Risk Management

Basic Idea of Risk Management

We have established "Risk Management Regulations" regarding the development of a management system to prevent the occurrence of risks that may impact our business activities, and to respond to risks that have materialized. Company-wide risks such as changes in the business environment, climate change, natural disasters, incidents and accidents, and information system failures significantly impact the sustainability of our group's business, and are therefore managed integrally by the Sustainability Promotion Committee.

Specifically, we visualize risk items with high impact and frequency on our group using a risk map. The results are reported to the Board of Directors, and countermeasures are considered and implemented for each high-priority risk item identified from these.

Risk Map Creation 

1. Extraction of our company's risk items by category:
   • Hazard Risks
     • Natural disasters, occupational accidents, fires, general accidents
   • Operational Risks
     • Business risks (development, procurement, manufacturing, sales, quality, information systems), ESG risks (Environment, Social, Governance)
   • Strategic Risks
     • Management strategy, human resources strategy, development strategy, sales strategy, real estate strategy
   • Economic Risks
     • Exchange rate fluctuations, economic fluctuations, interest rate fluctuations, geopolitical risks
2. Risk assessment (utilizing external consulting) was conducted for our company's full-time directors, executive officers, and all department heads based on the above risk items, performing both quantitative and qualitative evaluations.
3. From the results of the risk assessment, a risk map is created with the impact and frequency of each risk item as axes, and priority risks requiring countermeasures are identified. 

Management System for Climate-Related Risks

Climate-related risks are discussed and evaluated by the Sustainability Promotion Committee, as it is considered necessary to take cross-divisional measures such as adopting new technologies, including responding to stricter regulations by various governments. The Sustainability Promotion Committee also formulates policies, strategies, and budgets for minimizing identified risks and capturing opportunities, and incorporates them into the business plans of each division and Group Company to monitor progress.

As climate change advances, we can expect rising temperatures, rising sea levels, and more severe natural disasters such as typhoons and floods. While these are business risks, we recognize that if we can respond appropriately, they will also lead to business opportunities. In response to climate-related risks, we are pursuing the electrification of construction machinery, promoting the introduction of renewable energy at our plants, and responding to natural disasters (development and maintenance of BCP).

Management System to Integrate Climate-Related Risks into Company Overall Risks 

Since company overall risks such as natural disasters, incidents/accidents, and information system failures have a great impact on the sustainability of the Group's business, we will establish a system whereby the Sustainability Promotion Committee will manage overall company risks together with climate-related risks. In the future, based on reports and proposals from the divisions and subsidiaries in charge of each risk, the Sustainability Promotion Committee will evaluate the materiality of the risk and countermeasures to avoid, transfer, mitigate, or accept the risk, and report to the Board of Directors as necessary, thereby strengthening the risk management system.

Board Oversight Structure

The Board of Directors receives reports from the Sustainability Promotion Committee on a regular (in principle twice a year) or as-needed basis on climate-related risks and opportunities, and monitors the progress of initiatives, targets, and performance. In addition, the Board of Directors makes decisions on important matters such as management strategies, annual and longer-term business plans and annual budgets taking into account of climate-related risks and opportunities as necessary.