GovernanceRisk Management
Our Group reviews business risks on a periodic basis, based on our policy on internal control, and takes the necessary steps to manage such risks.
Business Risks
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| Risk | Description | Possibility | Effect | Response |
|---|---|---|---|---|
| ①Risks related to procurement of materials and other items | Limited supply or delays for raw materials and fuels, or rising prices of such materials or logistical costs | Medium | Large | Maintain good relations with suppliers, find new suppliers, increase the number of suppliers, and switch to general-purpose materials. |
| ②Risks related to natural disasters, accidents, and outbreaks of communicable disease | Suspension of operations or delays in production and shipments caused by natural disasters such as earthquakes, typhoons, and heavy rains, or accidents such as fires and power outages, or outbreaks of infectious disease (including such occurrences in the supply chain); and costs to repair damage to facilities | Medium | Large | Implement a business continuity plan, provide seismic reinforcement of structures, implement disaster preparedness measures, arrange dispersed manufacturing sites, and prevent the introduction and spread of communicable diseases. |
| ③Risks related to information security | Claims for damages due to the leaking of confidential information that the NEG Group obtained in the course of business, or tarnished corporate reputation due to such problems; and the suspension of business activities or information systems operation due to a computer virus or cyberattack | Medium | Medium | Establish an Information Management Committee, establish a Computer Security Incident Response Team (CSIRT), carry out incident response drills, deploy security systems, and provide in-house training. |
| ④Drastic changes in demand and market structure | Contracted demand for existing products due to technological innovation, or fluctuation of price or supply of products due to intensified competition | Medium | Medium | Speed up R&D, respond to new needs through aggressive sales. |
| ⑤Capital expenditure risks | Significant change in demand forecast, shortage of plant capacity, sudden change in price of major equipment or materials | Medium | Medium | When and however necessary, build new production facilities and continuously upgrade them. |
| ⑥Environmental risks | A shift to stricter environmental regulations, or more corporate responsibilities related to the environment demanded by society | Medium | Medium | Develop environmentally friendly products, ensure that facilities and management systems exert minimal impact on the environment, raise production efficiency, practice the 3Rs (reduce, reuse, recycle), strengthen efforts to reduce carbon emissions, and promote disclosure based on TCFD recommendations. |
| ⑦Risks related to legal restrictions | Violation of the laws or regulations of the country or region where we operate | Medium | Small | Comply with laws and regulations, survey changes in legal revisions, and hold periodic in-house education and audits. |
| ⑧Risks related to fluctuations in currency exchange rates and interest rates | Fluctuations in currency exchange rates and interest rates | Medium | Small | Utilize forward exchange contracts, properly manage interest-bearing debt, and carry out interest rate swap transactions. |
| ⑨Risks related to the sales of certain products | Change in investment or sales plan or material procurement policy of our major customers | Low | Large | Diversify our customer base. |
| ⑩Risks related to overseas business operations | Unanticipated changes in laws or regulations; international tax risk; particular trade practices; changes in political or social conditions; and social turmoil due to terrorism, war, outbreaks of infectious disease, or other factors | Low | Medium | Facilitate close communication between overseas subsidiaries and local authorities, and get advice from experts. |
| ⑪Risks related to labor and securing human resources | Difficulty in securing appropriate human resources for future business development and labor-related compliance violations | Low | Medium | Secure an optimal and effective workforce through active recruitment and training of diverse personnel, achieve labor saving through automation and other means, and institute labor management according to laws and regulations. |
| ⑫Risks related to intellectual property rights | A litigation related to intellectual property rights | Low | Medium | Obtain intellectual property rights useful for business, survey and monitor other companies’ intellectual property rights, develop alternative technologies, and take over or license intellectual property from other companies. |