GOVERNANCE
BASIC APPROACH
The Noritsu Koki Group views risks as potential events that could impede the progress of its business plans. We identify significant business risks through an assessment of the likelihood of occurrence and degree of impact on our business and operations. We analyze the causes of these significant risks and take measures to prevent them from materializing. For unavoidable risks, we examine them individually to manage them appropriately and reduce their potential impact.
RISK MANAGEMENT SYSTEM
Noritsu Koki has established the Risk Management Supervisory Committee, with the representative director and CEO as the chief risk officer to manage matters concerning risks and crises from a Group-wide perspective. The committee also formulates business continuity plans (BCPs) so that a rapid initial response can be taken in the event that a risk arises, and prepares various manuals to serve as crisis management guidelines for employees. In addition, each Group company has established a risk management committee, where members discuss matters concerning risk management and formulate countermeasures. This structure results in a higher level of risk management across the Group.
INITIATIVES
In 2023, we conducted risk assessments of the Group and each Group company, discussed the results at the Risk Management Supervisory Committee and considered countermeasures. We also conducted drills based on the BCPs of each Group company.
Looking ahead, we will promote countermeasures formulated based on the results of the assessment and continue to conduct risk assessment of the Group and each Group company. Also, we plan to re-evaluate BCPs for the Group and each Group company.
MAIN RISKS AND RESPONSES
We periodically assess and visualize a range of risks, including climate change and human capital-related risks from short-, medium- and long-term perspectives. By considering measures to prevent risks from materializing, or countermeasures for when they do materialize, we prepare for unforeseen situations that can obstruct business operations.
| Risk | Likelihood of Occurrence | Degree of Impact |
Response |
|---|---|---|---|
| Foreign Exchange Risk | High | Medium | The Noritsu Koki Group is a global enterprise, with overseas sales accounting for over 90% of consolidated revenue (2023). Foreign exchange rates are influenced by a wide range of factors, and it is difficult to predict the timing of currency fluctuations. Therefore, the Group works to minimize the impact of foreign exchange fluctuations on its business operations by conducting transactions mainly in Japanese currency. It also implements natural hedging by balancing foreign currency-denominated debt and receivables. |
| Country Risk | Medium | Medium | Since the Group operates its businesses globally, it may be exposed to risks such as economic recessions in various countries and markets, as well as unforeseen accidents or disasters and changes in laws and regulations. The Group monitors and analyzes global market trends and remains in day-to-day communication with customer companies and business partners to manage country risk appropriately. |
| Business Partner Credit Risk | Low | Medium | Credit risk of a business partner could also have an impact on the Group’s financial position or operating results. It is difficult to predict when such a risk might materialize; however, Noritsu Koki and its Group companies have developed considerable expertise in judging the creditworthiness of business partners and understanding of industry-specific trade practices. To mitigate unexpected outcomes related to business partner credit risk, the Group has also established provisions for expected credit losses for trade receivables in accordance with Group policy. |
| Risks Related to Production Activities |
Medium | High | Many of the Group’s products are manufactured at plants in Japan and by contractors based in other parts of Asia. Damage to plant equipment due to a large-scale natural disaster or human disaster, or pressure on electricity demand and supply, could impact production activities. The Group has formulated business continuity plans (BCPs) to enable production activities to continue even in the event of a disaster. Based on these BCPs, the Group has established a robust production system that will enable rapid restart of operations and recovery of facilities and equipment. |
| Cyber Risk | Low | High | The Group may obtain the personal or confidential information of customers or business partners in the course of its business activities. It has formulated an Information Security Policy and strives to protect personal information based on this policy through measures such as ensuring safety and reliability, and by obtaining the Privacy Mark at Group companies for which cyber security is of particularly high relevance. |
| Risks Related to Intellectual Property |
Low | High | The Group’s patents and other intellectual property are the source of its value creation. To prevent their illegal use by third parties, the Group promotes appropriate management and use of technologies and information. In addition, it conducts thorough surveys and implements measures before using technologies to prevent third-party claims of intellectual property right infringement beyond the scope of the Group’s awareness. |
| Risks Related to Corporate Acquisitions |
Medium | Medium | The Group recognizes that corporate acquisitions are an effective means of helping to achieve its management vision and growth strategies. When carrying out acquisitions, it performs due diligence of the assets and business condition of the target company in order to visualize risks. The Group also has established frameworks to carry out appropriate reporting and discussion in the key decision-making body, and to mitigate risks that threaten the realization of the Group’s expected profit growth and synergies. |
| Risks Related to Goodwill |
Medium | Medium | Goodwill reflects the anticipated future profitability expected from the acquisition or merger of a business. However, if the expected results are not achieved due to changes in the business environment or status of competition, impairment losses may incur, which could significantly impact the Group’s operating results. As with the response to risks related to corporate acquisitions, the Group strives to mitigate risk by establishing frameworks for appropriate reporting and discussion in the key decision-making body (enabling it to regularly monitor the business environment) and by implementing appropriate management and measures to ensure profitability. |
| Risks Related to the Supply Chain |
Medium | High | The Group uses parts and materials in production that are procured domestically and from overseas, and is therefore subject to the impact of global demand and supply trends and transportation conditions. In addition, a high-level response from the perspective of human rights and consideration for the natural environment is expected by society. The Group strives to mitigate risk by considering alternative parts and materials, as well as by promoting design innovations, diversifying suppliers, appropriately passing costs through to prices and enhancing transparency and response to human rights risks in the supply chain. |
| Risks Related to Climate Change |
ー* | ー* | The Group believes that responding to climate change is a priority issue and expressed its support for the Task Force on Climate-related Financial Disclosures(TCFD) recommendations in October 2022. The Group will identify the potential business impact of climate-related risks and opportunities and reflect them in business strategy, while striving to provide timely and accurate disclosure to stakeholders. |
- ＊See Responding to Climate Change for more information on our response to risks related to climate change