We Are Increasing Risk Sensitivity and Improving the Quality of Our Activities Through Further Strengthening of Our Risk-management Structures
Basic PhilosophyBuilding A System That Can be Brought to Bear on Ever-changing Risks and Crises
Here at SEKISUI CHEMICAL Group, we are building a risk management structure that unifies “risk management,” which aims to prevent risks from occurring in the first place, and “crisis management,” which responds to serious risks that have manifested. Through this unification of concepts, we are creating a system that can be brought to bear on ever-changing risks and crises.
Management StructureGroup-wide Sharing of Risk Management Policies
Since April 2020, ultimate responsibility for risk management at SEKISUI CHEMICAL Group has lain with the Managing Director of the ESG Management Department, whose Risk Management Group handles day-to-day risk management operations.
SEKISUI CHEMICAL Group is creating a risk management structure that centrally manages activities aimed at preventing risks (risk management) and activities responding to risks that have already manifested (crisis management).
Our risk management activities are based on the PDCA management cycle. Under PDCA, we analyze and evaluate company-wide risks as well as risks identified by each organization in accordance with the SEKISUI CHEMICAL Group Risk Management Guidelines, implement countermeasures, and then conduct reviews as necessary while taking corrective action.
Crisis management activities are conducted in accordance with the "SEKISUI CHEMICAL Group Crisis Management Guidelines.” A crisis management liaison committee consisting of each groups of headquarters and divisional company representatives holds regular meetings to review case studies and conduct training.
In the Medium-term Management Plan launched in fiscal 2020, we are deploying enterprise risk management (ERM) in a way that integrates our existing organization-specific risk management activities with our Group-wide risk management activities. In addition to the domestic organizations, we will accelerate the development of these activities in overseas Group, so that they are instilled throughout every corner of the Group. As part of ERM, we are introducing Group-wide and region-specific assessments of major risks. In particular, Group-wide major risks will be screened when risk management activities for each organization take place, allowing us to strengthen our response to major risks from a Group-wide perspective.
ERM stands for Enterprise Risk Management, and refers to Group-wide risk management.
As the business environment in which companies operate becomes increasingly uncertain and complex, SEKISUI CHEMICAL Group is systematically bringing to light the wide range of risks related to the business objectives of each organization. We have established an ERM system that quantifies each risk based on its likelihood of occurring and its potential impact. Dedicated offices in corporate administration then identify those risks that have a high possibility of leading to a “Group-wide serious incident” and then share and manage their findings with the Group. We are continually verifying the effectiveness of the ERM system by reviewing uncertainties on a regular basis.
In fiscal 2020, SEKISUI CHEMICAL Group launched a Group-wide Risk Review Subcommittee. Drawing on the specialized expertise of dedicated offices in corporate administration, the Subcommittee corrected and modified the Group-wide risks identified in fiscal 2019 and examined whether the likelihood of their occurring or their potential impact had changed, in light of changes in factors such as geopolitical risks and social demands. The results of the deliberations by the Subcommittee as well as various measures to reduce risks are discussed by the Sustainability Committee and then reported to the Board of Directors for their consideration in management decisions.
Bolstering Risk Management StructuresIncreasing Risk-sensitivity Using PDCA Cycles
In an increasingly complex external and internal environment, it is extremely difficult to accurately assess the risks that may emerge moving forward. SEKISUI CHEMICAL Group believes that increasing risk sensitivity among employees is essential to properly handling such risks, and the Group continuously runs PDCA cycles in line with the international standard for risk management ISO 31000.
These activities were launched during fiscal 2011 among 27 organizations, primarily business units. The number of organizations engaged in these actions has increased each year, reaching 175 in total, including Japanese and overseas affiliates accounting for 93% of consolidated sales in fiscal 2020. Amid the consolidation and addition of organizations, the number of organizations participating in these activities in 2021 is expected to be 171 in total, including Japanese and overseas affiliates accounting for 95% of consolidated sales. Activities were also launched in R&D. In addition, the Group is also working to improve the effectiveness of these actions by building an organizational framework in line with the business environment, sharing information among the various organizations, and promoting cooperation with specialized departments.
*1Temporary decline resulting from a large-scale M&A.
