Risk Assessment

(Risk Management Policy and System)

The ASAHI YUKIZAI GROUP’s sustainability management framework is based on our fundamental policies with regard to organizing internal control structures. Under these policies, we have established the Sustainability Management Rules and related internal regulations to develop and operate a sustainability management framework that identifies opportunities for value creation and manages the risks that may hinder them.

The Sustainability Management Committee (chaired by the President) reviews the Group’s key risks and opportunities, assesses their likelihood and impact, and identifies priority management themes as well as the departments responsible for addressing them. The Sustainability Management Group, which serves as the secretariat of the Committee, continuously monitors the progress of responses to key risks and opportunities by the responsible departments.

①Identification、②Evaluation、③Action、④Monitoring

①Identification
　・Identification of risks and opportunities facing the Group through department-wide surveys (including impacts
      on the Company, the environment, and society)
　・Structuring risk and opportunity information through risk scenario analysis

②Evaluation
　・Evaluation of each risk scenario based on internally defined criteria, including likelihood of occurrence, level of impact
      on stakeholders, and business recovery capability
　・Review by the Sustainability Management Committee and approval by the Board of Directors

③Action
　・Development of response and opportunity measures by the responsible departments for each risk category, with
      consideration given to their integration into the Mid-Term Management Plan
　・Implementation of each measure under the leadership of the responsible departments

④Monitoring
　・Regular monitoring of progress in implementing risk response measures and opportunity initiatives by the Sustainability
      Management Group, supporting continuous improvement by responsible departments


