Risk Management
Kumiai Chemical Group Basic Policy on Risk Management
- The Kumiai Chemical Group understands that risk management is the cornerstone of internal control and that it is important to conduct appropriate risk management, including proper management to prevent the occurrence of risks and a prompt reporting system and sharing for risk information. We foster our risk management culture by implementing these practices to secure the trust of stakeholders, achieve sustainable growth, and fulfill our social responsibilities as a corporation.
- The Kumiai Chemical Group implements appropriate measures to control risks, taking into account the cost effectiveness of company-wide or cross-organizational risks, and consolidates the development and operation of risk management by the departments in charge to respond to risks during normal times. To respond to risks during emergencies, we establish a risk taskforce which makes decisions on countermeasures and implements external actions to mitigate risks.
Risk Management System
Aggregating and Sharing Risk Information
The Corporate Governance Office oversees and promotes risk management according to the “Risk Management Rules” for handling risks during ordinary times. The Risk Management & Compliance Committee identifies risks that affect the whole Company or cross organizations as well as risks for each department, creates measures, and then aggregates and shares risk information with each department.
Regarding our business continuity plan (BCP), we take a result-event approach to handling damage to management resources to respond to all hazards. The scope applies to production and supply systems for agricultural chemicals and fine chemicals as well as factories belonging to group companies.
We have a system to establish the Risk Response Headquarters to handle critical risks such as during emergencies, according to our “Management Risk Control Rules.”
To respond to the business risks in connection with the spread of COVID-19, we had set up the Pandemic Response Headquarters in accordance with our BCP for handling difficulties related to executives and employees coming to work, and had deployed specific measures. We still monitor the infection status of COVID-19 among executives and employees, and support infected persons and close contacts, even now COVID-19 is reclassified as Class 5.
We introduced the telework system at the time of the spread of COVID-19 and also put in place the remote access system according to our “Information Security Operation Management Regulations” to ensure the same security level as in-house access.
Efforts have also been made to strengthen the security level such as by giving training on information security to all employees and setting comprehension requirements for remote work based on test scores. We also established an environment for quickly detecting and responding to unknown malware infections and malicious internal leaks using systems such as behavior detection at endpoints and for the entire network.
| Major risks | Overview of risk | Overview of countermeasure | ||
|---|---|---|---|---|
| 1 | Agricultural Chemicals and Agriculture-Related Business | Japan | Decrease in net sales in Japan due to various external environmental factors (weather, competitive products, laws and regulations) | Collecting information about changes of external environment and cooperating with related organizations |
| Outside Japan | Decrease in sales due to changes in the agricultural chemical market (weather, grain prices, crop acreage, resistance development, competitive products, generic products, laws and regulations) | Improving the accuracy of market forecasts, strengthening information gathering and analysis capabilities, and improving the accuracy of demand assessments and risk monitoring, and responding quickly when these occur | ||
| 2 | Fine Chemicals Business | Decrease in net sales due to a drop in demand for end products and decreased sales volume due to specification changes | Working with sales partners for responding quickly to changing needs | |
| 3 | Developing New Products | It takes much time to develop agricultural chemicals, so loss of sales opportunities resulting from revisions to laws and regulations in each country and changes in the market environment, impact development success | Quickly and accurately understanding regulatory trends and market trends in each country including revisions to laws | |
| 4 | Exchange Rate Fluctuation | Decrease in net sales and increase in procurement cost due to sudden exchange rate fluctuations | Creating a management plan that incorporates unification of currencies in sales and procurement, forward exchange contracts and impact of exchange rate fluctuations | |
| 5 | Changes of laws and regulations | Increase in costs for responding to changes with laws and tightening of regulations in each country related to the handling of chemical substances | Response and coverage through Responsible Care activities, and confirming costs | |
| 6 | Product quality | Problems with product quality due to unexpected quality issues, defects, incidents | Proper quality management based on ISO, and thorough implementation of defect detection via complaint management | |
| 7 | Production and procurement of raw materials | Delays and suspension of manufacturing at Kumiai and increase in procurements costs due to insufficient supply of raw materials as a result of incidents at suppliers, laws and regulations in the country of location, and geopolitical risks | Ensuring inventory by ordering raw materials early, arranging substitutes, and diversification of supply sources for important raw materials | |
| 8 | Impaired asset accounting application | Worsening financial situation due to impairment loss as group business assets decline | Monitoring management by dispatching officers to group companies | |
| 9 | Intellectual property | Decrease in net sales or leakage of technology and know-how due to infringement of our intellectual property Compensation payments due to violation of another company’s intellectual property rights |
Establishing a patent network for substances, manufacturing methods, intermediates, intended use, formulations, and usage methods Monitoring patent applications by other companies and the application examination status |
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| 10 | Information security | System outages due to cyberattacks or other unintentional incidents, leakage of confidential information | Implementing various prevention measures, and developing a response system in the unlikely event of occurrence | |
| 11 | Climate change | Increase in costs for responding to stricter greenhouse gas (GHG) emission regulations, and loss of trust from stakeholders due to insufficient efforts toward realizing a decarbonized society | Establishing GHG emission reduction targets, implementing meaningful capital investment, and promoting information disclosure via TCFD | |
| 12 | Natural disasters and infection disease | Suspension of operations at business sites and disruptions to supply chains due to sudden large-scale natural disasters and pandemics caused by emerging infection diseases | Formulating and implementing a BCP and preventive measures for facilities | |
| 13 | COVID-19 infection | Restriction of business activities due to employee infection, and long-term spread in society | Thorough implementation of basic preventive measures for infection and business operations under the BCP, and promotion of work style reforms according to new lifestyles | |
Risk and Compliance Education
Increased risk sensitivity and compliance awareness
In the significant changes of circumstances surrounding companies, risks become more diverse and complex, and the needs for risk management are increasing. In addition, as stakeholders' demands for compliance become more diverse and sophisticated, an employee's words or actions that deviate from social norms may lead to a loss of corporate social trust. Therefore, it is important to foster and deepen a risk culture, and foster a corporate culture based on compliance. For this purpose, Kumiai Group published an original booklet on "compliance" in 2019, its second edition in 2021, a booklet on "risk management" in 2020, and distributed them to all executives and employees of Kumiai Group.
"Comprehensive Labor Policy Promotion Act" is amended and the measures to prevent power harassment are legislated. News reports of the cases related to marijuana and other illegal drugs are increasing, involving famous comedians. Compliance awareness is needed to be strengthened. In addition to these circumstances, with Kumiai Group compliance awareness survey, we recognized that there are problems in communication at workplace, which is the basis of compliance.
Through compliance education using these booklets at Kumiai Group, we expect to increase risk sensitivity and lead high compliance awareness of personnel, and enhance shareholders' trust to Kumiai Group and its sustainable corporate value as the result.