Identifying, Analyzing, and Assessing RisksRisks that SEKISUI CHEMICAL Group Should Manage
To make clear which risks the Group as a whole should prepare itself for, in terms of both organization-specific risk management and Group-wide risk management, we have broadly categorized these as business environment, strategic, and operational risk, and have further subcategorized each category in order to comprehensively identify risk.
Based on the different risk criteria for organization-specific risk management and Group-wide risk management, we quantitatively assess the risk level for each of the identified risks using a risk matrix that combines results and likelihood of occurrence.
Major Risks Faced by SEKISUI CHEMICAL Group
1.Business environmental risks
- Major market trends
- Fluctuations in exchange rates, interest rates, and asset value
- Raw material price volatility and procurement
- Large earthquakes, natural disasters, industrial accidents
- Climate Change and environmental issues (resource depletion, water, marine plastics) Politics and society (political change / terrorism)
- Politics and society (political change / terrorism)
- Impact from the spread of COVID-19
- M&A / New Business / R&D
- Information-management (information leaks / technical information outflow)
- Quality (responsibility for manufactured goods / Major Quality Issues)
- Safety (fi re and explosions / major workplace accidents / hazardous substance leakage)
- Laws / Compliance / Human Rights (unethical or criminal behavior / volitions of the Monopolies Act or fraudulent transactions / unauthorized overwriting of data / bribery / harassment / environmental regulations, etc.)
- Intellectual property (IP disputes)
Basic Philosophy Toward BCP (Business Continuity Planning)
BCP is the very essence of business strategy. Therefore, SEKISUI CHEMICAL Group, whose adoption of a Company system has made the range of the business in which it engages broad, has decided on a basic posture of having those in charge of each line of business (the heads of business units, the presidents of business companies, etc.) determine the necessity of BCP individually, based on the particulars of the business in which they are engaged, and is promoting formulation of business-continuity plans and the implementation of business continuity management (BCM) based on ISO 22301, a standard for methods of implementing BCM. In light of the recent increase in the number of threats, as well as the growing need to determine how to continue operations in the event of a medium- to long-term loss of key management resources, and to prepare for such an event, the Group is developing an initial response plan (ERP) that places the protection of human life as the highest priority at all organizations as a company-wide initiative from fiscal 2021. In addition, the Group will also focus on establishing BCM for each of our domestic and overseas businesses in line with the individual characteristics of each business in our diverse lineup of operations. Even in an emergency situation that could threaten the continuance of operations, we will minimize losses to our organization and our customers while continuing to fulfill our social responsibilities as a company by responding quickly and restoring important functions as soon as possible.
Bolstering the Domestic Crisis-management System
Based on its experience during the Great East Japan Earthquake, SEKISUI CHEMICAL Group carried out a full-scale overhaul of its crisis management system in fiscal 2011 and has been refining that system ever since.
Specifically, we have conducted drills based on the Emergency Response Headquarters Procedures Manual (at the Secretariat), held annual education programs based on the Emergency Situation Initial Response Procedures Manual (for all employees), and organized disaster/infectious disease-preparedness systems based on disaster/infectious disease-preparedness checklists in all offices (around 800 within Japan).
As of January 2012, the rate of sufficiency regarding disaster-preparedness systems, in reference to the Cabinet Office’s guidance on corporate measures for disaster prevention, averaged 41% among all offices. Thanks to annual improvements, however, the Group has, since fiscal 2015, reached a point where it has been able to maintain an average rate of over 90%.
In preparation for emergency situations, SEKISUI CHEMICAL Group implements Group-wide response measures for emergencies as provided for in the Crisis Management Guidelines and the Emergency Response Headquarters Procedures Manual. Through training and providing the Emergency Situation Initial Response Procedures Manual to all employees, who carry this manual at all times, we ensure that all employees can take the appropriate action in the event of an emergency. In 2018 we also prepared an English version of our Emergency Situation Initial Response Procedures Manual, which is provided to employees requiring it. Moreover, in fiscal 2019 we installed a safety confirmation system in the work mobile telephones of all employees, which enables rapid confirmation of the safety of our employees in emergencies.
