Convertible securities			1,470		1,470		—		—
Derivatives			256,251		256,251		131,987		131,987
Financial assets at fair value through other comprehensive profit or loss
Trade accounts and notes receivable, net	W		1,123,869	(*1)			222,410	(*1)
Financial assets effective for fair value hedging
Derivatives	W		119,098		119,098		—		—
Other financial assets
Lease receivables			10,063	(*1)			7,406	(*1)
Financial liabilities carried at amortized cost
Borrowings	W		13,412,275		13,482,726		12,141,044		12,170,751
Bonds			1,137,839		1,142,725		523,094		523,500
Trade accounts and notes payable			4,156,149	(*1)			3,307,687	(*1)
Other accounts payable			2,000,444	(*1)			1,679,697	(*1)
Security deposits received			160,713	(*1)			138,384	(*1)
Financial liabilities at fair value through profit or loss
Derivatives	W		10,768		10,768		9,553		9,553
Other financial liabilities
Lease liabilities	W		57,975	(*2)			59,678	(*2)

(*1) Excluded from disclosures as the carrying amount approximates fair value.

(*2) Excluded from the fair value disclosures in accordance with IFRS 7 ‘Financial Instruments: Disclosures’.

Financial instruments carried at fair value are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques. The different levels have been defined as follows:

The Group measures fair value for financial reporting purposes, including fair value measurements, which are classified as “Level 3”. The Group consults on the fair value assessment process and its results in accordance with the financial reporting schedule, and recognizes changes in the "level" at the end of the reporting period when there is a change in events or circumstances that cause a shift between fair value levels.

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of December 31, 2024 and 2025 are as follows:


(In millions of won)		December 31, 2024
Classification		Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss
Equity instruments	W		18,958		—		101,543		120,501
Convertible securities			—		—		1,470		1,470
Derivatives			—		256,251		—		256,251
Financial assets effective for fair value hedging
Derivatives	W		—		119,098		—		119,098
Financial liabilities at fair value through profit or loss
Derivatives	W		—		10,768		—		10,768


(In millions of won)		December 31, 2025
Classification		Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss
Equity instruments	W		21,008		—		103,308		124,316
Derivatives			—		131,987		—		131,987
Financial liabilities at fair value through profit or loss
Derivatives	W		—		9,553		—		9,553

The valuation techniques and inputs for assets and liabilities measured at fair value that are classified as Level 2 and Level 3 within the fair value hierarchy as of December 31, 2024 and 2025 are as follows:

          (In millions of won)

          December 31, 2024

          December 31, 2025

          Classification

          Level 2

          Level 3

          Level 2

          Level 3

          Valuation technique

          Input

          Financial assets at fair value
   through profit or loss

Equity instruments

W

—

101,543

—

103,308

Net asset value method and Comparable company
analysis

Price to book value ratio

Convertible securities

—

1,470

—

—

Risk-adjusted discount model and binominal option pricing model

Discount rate, stock price and volatility

Derivatives

256,251

—

131,987

—

Discounted cash flow

Discount rate and Exchange rate

          Financial assets effective for fair
   value hedging

Derivatives

W

119,098

—

—

—

Discounted cash flow

Discount rate and Exchange rate

          Financial liabilities at fair value
   through profit or loss

Derivatives

W

10,768

—

9,553

—

Discounted cash flow

Discount rate and Exchange rate

Fair value hierarchy classifications, valuation techniques and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of December 31, 2024 and 2025 are as follows:

          (In millions of won)

          December 31, 2024

          Classification

          Level 1

          Level 2

          Level 3

          Valuation technique

          Input

          Liabilities

Borrowings

W

—

—

13,482,726

Discounted cash flow

Discount rate

Bonds

—

—

1,142,725

Discounted cash flow

Discount rate

          (In millions of won)

          December 31, 2025

          Classification

          Level 1

          Level 2

          Level 3

          Valuation technique

          Input

          Liabilities

Borrowings

W

—

—

12,170,751

Discounted cash flow

Discount rate

Bonds

—

—

523,500

Discounted cash flow

Discount rate

iv)

