Risk Management

Policy and Basic Approach

In a time when the surrounding business environment changes from day to day, leading to increased complications and uncertainty, we are facing a multitude of risks. By maintaining its production system, ensuring suitable access to natural resources, and strengthening disaster prevention measures in order to secure business continuity, the Nippon Kayaku Group is taking preventative measures against risks before they surface, and putting plans in place to mitigate their effects.
In order to “restore business operations within a specified timeframe” in times of disaster or emergency, we are not only promoting the establishment of a BCP Manual for our head office and all business units, but also the preparation of BCP Manuals for every overseas workplace.

System

In order to take preventative measures against risks before they appear, thereby minimizing their effects, we have set up a Crisis Management Committee to serve as an advisory body to the Sustainable Management Meeting. This committee convenes twice a year, and on an ad hoc basis when required.
The committee, chaired by an Executive Director with an official post nominated by the President, consists of representatives from each business unit’s planning department and every section of our General Administration Department, which is unattached to any particular business unit. It is tasked with constructing and administering a crisis management system designed to take preventative measures against the most damaging risks to corporate management and business activities, and to respond to emergencies and conduct damage recovery activities once normal service has been resumed. The most important matters discussed by this committee are reported to the Sustainable Management Meeting and even the Board of Directors, who then provide relevant feedback.

危機管理委員会

Targets and Results

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Key sustainability issues Action plans Indicators(KPI) FY2025 Targets Results FY2024 Initiative-related Topics
FY2023 FY2024
Risk Management
  • Respond to various business-related risks and ensure business continuity by maintaining production systems, ensuring the proper procurement of raw materials, and strengthening measures against disasters
Implementation rate of risk control activities for business, etc., and top five risk control activities 100% 100% 100%
  • Top Five Risk Control Activities conducted at seven domestic factories and all group companies. (The lack of outstanding human resources emerged as an increasing risk-trend)
  • Certain domestic and overseas business sites picked up for hearings related to their Top Five Risks
  • BCP drill conducted at several sites within the Fine Chemicals Business Unit, based on a Kanto-region-epicentered earthquake scenario
  • BCP drills conducted at Chinese group companies
Number of BCP drills conducted Once or more per year 3 3

Initiatives

Risk Prevention

“Business Unit Risk Control Activities” and “Top Five Risk Control Activities”

In order to identify significant risks and enact the requisite controls, the Nippon Kayaku Group undertakes the following “Business Unit Risk Control Activities” and “Top Five Risk Control Activities” on an annual basis.
Business Unit Risk Control Activities cover our three business units, our R&D Department, and our Head Office Administration Department. They involve extracting the risks most impactful to each business unit and department from a managerial perspective, and examining ways to deal with them.
Our “Top Five Risk Control Activities” cover all plants, research labs and business sites inside Japan, as well as domestic and overseas group companies. Each business site extracts its five key risks from its own perspective and explores possible response measures.
Risks and response measures identified for each business unit and site are reported to the Internal Control Management Division, which serves as the office for the Crisis Management Committee. The Internal Control Management Division comprehensively grasps and analyzes risk trends, passes on its findings to the Crisis Management Committee for discussion and final decision on the major risks and responses, then makes twice-yearly reports on initiatives and progress updates to the Sustainable Management Meeting and Board of Directors.

Business Risks

When it comes to risks that can potentially affect our business activities, the Nippon Kayaku Group looks at the risks facing each business unit and section as specified in our “Business Unit Risk Control Activities,” and extracts potential risks based on business-specific, business-environment and geopolitical considerations. We view business strategy, natural disasters, climate change response and compliance as the areas of principal risk to business continuity, business sustainability and increasing corporate value, and are therefore working on response measures vis-à-vis the 13 items listed in the chart below. In emergency situations, we set up a Crisis Management Committee and build a structure which enables our Group to effect prompt and appropriate response. (See here for further details on our emergency response and crisis management system).

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Key Companywide Risks for FY2024
Risk Type No. Risk Category
Risks affecting management strategy 1 Procurement of raw materials
2 Product quality
3 Changes in business environment
4 Occurrence of accidents
5 R&D
6 Changes in regulations and policy
7 Changes in tariffs; exchange rate movements
8 Intellectual property
9 Information leaks
10 Cessation of computer systems
Risks associated with natural disasters and climate change response 11 Natural disasters
12 Climate change response
Compliance risks 13 Compliance and law violations etc.

Responses to ESG Risks

The Nippon Kayaku Group believes in the necessity of appropriately grasping the risks and opportunities associated with sustainable management, and linking the acts of reducing those risks and gaining new business opportunities to further business growth.
Having recognized the above, we have disclosed information based on the risks and opportunities surrounding our Key Sustainability Issues, and TCFD and TNFD proposals. By working towards resolving environmental and social issues through our business activities are we aiming to achieve a sustainable society and additional corporate value.
In order to continue our appropriate responses to the diversification of business activities and changing social and environmental issues, we will periodically review these risks and opportunities, and work towards disclosing information of substantial quantity and quality.

Education and Training

As part of our PDCA Cycle activities designed to plan for greater risk awareness and minimization, we provide risk management training to all our executives, employees (including contracted and part-time employees), and temp staff. We also implement separate risk management education and training for new hires, new managers, and employees transferring overseas.

Responses to Emergencies, and the Structure and Administration of our Crisis Management System

Crisis Management System Preparation

In anticipation of the most critical risks posed to our business activities, we have fixed our Crisis Management Regulations and are currently preparing our Crisis Management System. We are also using our Detailed Crisis Management Regulations to work on building an emergency response structure which allows for more accurate responses based on the preventative measures outlined in various response manuals.

Business Continuity Plan (BCP)

Preparation of BCP Manuals

By way of preparing for natural disasters and outbreaks of infectious disease, our Group is drawing up its own BCP Basic Manual. This serves as the base for each domestic and overseas business site, plant and group company to fix its own individual BCP manual and periodically revise the contents to boost effectiveness.

BCP Drills

As part of our efforts to confirm the effectiveness and workability of its BCP manuals, as well as heighten employee awareness, the Nippon Kayaku Group stages BCP drills both domestically and overseas to ensure that damage is minimized, business can continue, and operations can be promptly restored when emergency situations occur. Inside Japan, the director in charge of the business unit serves as the Crisis Management Chief and conducts an annual BCP drill. FY2024 saw the Fine Chemicals Business Unit conduct a blind scenario-style BCP drill under the auspices of the president and Crisis Management Committee Chair. The drill simulated an earthquake in the Kanto region, and saw the relevant departments of head office, research labs and plants link up to gather and share various information on situations pertaining to damage, disaster and customers. We were able to confirm that the Crisis Management Chief made prompt and appropriate calls, that instructions were carried out, and that the Business Continuity Plan is effective.
In China, meanwhile, KAYAKU CHEMICAL (WUXI) staged a BCP drill based around a scenario which saw damage caused by a plant fire. Meanwhile, WUXI ADVANCED KAYAKU CHEMICAL and Shanghai KAYAKU International Trading teamed up to hold a drill based around a typhoon-damage scenario. The issues and matters of concern confirmed during both drills have been fed into future drills, as well as BCP manual updates and improvements. In addition, with the aim of heightening employee awareness of business continuity, a study session was held on initial response to emergencies using the safety equipment at WUXI POLATECHNO OPTICS, KAYAKU CHEMICAL (WUXI), WUXI ADVANCED KAYAKU CHEMICAL and Kayaku Safety Systems (Huzhou). Going forward, we shall continue to conduct BCP drills around various assumed scenarios in order to enhance our crisis response abilities.

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