(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 Sustainability Management Committee periodically reviews risks and endeavors as far as possible to avoid their occurrence 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.
    To address this risk, we have established an Overseas Crisis Response Manual. We obtain information about such risks from local consultants and consulates as appropriate, and, should a risk materialize, we give top priority to the safety of employees stationed or traveling overseas and take measures to minimize damage.
  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. In recent years, we have established and expanded a number of production facilities. To reduce the risk of accidents at these facilities, we conduct risk assessments from the design stage and add newly completed facilities to the scope of our damage insurance coverage as appropriate.
  3. Shortage and Outflow of Human Resources
    The ASAHI YUKIZAI GROUP recognizes that a shortage of human resources has become an issue due to the rapid expansion of our existing businesses. In addition, the outflow of human resources may hinder the transfer of skills and expertise and reduce the Group’s growth potential.
    The Group places importance on sustainable organizational growth and strives to secure human resources in a planned manner by utilizing both new graduate recruitment and mid-career hiring to attract and develop diverse talent capable of succeeding on a global scale in a wide range of fields. In addition, under our human resource development policy of fostering individuals who “take on challenges on their own initiative and move forward together,” we are working to cultivate an organizational culture in which employees can fully demonstrate their capabilities. Through town hall meetings (Mirai Talk) and coaching projects, we encourage dialogue with management and promote organizational development.
  4. Harassment
    There is a risk that the occurrence of claims for damages or a decline in social credibility resulting from harassment may affect the maintenance and expansion of business relationships and the securing of human resources, thereby having a significant impact on the Group’s business activities.
    The ASAHI YUKIZAI GROUP is working to ensure that this policy is thoroughly understood throughout the Group. The President himself has communicated through a video message that “fostering a strong corporate culture and a positive workplace environment is important, and for that reason harassment, which not only harms individual dignity but also adversely affects workplace morale and productivity, must never be tolerated.” In addition, the ASAHI YUKIZAI GROUP Code of Conduct prohibits harassment and requires all officers and employees to comply with this policy.
    The ASAHI YUKIZAI GROUP is working to reduce harassment risk via measures such as providing employee training, and establishing and operating an internal whistleblowing system.
  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 or similar event, making it difficult to secure funding.
    The ASAHI YUKIZAI GROUP is working to stabilize its financial position by holding cash on hand at each Group company in preparation for emergencies. If additional funds are required, the Company provides financing to Group companies, or Group companies utilize their available bank credit facilities, thereby avoiding funding-related risks.
  6. Matters Related to Information Security
    In the event that 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 administrative processes, 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, conducting regular employee training and education in accordance with our Basic Rules on Information Management, and implementing systems that monitor information devices and detect and respond to suspicious activities. In recent years, the use of generative AI services has expanded. While these services can contribute to greater operational efficiency and idea generation, they also involve risks such as information leakage and copyright infringement. To address these risks, the ASAHI YUKIZAI GROUP has established Guidelines for Generative AI Services that set out rules and precautions for their use. We also take measures to ensure that generative AI services can be used safely within a closed internal environment.
  7. Intellectual Property Infringements
    The ASAHI YUKIZAI GROUP strives to acquire and protect intellectual property rights related to its products and technologies. However, our profitability and business performance may be adversely affected if we are unable to sufficiently eliminate counterfeit products, or if our intellectual property rights do not function effectively due to reasons such as being judged legally invalid. On the other hand, there is the possibility that our business performance could be adversely affected if our products infringe 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, as well as 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 prior intellectual property rights and take measures such as utilizing the services of external patent firms.
  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 and ISO 9001, 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 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 strengthen our quality control framework, continuously improve process management, and conduct regular reviews to prevent the production of defective products. In addition, we thoroughly investigate the cause of any complaint and implement measures to prevent recurrence. We also maintain insurance coverage to compensate for losses arising from such risks and continuously review the appropriateness of such coverage.
  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 the countries and regions in which it operates. If we violate these laws or regulations, we may be required to pay fines or be subject to sanctions that restrict the continuation and development of our business activities. Such violations may also result in a loss of social credibility and could have a significant impact on the Group’s business activities.
    The ASAHI YUKIZAI GROUP has established compliance with laws and regulations as a fundamental principle in its Work Rules and the ASAHI YUKIZAI GROUP Code of Conduct, and requires all officers and employees to adhere to this principle. In addition, we are working to strengthen our compliance system through employee education on relevant laws and regulations, the collection of information regarding legal and regulatory amendments and the implementation of appropriate responses, regular internal audits, and strict action against violations of laws and regulations, thereby striving to reduce these risks.
  11. Procurement
    The ASAHI YUKIZAI GROUP uses polyvinyl chloride resin, phenolic resin, and other raw materials in its products, and a significant portion of these materials are petrochemical-based. Accordingly, it is important for the Group to procure these materials in a stable and timely manner. Market conditions may lead to sharp increases in raw material prices, and deterioration in the supply-demand balance for raw materials, as well as geopolitical risks including conflicts and political instability in the Middle East, may result in soaring raw material costs or supply shortages. Such circumstances may adversely affect the Group’s production activities and business performance.
    In addition, if issues related to human rights, labor practices, environmental matters, or misconduct are discovered at a particular supplier, transactions with that supplier may be suspended, making procurement difficult and significantly affecting production activities.
    To address these risks, the ASAHI YUKIZAI GROUP has established procurement policies and requires suppliers not only to maintain appropriate quality and delivery management, but also to respect human rights, comply with laws and regulations, and avoid misconduct.
    In addition, we continuously collect information on raw material suppliers and procure materials from a diversified supplier base rather than relying on any particular supplier, thereby securing the required quantities at optimal prices. When raw material prices increase significantly, we endeavor to reflect such increases in product prices in an appropriate and timely manner.
    Furthermore, to mitigate the risk of supply shortages caused by an imbalance in supply and demand, we procure materials from multiple suppliers on an ongoing basis.
  12. Large-Scale Disasters
    The ASAHI YUKIZAI GROUP recognizes the possibility that large-scale disasters may result in injuries to employees, damage to factories, the suspension of warehouse and logistics functions, and the inability to procure raw materials and supplies, thereby having a significant impact on business continuity.
    To address these risks, the Group has developed emergency response plans for its business offices and manufacturing sites in Japan, conducts disaster response drills, and has established BCP initial response and recovery manuals. Through these measures, we strive to ensure the safety of our employees and other stakeholders and to minimize the impact on our business activities.
  13. Climate Change
    Climate change is having an increasingly significant impact on the economy, society, and the environment. The ASAHI YUKIZAI GROUP’s business activities and business performance may be affected by factors associated with the transition to a decarbonized society, including the strengthening of regulations in various countries, fluctuations in energy costs, and changes in customer needs.
    In light of these circumstances, the Group recognizes climate change as an important risk factor and analyzes and evaluates its potential impacts on our business in order to implement appropriate countermeasures. In addition, we receive assessments of our initiatives through such processes as responding to the CDP (Carbon Disclosure Project) questionnaire.
    Furthermore, we contribute to mitigating climate change-related risks through the effective use of water resources and the provision of products that help conserve energy, including high-performance spray polyurethane foam insulation materials.