Risk Assessment

(Risk Management Policy and System)

The ASAHI YUKIZAI GROUP’s internal risk management rules are based on our fundamental policies with regard to organizing internal control structures. These rules divide risks into two categories (management strategy risks and business risks), which are managed according to their respective stipulated method.

The term “management strategy risks” refers to risks that may result in both profits and losses from M&As and new businesses, etc. However, appropriate management decisions are made on the basis of the construction of the optimum corporate governance system, and based upon full and proper deliberations at important meetings such as board meetings and management meetings, and upon our rules concerning decision-making authority, our group company operational rules, and any other relevant rules. In addition, we make continual improvements based upon evaluations and monitoring of these series of decision-making mechanisms and the effectiveness of their application.

The term “business risks” refers to risks that impede our operations and only generate losses and disadvantages. In order to manage business risks more appropriately, we designate the directors in charge of divisions and departments as “the person in charge of risk management.” We have established a risk management committee, which is chaired by the CEO and under the direct control of our board of directors. This committee identifies and assesses risks, and determines which are major business risks. Measures to prevent latent risks before they emerge, and strategies to deal with risks once they have surfaced, are reported and deliberated by the risk management committee, and the status of the countermeasures is monitored on a regular basis.


(Business Risk Management System)

(Risks and Countermeasures)

The list below shows information regarding the main risks considered to have the potential to impact the ASAHI YUKIZAI GROUP’s business performance and financial situation.
However, it is not an exhaustive list of all risks. There may be some that are currently impossible to predict, or some that may impact us in the future even though they are not considered to be a serious risk at the moment. The risk management committee periodically reviews business risks and endeavors as far as possible to avoid the occurrence of risks and to minimize their impact when they do materialize.

