RISK MANAGEMENT

Our fourth medium-term plan, Unite for Growth 2027, requires us to tweak existing businesses and expand into new business fields. We must therefore detect and actively address risks that could disrupt these efforts. To that end, we are enhancing our risk sensitivity and developing a risk management program involving both management and frontline staff.

Processes in Place

Risk Management Structure

Our risk management structure is designed to enable an integrated approach in which the management of risks affecting KOKUYO Group as a whole is integrated with business strategy, with efforts to ensure that the acceptable risks we take in pursuit of our goals are well balanced with the returns from such risk-taking. This approach involves identifying and assessing all risks that threaten to disrupt our efforts to achieve our corporate goals (including strategic risks, financial risks, operational risks, and compliance risks) and then acting in a way that is optimal for our organization as a whole. Risk management, corporate governance, and internal controls are all critical components of corporate management, but rather than managing each separately, we integrate them under common goals so that they function as an organic whole, helping us sustain business growth and achieve our goals.
To ensure that the right internal controls are in place and working effectively, we established the Organization-Wide Internal Controls Committee, which is chaired by the President and CEO. The committee sets organization-wide guidelines and rules related to internal controls. It also monitors the internal controls (checking whether the right internal controls are in place and whether they are working) as necessary. For risk management, we have the Risk Management Committee, a body that advises the President and CEO on risk management. The committee ascertains and assesses a broad set of risks that could potentially impact KOKUYO Group and advises on how to control the potential effects of the risks. The committee is responsible for putting in place measures to enable the unified management of risks that have materialized, affecting KOKUYO Group. It is also responsible for keeping the risk management system running, confirming that measures are in place to ensure that risks that have materialized do not materialize again, and monitoring action plans for major risks.

Risk Assessment Process

Outlined below is KOKUYO Group’s risk assessment process for the organization as a whole and for individual business units. The process is spearheaded by the Risk Compliance Committee.

1. 1.
   Identifying risks
   Business and corporate divisions assess legal and regulatory developments, societal expectations, industrial trends, and business strategies to identify risks and opportunities in environmental, social, and governance categories.
2. 2.
   Assessing risks and assigning priority level
   The risks identified in 1 are assessed by the likelihood that they will materialize and by the magnitude of the effect on KOKUYO Group’s business and stakeholders if they do materialize. The risks that score high in both measures are classified as major (i.e. high-priority) risks.
3. 3.
   Conferring on actions to take
   Risk managers of the relevant corporate and business divisions confer on whether the risk in question should be avoided, mitigated, transferred, or accommodated and on what specific measures to take.
4. 4.
   Monitoring and updating
   The risk managers of corporate and business divisions regularly monitor the progress made in formulating and implementing measures to address the major risks. The set of risks and opportunities are regularly updated to reflect social and business trends so that the process can be continually improved.