Emergency Situation Initial Response Procedures Manual (April 2021 revised edition)
Emergency Response Headquarters Functions (when a major earthquake occurs)
Initial action of the Emergency Response Headquarters (in the event of a major earthquake)
Procedures for contacting the divisional company/headquarters from the site immediately after the emergency occurs.
Structure of Overseas Crisis Management System
Based on the “Overseas Safety Management Regulations,” SEKISUI CHEMICAL Group divides the world into six crisis management regions. The Overseas Crisis Management Office (Risk Management Group, ESG Management Department) plays a central role in sharing crisis management information with business travelers, expatriates and local employees, alerting them in a timely manner and instructing them on travel restrictions in addition to other activities in emergency and non-emergency situations. As the number of overseas Group locations increases with each passing year, we established Regional Headquarters in each of the four main regions and appointed the person responsible for the Regional Headquarters as the Regional Head. In the event of a crisis event, the Regional Head and the Overseas Crisis Management Office will work together to collect information and take initial action. We have also established a highly specialized support framework in coordination with our security assistance and medical assistance partners. Additionally, the Group conducts training sessions for employees seconded overseas before they are dispatched abroad, provides pre-trip e-learning for employees sent on business trips, provides country-specific training focusing in particular on infectious diseases, and educates employees on the basics of crisis management and specific countermeasures.
Global Crisis Management Guidelines
SEKISUI CHEMICAL Group’s Measures to Prevent the Spread of the Novel Coronavirus
In response to the spread of COVID-19, Sekisui Chemical has been implementing a variety of measures to help stem the spread of the virus in order to protect the health of our employees and meets the demand of society. Alongside the quick establishment of a company-wide emergency task force, we set up a special page dealing with infectious diseases on the company intranet as part of our effort to disseminate action guidelines and share strategies on how best to prevent the spread of infectious diseases. The safety of our employees is our top priority, and in the event that an infected person is confirmed within the Group, we will promptly assess the situation and share the information with the relevant parties.
Until the global pandemic is brought under control, we will continue to regularly monitor the implementation of infectious disease countermeasures at all of our domestic and overseas business sites as part of our effort to ensure a secure environment for the continuation of our business.
By introducing "Dashboard", a centralized database of risk-related information for risk-management activities, 1)efficiency; 2) accuracy; and 3) visualization have significantly advanced. We are also working to strengthen the risk identification process by utilizing various audits. In fiscal 2021, we plan to screen all active organizations for major company-wide risks when conducting assessments, so we can respond to major risks from a company-wide perspective.
Enhancement of training systems
1) Raising awareness of risk management activities and training of risk managers
In fiscal 2020, risk management training was provided to 28 newly appointed risk managers (persons responsible for duties related to risk management activities in their respective organizations). Focusing on teaching the knowledge and skills necessary for the practice of risk management, the training will continue, for the enlightenment of the risk managers who are responsible for the day-to-day activities.
The Group provides other risk management training as necessary, to improve understanding of risk management as appropriate to each management level. For example, training programs for managers and for newly appointed officers of affiliated companies are provided.
2) Enhancement of content of training for overseas crisis managers
< For people going on business trips >
With a view to preventing the spread of COVID-19, in principle, the Group currently prohibits all overseas travel. If an exceptional need for an overseas business trip arises, the people going on the overseas trip are required to undergo a training program focused on infectious diseases as a safety measure and must take detailed measures to prevent infection.
< For people transferring to a new position or location >
Transferring personnel undergo timely training customized to the circumstances of their country of destination, regarding mental preparations and points of concern focused mainly on safety management when stationed overseas.
< For both business travelers and transferees >
Through e-learning (both basic and applied versions), content dealing with local characteristics, customs and the like is prepared in a test format, to enhance the employees’ crisis-management mindset. With respect to the six countries to which Group employees most commonly travel on business (the United States, South Korea, China, Thailand, India and Vietnam), the applied version of the e-learning is taught, to provide more detailed, country-specific information.
< For the Overseas Crisis Management Office and persons responsible for day-to-day duties >
In fiscal 2020 the Group implemented an emergency simulation exercise. The exercise confirmed the roles of and lines of communication with the Overseas Crisis Management Office, particularly the Group head of the dedicated offices in corporate administration, and the Company (person in charge of day-to-day duties).