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Risk Management

J-Oil Mills value risk management through accurate identification, evaluation, and management of risks, as well as on compliance. In 2020, we reorganized our organizational structure to ensure more thorough enforcement and implementation of risk management and compliance. We clarified the functions of the Ethical and Compliance Committee and Risk Management Committee, which had existed up to now, and established the Management Risk Committee as a new organization providing instruction and reporting to the Management Meeting, and strengthened its functions and activities.

The Management Risk Committee responds comprehensively and promptly to potential risks that could affect management, crises such as compliance violations (manifested risks) and grave crises, and strives to prevent and reduce their impact. Under the Management Risk Committee, we established the Compliance Subcommittee with missions including to raise employee awareness and deal with compliance violations, and the Risk Management Subcommittee with a mission to anticipate and prevent risks and respond to crises.
Below, we have outlined the major risks (management risks) that we recognize as having the potential to substantially affect the Group's financial position, operating results, and cash flow.
Forward-looking statements are based on the Group's assumptions and beliefs made using information available as of March 31, 2023.

Management risks and responses

Items Risks Risk awareness Our response to risks
Strategic risks Risks of drop in demand for the Company's products
  • Inflow of inexpensive products from overseas due to tariff reductions
  • Decrease in demand for products due to market contraction caused by continued decline in birthrate and aging population
  • Drop in demand due to higher prices for oils, fats, and meal products
  • Lackluster demand due to inappropriate communication of product features and value to customers
  • A decrease in competitiveness due to delays in product development and technological advancements that align with customer preferences and changes in societal conditions
  • Bad inventory resulting from insufficient management of supply and demand
  • Respond to changing consumer values by adding value to our products and strengthening our offerings (in terms of function or health)
  • Strengthen our ability to respond to growing demand for substitutes for animal proteins and fats by proposing combinations of starch, margarine, and plant-based foods
  • Optimize communications for each customer segment, and digitalize brand and product communications
  • Enhance companywide system responses and establish flows optimized for total supply chain management
Risks associated with overseas expansion
  • Potential unexpected changes in laws, regulations, and taxation systems inherent in overseas expansion
  • Political and social risks such as unforeseen conflicts and terrorism
  • Fraudulent accounting or illegal activities due to governance failures at overseas subsidiaries
  • Act promptly to acquire information on laws and regulations of each country and overseas risks from external consultants, Group companies operating overseas, and other external information sources
  • Expand internal controls and conduct regular audits
Financial risks Risks related to raw material procurement, exchange rates, etc.
  • Increase in procurement costs due to changes in quality and market prices of key raw materials
  • Increase in procurement costs due to market fluctuations in exchange rates, ocean freight costs, etc.
  • Inability to procure materials due to geopolitical risks (e.g., the situation in Ukraine and palm oil export bans in Indonesia), and higher procurement costs
  • Increase in procurement costs due to higher demand for biofuels
  • Engage in competitively advantageous transactions within the scope of raw material procurement regulations and forward foreign exchange contract operation regulations
  • Carry out hedging transactions through futures pricing and forward exchange contracts
  • Screen and recruit new raw material sourcing areas and suppliers
  • Adjust prices as appropriate, based on raw material procurement costs and other factors
  • Promote sustainable procurement activities throughout the supply chain
Risks related to funding
  • Increase in the interest rate burden due to a rise in market interest rates
  • Fundraising difficulties owing to turmoil in financial markets
  • Select funding methods comprehensively, based on the nature of funding needs, the financial market environment, the balance of long/short-term needs, funding costs, the diversification of funding sources, and other factors
  • Reduce interest rate fluctuation risk through a combination of fixed-rate funding, using corporate bonds and long-term borrowings
  • Ascertain the scale of capital impairment risk by continuously monitoring assets with impairment concerns and deferred tax assets
  • Improve capital efficiency by managing working capital, reducing cross-shareholdings, and taking other measures to reduce assets
Risks related to impairment losses on goodwill and fixed assets
  • Poor operating performance of subsidiaries that we acquired or took a stake in, or failure to achieve their business plans
  • Decline in fair value of property, plant and equipment or intangible assets
  • Deliberate on the appropriateness of acquisition prices and follow up on progress toward achieving post-acquisition synergies at the Investment and Financing Committee and Management Committee
  • Regular monitoring of the macroeconomic environment
  • Estimate future cash flows based on business plan
Hazard risks Risks related to natural disasters and the spread of infectious diseases
