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Governance: Risk Management

Contents

Risk Management

Risk Management Committee

We have established a Risk Management Committee consisting of approximately 20 members, including directors, corporate officers, and department managers, to establish a risk management system, develop rules and regulations, and identify and prevent risks that may arise in the course of business activities. In addition, we promote cross-functional activities among divisions and Group companies, including the formulation of business continuity plans, training, and information sharing. Furthermore, important matters in risk management are reported to the Board of Directors, the Managing Directors’ Meeting, and the Audit & Supervisory Board. In FY2024, the Risk Management Committee met four times and monthly meetings were held by the secretariat. At the meetings, a variety of risks such as earthquake risks, information leakage risks and raw materials procurement risks, are discussed and shared within the Committee in order to enhance risk preparedness. In addition, proposals are discussed and reviewed within the Committee to formulate priority risk management issues to be addressed in FY2025 onward.

Risk Management Regulations

The Company has established Risk Management Regulations that anticipate comprehensive risks that may arise in the course of the Shin-Etsu Group’s business activities from a long-term perspective and has established a risk management system and responses to any risks that materialize.

Risks Anticipated in the Risk Management Regulations

figure: Risks anticipated in the Risk Management Regulations. Business risks, Environment and safety risks, Research and development risks, Information management risks, Production and quality management risks, Intellectual property, Sales risks, Fraud risks, Purchasing risks, Country risks, Finance and accounting risks, Legal risks, Personnel and labor risks, Other

Risk Management Procedures

Risk management is carried out following the procedures of the PDCA cycle shown in the diagram below in accordance with the characteristics of each risk.

figure: Risk Management Procedures. 1. Risk Identification: Identify and recognize the risks associated with each department’s business and operations. →2. Risk Assessment: Evaluate the magnitude, scope, etc. of risks identified and recognized. →3. Risk Control: Control the size, scope, etc. of the assessed risk. →4. Emergency Response: Creation of Manuals Establish responses in the event that risk events occur. →5. Audit and Inspection: Evaluate the current situation and check measures, etc.

Activities of the Risk Management Committee in FY2025

The Risk Management Committee works in a multifaceted and company-wide effort to preemptively eliminate risks that may affect management and business activities, and to minimize the impact of risks when they do occur and prevent their recurrence.

In FY2024, in addition to its ongoing work of considering countermeasures against geopolitical risks, cybersecurity risks, infrastructure risks, occupational safety risks, raw materials procurement risks, and other risks, including those of Group companies in Japan and overseas, the Committee worked on securing human resources, taking measures to prevent talent outflow, and ensuring stable procurement of raw materials.

In light of the volatile international situation in FY2025, the Committee will continue its efforts to prevent and strengthen measures against the following risks:

  • Cyber risk
  • Business continuity planning (BCP)
  • Procurement of hard-to-obtain raw materials
  • Expansion of risk management systems to subsidiaries and affiliates, etc.

In addition, we will check the status of efforts to address these risks in each of our core business divisions and Group companies and proceed with necessary countermeasures together with the relevant business unit. The Risk Management Committee will continue to support the sustainable development of the company by eliminating risks before they occur and enhancing risk preparedness.

Business Continuity Plan and Handling in Emergencies

The Group offers a number of products with high market share not only in Japan but around the world or which used in special applications in state-of-the-art industries. For that reason, if these products cannot be supplied due to an accident or serious disaster such as a massive earthquake or fire, it will have an effect on society.

In the Company, each division and each plant is preparing for a disaster and accident and formulates a business continuity plan on the basis of the Companywide Business Continuity Management Regulations. Each Group company also formulates a business continuity plan.

In addition, if a disaster or accident occurs, we will work using the structure shown below. Each of the countermeasures head office and organizations carry out emergency response and recovery support on the basis of pre-defined business standards.

System and Major Response Operation in the Occurrence of a Disaster or Accident

figure: System and major response operation in the occurrence of a disaster or accident. Disaster countermeasures head office Director: President With the countermeasures head office (Head office administration department) ・Grasp the situation of the accident, disaster ・Information collection, transmission ・Confirm the safety of employees, ensure necessary personnel ・Situational awareness of business partners, secure alternative suppliers ・Respond to outside inquiries Division countermeasures head office (Appropriate division) ・Grasp the damage, confirm the stock ・Grasp the customer's situation ・Respond to customer inquiries ・Implement alternative measures, re-examine the recovery plan Plant countermeasures head office (Appropriate factory) ・Report, contact regions, head office, employees ・Grasp the damage to production equipment, employee safety ・Secondary disaster prevention ・Ensure necessary personnel ・Recovery plan proposal, implementation

Conduct comprehensive disaster prevention drills

(June 2024, Shin-Etsu Chemical Gunma Complex)

(November 2024, Shin-Etsu Chemical Kashima Plant)