Risk Management

KH Neochem's initiatives

Risk Management Activities and System

KH Neochem defines risk as the uncertainties that affect management and business activities. To achieve sustainable growth, we identify risks to the greatest extent possible, prevent latent risks from materializing, and manage active risks with organizational, strategic, and continuous controls. To promote effective risk management, a Risk Management Committee has been established, chaired by the CFO, who is responsible for overall risk management, with all division heads as members. In principle, this committee meets twice a year and reports its discussions to the Sustainability Committee as well as to the Board of Directors on important matters.

Risk Evaluation Process and Material Risk Selection

In our risk evaluation process, we identify both internal and external risks in light of social and environmental circumstances, and produce a risk map for the entire company that evaluates their impact and probability of occurrence. Among the identified risks, those with a particularly high impact on our management and business activities, and which require Company-wide measures, are designated as material risks. A risk owner is assigned for each material risk, along with a supervising division and relevant divisions responsible for formulating and implementing countermeasure plans, ensuring proactive efforts to mitigate these risks. Additionally, the Risk Management Committee reviews the assessment of materials risks and reports on the progress of countermeasures, while conducting discussions among its members.

Material Risks and their Countermeasures

Business Continuity Management (BCM)

The Company manufactures and supplies essential products for production activities across a wide range of industries and to provide richer lives for people. For that reason, we believe that we have an important responsibility to maintain and continue our business activities and achieve an early recovery in the event of a large-scale disaster. To this end, we have established a business continuity plan (BCP) at our Headquarters and each plant. Additionally, we conduct annual drills to verify the effectiveness of our BCP. In 2023, we conducted our first role-playing drill, simulating a major earthquake directly beneath the Tokyo metropolitan area, affecting both our Headquarters and Chiba Plant simultaneously, and are advancing discussions and countermeasures based on the challenges identified. Moving forward, we will continue to enhance the effectiveness of our business continuity management (BCM) through BCP training and other initiatives.

Climate-Related Disclosures Based on TCFD Recommendations

The business environment surrounding KH Neochem is growing increasingly uncertain as cases of heat stroke and natural disasters rise due to climate change, and voices calling for decarbonization and carbon neutrality grow louder and more numerous. In January 2022, we declared our endorsement of the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations and have disclosed climate-related information ever since.

Governance and Risk Management

We identify material risks according to the risk evaluation process. The risks arising from climate change have been identified as material risks to our business due to the significant impact they are expected to have on KH Neochem in the future. In addition, we are taking measures to prevent risks from materializing and reduce their impact by continuously conducting risk assessments based on our risk management system and monitoring them at board meetings when necessary.

Strateg

We identify risks and opportunities related to climate change and analyzes scenarios based on warming of 4℃ and 1.5℃ respectively, to assess the impact of future risks and opportunities heading toward 2030. By engaging in the Seven Promises and driving Sustainable Management, we seek to expand the climate change-related opportunities while mitigating the risks, thereby increasing our corporate value.

*1 See the RCP 8.5 scenario of the Intergovernmental Panel on Climate Change (IPCC).

*2 See the NZE2050 scenario of the International Energy Agency (IEA).

KH Neochem's climate change-related risks and opportunities

We have listed items that have a significant risk or opportunity impact on the Company.