  • Personal injuries to employees or others, or damage to facilities and equipment due to major earthquakes, typhoons, torrential rains, etc.
  • Suspension of operations or sluggish product supply due to the spread of infectious diseases such as COVID-19
  • Difficulties with maintaining business activities due to supply chain interruptions or failures of social infrastructure
  • Reinforce response capabilities by periodically reviewing the crisis management system and business continuity plan
  • Operate efficiently, using remote work and other means
  • To ensure stable supplies, establish a production system with multiple channels by securing contractors and partners, maintain appropriate inventories, and accelerate communications and information-sharing with customers
Operational risks Risks related to climate change and the environment
  • Difficulty in securing stable supply of raw materials due to lower harvest volumes, changes in quality, or other factors caused by rising temperatures and abnormal weather conditions
  • Increase in production costs due to stricter CO2 emission regulations
  • Decrease in corporate value due to insufficient environmental measures or violations of environmental laws and regulations
  • Promote ESG management that integrates business operations
  • Conserve resources and energy, reduce CO2 emissions, eliminate plastics, and make effective use of water resources
  • Maximize resource use efficiency by applying AI in the value chain
Risks related to human rights
  • Decrease in corporate value due to insufficient human rights measures in the supply chain
  • Human rights violations such as harassment
  • Make effective use of external programs to identify supply chain sustainability issues and implement improvements
  • Ensure traceability in raw material procurement
Risks related to logistics
  • Stagnation in product supplies or substantial delivery delays due to shortages of drivers and cargo handlers, inability to secure delivery vehicles, and other logistics failures due to shortcomings in the management of logistics costs
  • Enhance the logistics and working environments by improving work ancillary to delivery operations, reducing long wait times, extending lead times to ensure vehicles are available as planned, and setting rates appropriately
  • Respond appropriately to changes in laws and regulations
Risks related to information leakage and cyber security
  • Information leaks, falsifications, or losses resulting from unauthorized access, computer virus, etc., or stoppages of ICT infrastructure, production lines, or other systems
  • Inadequate response to incidents
  • Implement robust security measures
  • Periodically monitor the management status of confidential documents within the company
  • Regularly conduct information management training for employees through e-learning
  • Enhance monitoring of cyber-attacks from external sources
  • Prepare and thoroughly implement incident response procedures
Risks related to food safety
  • Voluntary collections and recalls due to health hazards to customers or violations of laws and regulations such as labeling
  • Intentional contamination with foreign objects, food fraud, and data tampering
  • Operate a quality management system based on ISO 9001 (reduce quality risks by conducting quality assessments at the product development stage and strengthening the system)
  • Proper operation and confirmation through ISO 22000 certification and quality audits
  • Conduct ongoing employee training
  • Product development and R&D that reflects customer feedback
Risks related to human resources and labor
  • Shortage of human resources with advanced specialties and next-generation talent
  • Decline in corporate competitiveness due to lack of progress in diversity, equity and inclusion initiatives
  • Deterioration of corporate value, claims for damages, etc., resulting from workplace accidents, occupational incidents, labor-related laws and regulations, labor disputes, etc.
  • Maintain and improve a comfortable work environment, establish fair personnel and remuneration systems, and ensure that these systems are properly implemented
  • Develop highly specialized human resources and next-generation management personnel
  • Promote diversity by providing opportunities for women to excel and offering extended postretirement employment programs
  • Conduct health and safety training, establish a health and safety management system, improve the working environment, and respond promptly in the event of accidents
Risks related to compliance
  • Violation of laws and regulations or social norms, or incidents of fraud, harassment, etc.
  • Business constraints due to changes or additions to laws and regulations
  • Formulate the J-Oil Mills Code of Conduct to ensure compliance with laws, regulations, and social norms, and disseminate it through in-house training programs
  • Detect and correct misconduct and harassment through the establishment of internal and external whistleblowing helplines at an early stage
  • Keep a close watch on information on changes in laws and regulations to ensure compliance with the changes
Risks related to intellectual property
  • Loss of competitive advantage, due to insufficient rights to our intellectual property, in the face of similar technological developments by competitors
  • Sales injunctions, claims for damages, etc., due to infringements of third parties’ intellectual property rights
  • Strengthen mutual cooperation with related departments to detect inventions at an early stage, and acquire intellectual property rights swiftly and appropriately
  • Establish a system to prevent infringement of third-party intellectual property rights
  • Conduct ongoing training for employees on intellectual property rights

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