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Governance and CSR Management

Governance Report

Risk Management

Hitachi Chemical has created the Hitachi Chemical Risk Management Implementation Guidelines, which provides a list of applicable risks and stipulates that all managers and employees have a role in preventing the risks from materializing. It also outlines the criteria regarding the set up of Emergency Response Headquarters, as well as its members, activities and communication standards. Risks, that could pose a significant threat to management, are specified through risk assessment in terms of types of risks, divisions in charge, scale of damage, and frequency of occurrence to assess their impact on management. These risks are reported to the Executive Officers' Meeting and the Board of Directors. Furthermore, disaster mitigation measures required to be developed and implemented are notified to each division and announced in the Company’s securities report. Also, as of April 2014, Risk Management Center has set up direct reporting to the president, who is responsible for the overall management of the Group, to deal with internal control-related risks that could endanger the existence of the organization itself or natural disasters including earthquake and pandemic. Risk Management Center includes an internal control division (Auditing Office) that, as a body independent from other divisions, works among other things for further improvement of corporate governance structure in close cooperation with Audit Committee.

Risk Management System

Risk Management System

Risk Management Process

Risk Manegement Process

Main Risks and Countermeasures
Category Main risks Countermeasures
Health & safety Business continuity Damage caused by earthquakes and tsunamis Infection with diseases, pandemics • Develop manuals on initial response that varies from business site to business site, formulate BCP and conduct drills
• Formulate BCP against worldwide new-strain influenza, make alternate production arrangements, support preparedness of overseas Group companies
Stable revenue Recession, fall in demand, intensified competition Failure to detect product defects, leaks to outside • Formulate medium/long-term strategies, dynamic business operations by each business division
• Application to quality management systems, stringently enforce manufacturing processes
Social responsibility Unfair trading (bidrigging, bribery) Leakage of customer/ client information • Promote audits, education, various compliance programs
• Thoroughly manage information through the development of rules and self-auditing, raise awareness by e-learning
• Evaluate Information security and execute measures to improve Information security
Business-related Risks Listed on Our Securities Report
Category Type of Risk Description
External Environment Economic Trend Decrease in personal consumption and capital investment in the private sector
Increased Competition Inability to maintain product and service competitiveness, etc.
Developments in Overseas Situations Occurrence of political and social issues in overseas countries
Accident and Disaster Occurrence of loss due to accident, natural disaster, etc.
Official Restriction Change in regulations regarding business activities
Exchange Fluctuation Decrease in price competitiveness of export products due to higher value of the yen, rise in imported raw materials cost due to weak yen
Financial Risk Price of securities/change in the interest rate, etc.
Governing of Group Business Restructuring Issues involving business restructuring carried out to improve business efficiency and competitiveness
Acquisition, Merger, Strategic Partnership Issues involving acquisition of other companies to enhance business, and merger or strategic partnership with other companies
Relationship with Parent Company Implications of changes in parent company Hitachi, Ltd.'s business strategies
Business Operation Rapid Technological Innovation Rapid Technological Innovation
Dependency on Suppliers Insufficient supply or delayed delivery of materials and services, etc.
Product Quality and Responsibility Occurrence of defect, etc. in product and service
Dependency on Skilled Human Resources Inability to secure skilled human resources
Information Leakage Leakage of the company's or third party's trade secrets and personal information Issues involving protection
Litigation and Other Legal Proceedings Legal proceedings instituted by business partner or a third party
Environmental Issue Tightened regulations regarding inappropriate handling of chemical substances or the environment
Fluctuation of Raw Materials Cost Rise in the cost of main raw materials
Dependency on Skilled Human Resources Inability to secure skilled human resources
Intellectual Property Issues involving protection, management and acquisition of intellectual property, and occurrence of legal proceedings instituted by third party
Retirement Benefit Obligation Changes in preconditions for calculation of retirement benefit obligation
Information System Occurrence of information system problem

Business Continuity Management

The Hitachi Chemical is committed to reducing the risk of any disruption to its ongoing business and preparing itself for the unlikely event of a risk materializing.

As part of these efforts, the Group has put in place a Business Continuity Plan (BCP) to address such contingencies as a major earthquake or pandemic (e.g., a new influenza pandemic) and continues to work to increase our state of readiness every year.

At the same time, the Company is placing emphasis on training exercises simulating BCP scenarios. In fiscal 2016, the Company conducted a Nankai Trough earthquake response simulation at Nabari Works in March 2017 and a new influenza global pandemic exercise in June 2017. The items discovered through these exercises are reported to the Executive Officers' Meeting, shared among the entire management including Executive Officers and utilized to improve next year’s BCP. By repeating and continuing these kinds of BCP training, the Company hopes to nurture abilities that enable flexible and prompt handling of crisis situations.

Number of Participants in BCP Management Simulation Training
FY 2012 2013 2014 2015 2016
Participants 77 71 72 73 34

Simulated training exercise

Simulated training exercise

Simulated training exercise

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