1. Changes in the Political Situation
   The ASAHI YUKIZAI GROUP possesses production and business sites in Japan and overseas, and engages in the manufacture and sale of products. Unexpected changes to laws and regulations or the tightening of regulations in markets in which we have invested, or the emergence of political or social turmoil such as war or conflict, may hinder our overseas business activities and adversely affect the Group’s production activities and business performance.
   We obtain information about such risks from local consultants and consulates as appropriate, and take measures to minimize damage if the risk materializes.
2. Occurrence of Major Incidents
   The ASAHI YUKIZAI GROUP engages in manufacturing and processing at our production sites in Miyazaki, Aichi, Tochigi and Hiroshima in Japan, and at our production sites in the U.S., China, India and Mexico. When equipment malfunctions or incidents such as fires, explosions or leaks occur as a result of bad maintenance, the consequences may include not only work-related employee injuries or deaths, but also the inability to supply our business partners, and the need to pay compensation to the local community affected. The reliability and business performance of the Group may be adversely affected by such incidents.
   Each of our factories implements measures such as periodic inspections and maintenance of manufacturing equipment, promotes safety activities, holds periodic drills to deal with hypothetical disasters and accidents, and takes out damage insurance.
3. Outflow of Human Resources
   There is a risk that a company’s growth potential will decline due to the resignation of young and mid-career employees.
   The ASAHI YUKIZAI GROUP is working to secure human resources and encourage them to stay with us by adopting an elder system where more experienced employees support the development of new recruits, enhancing our training structure and courses that support self-development, creating a pleasant working environment, and establishing an external consultation desk.
4. Harassment
   There is a risk of reputational damage and a fall in stock prices if complaints or consultations about harassment are made to the mass media or the labor bureau.
   The ASAHI YUKIZAI GROUP is working to reduce harassment risk via measures such as setting up an internal whistleblowing system, and providing thorough employee training on how to prevent harassment, in line with our ethos of creating safe and pleasant workplace environments.
5. Financing
   The ASAHI YUKIZAI GROUP’s primary source of operational funds is from the cash flow generated by our business activities. We have sufficient cash on hand and have available credit from banks, so our financing risks are minimal. However, an assumed risk for group companies is that cash flow from operating activities will decrease if a major business partner goes bankrupt due to a sudden economic downturn, for example, making it difficult to raise funds.
   Each company in the ASAHI YUKIZAI GROUP holds cash on hand in preparation against emergencies and, if that is not enough, we finance the group company. In addition, each group company has a set amount of credit available from the bank and is working to stabilize their financials, for example by avoiding risks related to fund raising.
6. Matters Related to Information Security
   In the event that the our computer systems cannot be used normally or personal information is leaked to an outside party due to unforeseen circumstances such as cyberattacks or unauthorized access, the ASAHI YUKIZAI GROUP’s business performance may be negatively impacted by the resulting occurrence of delays in our business activities and admin, loss of credibility, decreased sales, and compensation costs.
   In order to maintain and improve the level of information security, we take appropriate security measures for our information systems, such as undergoing external cyber risk assessments and conducting regular employee training and education in accordance with our basic rules on information management.
7. Intellectual Property Infringements
   The inability to register valid patents with regard to counterfeits of our products, and the inability to have our intellectual property rights recognized, could lead to huge losses. On the other hand, there is the possibility that our business performance could be adversely affected if our products infringed on the intellectual property rights of other companies, and that large amounts of licensing fees and compensation for damages might have to be paid retrospectively, and a risk that sales might be suspended.
   In addition to providing regular education and training on intellectual property rights for our employees, we have introduced a system to encourage employees to detect infringers of intellectual property rights, and are striving to protect intellectual property rights. To prevent infringement of other companies' intellectual property rights, we thoroughly investigate intellectual property rights in advance and take measures such as utilizing the services of an external patent firm.
8. Debt Collection and Credit Control
   The ASAHI YUKIZAI GROUP provides products and services to customers, and most of those transactions involve credit or promissory notes. Our business performance and financial situation may be adversely impacted if a major customer goes bankrupt and debts cannot be collected.
   We endeavor to avoid debt collection risk by conducting regular credit checks and setting transaction limits in accordance with the customer’s credit.
9. Product Liability, Recalls, Quality Defects, etc.
   Based on our strict quality standards, we pay meticulous attention to ensure the quality of our products. However, if a defect occurs in a product, we may be liable for direct or indirect damage caused by the defect, which may not be adequately covered by liability insurance, and may incur substantial costs for countermeasures. In addition, media reports concerning such an issue may damage our brand image, lead to a loss of customers, etc., which may adversely affect our operations, business performance, and financial condition.
   In accordance with ISO 9001, we have established and regularly reviewed product quality procedures to prevent the production of defective items. In addition, we thoroughly investigate the cause of any complaint, and draft and implement measures to prevent a recurrence.
10. Response to Violations of Laws and Ordinances and the Tightening of Regulations
    The ASAHI YUKIZAI GROUP conducts business activities on a global scale and is subject to the laws and regulations of each region. In addition to ensuring strict compliance with laws and regulations related to our business activities, we have established the ASAHI YUKIZAI GROUP Code of Conduct with even higher standards, and are working to strengthen our compliance system through employee education and regular internal audits. Our business activities may be restricted when a law is amended, which could adversely impact our business performance and financial situation. We are striving to reduce risks by utilizing a service in Japan to notify us of changes in laws and regulations that relate to us, and by providing information from consultants overseas, and have established a system to promptly respond to changes in laws and regulations.
11. Response to COVID-19
    In response to the COVID-19 pandemic that broke out in January 2020 and spread rapidly throughout the world, we took measures at our factories in Japan to ensure the safety of our employees and secure business continuity, such as restricting business trips and conducting daily temperature checks for employees. In accordance with government guidelines, we are working to improve the ICT environment and expand telecommuting, with the highest priority being to prevent the spread of infection. On the assumption that we must learn to coexist with the coronavirus, we will continue our efforts to ensure the safety and security of our employees and fulfill our responsibility to supply products to customers.