The interest rates applied for determination of the above fair value as of December 31, 2024 and 2025 are as follows:


	December 31, 2024	December 31, 2025
Borrowings, bonds and others	3.70%~3.96%	3.32%~3.90%

There is no transfer between Level 1, Level 2 and Level 3 for the years ended December 31, 2024 and 2025, and the changes in financial assets classified as Level 3 of fair value measurements for the years ended December 31, 2024 and 2025 are as follows:


(In millions of won)
Classification		January 1, 2024		Acquisition		Disposal			Valuation			Changes in Foreign Exchange Rates		December 31, 2024
Equity instruments	W		87,027		5,470		(128	)		(2,809	)		11,983		101,543
Convertible securities			3,127		—		(1,838	)		—			181		1,470


(In millions of won)
Classification		January 1, 2025		Acquisition		Disposal			Valuation		Changes in Foreign Exchange Rates			December 31, 2025
Equity instruments	W		101,543		1,422		—			2,914		(2,571	)		103,308
Convertible securities			1,470		—		(1,399	)		—		(71	)		—

The net gains and losses by category of financial instruments for the years ended December 31, 2023, 2024 and 2025 are as follows:


		2023
(In millions of won)		Financial assets at amortized cost			Financial liabilities at amortized cost			Financial assets at FVTPL			Financial assets at FVOCI			Derivatives			Others			Total
Interest income	W		134,388			—			—			—			—			276			134,664
Interest expense			—			(720,086	)		—			—			—			(3,343	)		(723,429	)
Foreign currency differences			108,546			(176,376	)		—			—			(36,052	)		—			(103,882	)
Reversal of bad debt expense			181			—			—			—			—			—			181
Gain or loss on disposal			(48,600	)		—			132			(329	)		—			—			(48,797	)
Gain or loss on valuation			—			—			(13,274	)		—			—			—			(13,274	)
Gain or loss on repayment			—			(167	)		—			—			—			—			(167	)
Gain or loss on derivatives			—			—			—			—			102,116			—			102,116
Total	W		194,515			(896,629	)		(13,142	)		(329	)		66,064			(3,067	)		(652,588	)


		2024
(In millions of won)		Financial assets at amortized cost			Financial liabilities at amortized cost			Financial assets at FVTPL			Financial assets at FVOCI			Derivatives		Others			Total
Interest income	W		87,510			—			—			—			—		182			87,692
Interest expense			—			(906,766	)		—			—			—		(2,874	)		(909,640	)
Foreign currency differences			1,189,874			(2,238,150	)		—			—			190,906		—			(857,370	)
Reversal of bad debt expense			(689	)		—			—			—			—		—			(689	)
Gain or loss on disposal			(7,708	)		—			(109	)		(18,470	)		—		—			(26,287	)
Gain or loss on valuation			—			—			(8,590	)		—			—		—			(8,590	)
Gain or loss on repayment			—			(678	)		—			—			—		—			(678	)
Gain or loss on derivatives			—			—			—			—			413,480		—			413,480
Total	W		1,268,987			(3,145,594	)		(8,699	)		(18,470	)		604,386		(2,692	)		(1,302,082	)

25.

Financial Risk Management, Continued

(f)

Net gains and losses by category of financial instruments, Continued


		2025
(In millions of won)		Financial assets at amortized cost			Financial liabilities at amortized cost			Financial assets at FVTPL		Financial assets at FVOCI			Derivatives			Others			Total
Interest income	W		51,420			—			—		—			—			266			51,686
Interest expense			—			(700,214	)		—		—			—			(2,394	)		(702,608	)
Foreign currency differences			(367,983	)		454,997			—		—			(22,646	)		—			64,368
Bad debt expense			107			—			—		—			—			—			107
Gain or loss on disposal			(7,062	)		—			497		(13,854	)		—			—			(20,419	)
Gain or loss on valuation			—			—			7,343		—			—			—			7,343
Gain or loss on derivatives			—			—			—		—			34,935			—			34,935
Dividend income			—			—			266		—			—			—			266
Total	W		(323,518	)		(245,217	)		8,106		(13,854	)		12,289			(2,128	)		(564,322	)