Risk Management | IR Information | Morinaga & Co., Ltd.

Philosophy of Total Risk Management

The Morinaga Group identifies total risk that potentially exists in its business activities and takes appropriate measures against the risk based on the philosophy of total risk management.

(1) To Fulfill Corporate Social Responsibility

(i) Ensuring of the safety of employees and visitors
(ii) Safeguarding of assets
(iii) Early business recovery and ensuring of business continuity

(2) To Gain Corporate Social Responsibility

(i) Timely and appropriate information disclosure
(ii) Contribution to local communities
(iii) Humanitarian considerations

Major Risks and Responses

In an effort to respond to potential risks existing in its business activities, the Morinaga Group established the “Total Risk Management Rules” in FY2002/3 as part of its internal control system. Based on the Rules, we classify and assess possible risks and implement preventive measures in normal times. See the table below for major possible risks and countermeasures.
The Total Risk Management Rules includes various manuals such as the Natural Disaster Crisis Preparedness Manual, which sets out measures to ensure an early resumption of business in case of crisis. In FY2018/3, in an attempt to take our business continuity plan (BCP) a step further, we began to work on the development of business continuity management (BCM), a framework of continuous improvements that allow the Company to continue operations even when being affected by a disaster or accident, or resume operations as early as possible after an interruption.
In the event of a crisis, we will assess and judge the situation promptly, take necessary actions such as the establishment of a task force and information disclosure, while conducting a cause analysis and implementing recurrence prevention measures.
Further, to demonstrate our strong stance against anti-social forces, we appointed a person in charge of preventing unreasonable demands. We also work to collect information from related administrative agencies, and, in case of an emergency, we will take organization-wide actions swiftly, working closely with these agencies.

Morinaga Group's Total Risk Management System

■ Important Risks from a Short- to Medium-Term Perspective

Risk Item	Assumed Risk	Response by the Morinaga Group
Food safety	Cost burden and damage to social credibility due to a large-scale recall attributed to unforeseen quality accidents or product liability compensation	Formulation of the Quality Policy and Quality Assurance Rules and establishment of a systematic quality assurance system Establishment of Crisis Management Response in preparation for the occurrence of quality incidents
Production system	Suspension or delay of product production due to factory inoperability caused by a disaster or other unforeseen event	Maintaining production of mainstay products and implementing measures to restart following business continuity management (BCM)
Raw materials procurement	Fluctuations in raw material prices and procurement shortfalls due to the following factors: ▶Fluctuations in the exchange rate ▶Crop failure due to global warming and　unseasonable weather ▶Global spread of infectious diseases, political instability　in the country of origin, conflicts, and other uncertainties ▶Rising crude oil Prices ▶Increase in labor unit price and logistics costs due to labor shortages	Execution of foreign exchange contracts and other measures to hedge against exchange rate volatility Decentralization and diversification of production areas and supplier procurement bases Maintaining appropriate inventory Promotion of sustainability of important raw materials and sustainability initiatives by suppliers
Weather, natural disasters, and other unforeseen circumstances	Reduced purchasing opportunities due to weather conditions Supply chain stagnation due to large-scale natural disasters	Establishment of production and supply systems to ensure that product supply does not stagnate Demand prediction and production management based on information collection and analysis Ensuring the safety and asset protection of employees and related parties in the event of a disaster
Infectious diseases and the changes they cause	Supply chain stagnation due to pandemics of infectious diseases Changes in consumer lifestyles, preferences, and purchasing behavior	Establishment of production and supply systems to ensure that product supply does not stagnate Continuous research and analysis of changes in consumer behavior and preferences,　and development of　a product research-and-development system to meet new demand
Leakage of corporate and/or personal information	Unexpected leakage of important information due to unauthorized access or other breaches, and in that case, suspension of business activities, occurrence of large costs, and damage to credibility	Implementation of a 24-hour monitoring system by the Security Operation Center and development of an internal management system Thorough fact-finding and investigation of causes when information leakage occurs, measures to prevent the spread of damage, prompt announcement, and implementation of measures to prevent recurrence
Business expansion into overseas markets	Occurrence of unforeseeable circumstances due to the following events: ▶War or terrorism ▶Political or social change ▶Business practices ▶Changes in legal regulations and tax system of each country/region ▶Sudden fluctuations in the exchange rate	Review of strategies through information collection in each country and region, flexible changes to product supply bases, and provision of appropriate guidance and audits to overseas subsidiaries Strengthening of business management and risk management systems of subsidiaries
Corporate social responsibility	Litigation or punishment for violating laws and regulations, and loss of trust from stakeholders as well as damage to reputation and brand value, due to social sanctions	Stipulation of compliance with laws, regulations, social norms, and the fulfillment of corporate social responsibilities in the Morinaga Group Code of Conduct and Standards of Behavior, Human Rights Policy, Tax Policy, and Anti-Bribery Policy and other guidelines Establishment of a system to respond promptly and appropriately in accordance with laws and regulations when risks are recognized
Occupational injuries	Occurrence of an accident that threatens the life or health of an employee, and loss of valuable human resources (e.g., accidents during manufacturing operations, traffic accidents, overseas assignments)	Establishment of the Morinaga Group Occupational Health and Safety Policy; Dissemination of information inside and outside the Company, and promotion of a safe and comfortable work environment Labor-management meetings on safety measures to share information on occupational accidents and take measures to prevent accidents
Investment in property, plant, and equipment	Failure to obtain results as anticipated and planned at the initial stage of investment, decline in business profitability, and occurrence of impairment losses on property, plant, and equipment	Implementation of investment management in accordance with investment management regulations

■ Important Risks from a Medium- to Long-Term Perspective

Risk Item	Assumed Risk	Response by the Morinaga Group
Secure and foster human resources	Decline in market competitiveness due to delays in securing and developing appropriate human resources and developing systems and environments that enable diverse human resources to demonstrate their abilities and play an active role	Establishment of the Morinaga Group Diversity and Inclusion Policy, dissemination of it among employees, and penetration through education Securing and developing human resources based on expertise and global perspectives
Climate change	Impact on business continuity, performance, and financial status for　the medium to long term in the entire value chain from raw materials　procurement to consumer purchasing behavior	Efforts for global environmental conservation and achieving a resource recycling society Enhancing the management of sustainability issues

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