| Strategic Risk |
Risk of declining demand for our products |
- Inflow of cheap products from overseas due to lower tariffs
- Decreasing product demand due to market shrinkage caused by the continuing declining birthrate and aging population
- Decreasing demand due to rising prices of oils, fats and meal products
- Sluggish demand due to inability to properly communicate product features and value to customers
- A decline in competitiveness due to delays in product and technological development in response to changes in customer preferences and social conditions, etc.
- Poor supply and demand management leads to dead stock
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- Add value to products in areas such as functionality and health in response to changes in consumer values, and strengthen proposals for this
- Strengthen response capabilities to growing demand for alternatives to animal protein and fats by proposing combinations of starch, margarine, and PBF (plant-based food)
- Implementing optimal communication according to customer segments, as well as digitalization of brand and product communication
- Strengthening company-wide system compatibility and establishing an optimized flow for total SCM (supply chain management) management
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| Potential risks in expanding overseas |
- Unexpected changes in laws, regulations, and tax systems that may occur when expanding overseas
- Unforeseen political and social risks such as conflict and terrorism
- Accounting fraud and illegal acts occurring due to poor governance at overseas subsidiaries
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- Obtaining information on laws and regulations in various countries and overseas risks from external consultants and group companies operating overseas, and implementing rapid response
- Enhancement of internal controls and implementation of regular audits
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| Financial Risk |
Risks related to raw materials procurement, exchange rates, etc. |
- Increased procurement costs due to changes in the quality and price fluctuations of key raw materials
- Increased procurement costs due to fluctuations in exchange rates, ocean freight rates, etc.
- Inability to procure supplies and increased procurement costs due to changes in the international situation (the situation in Ukraine, the ban on palm oil exports by Indonesia, etc.)
- Increase in procurement costs due to increased demand for biofuels
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- Transactions that are considered to be in a competitive position within the scope of raw material purchasing regulations and foreign exchange forward contract operation regulations.
- Futures pricing and hedging transactions using forward exchange contracts, etc.
- Research and adoption of new raw material sources and suppliers
- Implement appropriate price revisions in response to raw material procurement costs, etc.
- Promoting sustainable procurement activities throughout the supply chain
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| Risks related to fund raising |
- Increase in interest burden due to rising market interest rates
- Difficulties in raising funds due to turmoil in financial markets
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- Selection of a comprehensive fund raising method based on the nature of fund demand, financial market environment, long-term and short-term balance, fund raising costs, and diversification of fund raising sources
- Reduce interest rate fluctuation risk by combining fixed interest rate financing through corporate bonds and long-term borrowings
- Grasp the scale of capital impairment risk through continuous monitoring of assets with impairment risk and deferred tax assets
- Improve capital efficiency by thoroughly reducing assets through working capital management and reduction of cross-shareholdings
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| Risks related to impairment losses on goodwill and fixed assets |
- Poor performance of subsidiaries acquired or invested in, and significant shortfall in business plans
- Declines in the fair values of property, plant and equipment and intangible assets
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- Deliberations at the Investment and Loan Committee and the Management Committee regarding the appropriateness of the acquisition price and follow-up on the realization of post-acquisition synergies
- Regular monitoring of the macroeconomic environment
- Estimates of future cash flows based on business plans
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| Hazard Risk |
Risk of natural disasters and the spread of infectious diseases |
- Casualties to employees and damage to facilities and equipment caused by large-scale earthquakes, typhoons, torrential rains, etc.
- Suspension of operations and disruption of product supply due to the spread of infectious diseases, including COVID-19
- Difficulties in continuing business activities due to supply chain disruptions and breakdowns in social infrastructure
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- Strengthening response capabilities by regularly reviewing crisis management systems and business continuity plans (BCPs)
- Efficient business operations, including remote work
- To ensure a stable supply, we will secure multiple production systems by securing subcontractors and partners, ensure appropriate inventory, and speed up communication and information sharing with customers.
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| Operational Risk |
Climate change and environmental risks |
- Difficulties in securing a stable supply of raw materials due to reduced yields and changes in quality caused by rising temperatures and abnormal weather
- Increase in production costs due to stricter CO2 emission regulations
- Decline in corporate value due to insufficient environmental measures and violations of environmental laws
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- Promoting ESG management integrated into business
- Resource and energy conservation, reduction of CO2 emissions, reduction of plastic use, effective use of water resources
- Maximizing resource utilization efficiency by utilizing AI in the value chain
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| Human rights risks |
- Decreasing corporate value due to inadequate human rights practices in the supply chain
- Harassment and other human rights violations
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- Identify and improve sustainability issues in the supply chain through effective use of external programs
- Ensuring traceability in raw material procurement
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| Logistics-related risks |
- Logistics failure due to lack of proper logistics cost management, such as stagnation of product supply and significant delivery delays due to a shortage of drivers and loading and unloading workers or an inability to secure delivery vehicles
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- Improving the logistics and working environment by improving incidental tasks outside of delivery work, reducing long waiting times, systematically securing vehicles by extending lead times, and setting appropriate fees.
- Appropriate response to changes in laws and regulations
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| Risks of information leaks and cybersecurity |
- Leakage, falsification, or loss of information due to unauthorized access or computer virus infection, etc., and the suspension of ICT infrastructure, production lines, etc.
- Inadequate response when an incident occurred
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- Implementing robust security measures
- Regular monitoring of the management status of confidential documents within the company
- Regularly provide employees with information management training through e-learning
- Strengthening monitoring of external cyber attacks
- Prepare and thoroughly implement procedures for responding to incidents
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| Food safety risks |
- Voluntary recalls and recalls due to health hazards to customers or violations of labeling laws
- Intentional adulteration, food fraud, and data tampering
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- Operate a quality management system based on ISO9001 (reduce quality risks by implementing quality assessments at the product development stage and strengthening the system)
- Obtaining ISO22000 certification and conducting quality audits to ensure proper operation and confirmation
- Continuing employee education
- Product development and research and development that reflects customer feedback
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| Risks related to human resources and labor |
- Shortage of highly specialized human resources and next-generation leaders
- Lack of progress in DE&I (Diversity, Equity and Inclusion) leads to a decline in corporate competitiveness
- Workplace accidents, accidents during work, loss of corporate value due to labor-related laws and regulations, labor troubles, claims for damages, etc.
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- Maintaining and improving a pleasant working environment, establishing a fair personnel and treatment system and implementing appropriate operations
- Developing human resources with advanced expertise and the next generation of management talent
- Promoting diversity through the active participation of women and post-retirement employment extension systems
- Implementing safety and health education, establishing a safety and health management system, improving the working environment, and responding quickly when accidents occur
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| Compliance risks |
- Occurrence of acts that violate laws, regulations, or social norms, or fraud, harassment, etc.
- Business constraints due to changes or additions to laws and regulations
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- Formulated the "J-Oil Mills Code of Conduct" to ensure compliance with laws, regulations and social norms, and thoroughly publicized it through in-house training
- Early detection and correction of fraud and harassment through the establishment of internal reporting systems both inside and outside the company
- Keep a close eye on information on amendments to laws and regulations to keep up with changes
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| Risks regarding intellectual property |
- Loss of competitive advantage due to insufficient protection of our intellectual property rights against similar technological developments by competitors
- Suspension of sales and claims for damages due to infringement of third party intellectual property rights
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- Strengthening collaboration with related departments to quickly discover inventions and acquire intellectual property rights promptly and appropriately
- Establishing a mechanism to prevent infringement of third party intellectual property rights
- Ongoing training for employees on intellectual property rights
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