Risk Management
Risk Management
Sodick has established basic rules for risk management, and works to determine, analyze, evaluate, and take appropriate measures to avoid the risks that exist at each division. At the same time, Risk Management Committee has been established to formulate necessary preemptive response policies to prepare for the occurrence or potential occurrence of unforeseen situations that would have a major impact on management, and to respond appropriately and as needed in the event a situation were to occur.
Risk Management Structure
Risk Evaluation and Analysis
Once a quarter at the Risk Management Committee, we collect risk investigation sheets (which evaluate degree of impact and likelihood of occurrence in two axes and three stages) from each division of Sodick and subsidiaries. And we conduct a detailed evaluation and analysis of risks judged to be particularly significant. Then, we think about measures against these risks and report to and discuss at theBoard meetings, and finally reflect into our business strategies.
In 2022, with the identification of the materiality issue “addressing environmental management,” we considered “climate change risks” as one of our primary risks. After the evaluation and analysis, we considered countermeasures and reported the details to the Board of Directors.
Cybersecurity
We strive to strictly manage confidential business and technological information through appropriate IT technology measures, establishment of internal systems, and employee training. In 2022, we conducted a third-party vulnerability diagnosis to strengthen security measures and prepared to launch a Security Operation Center (SOC).
Major Risks
Sodick recognizes the following as the primary risks with the potential to have a major impact on the Company’s business performance and/or financial position.
- Risks related to economic fluctuations
- Legal and regulatory risks
- Impairment risks related to non-current assets
- Risks related to new businesses
- Risks related to corporate social responsibility
- Construction cost estimation risks
- Risks related to securing and developing human resources
- Risks related to the competitive environment
- Information security risks
- Risks from major fluctuations in foreign exchange rates
- Risks related to procurement of raw materials and parts
- Risks related to natural and other disasters
- Risks at overseas businesses
- Risks related to interest-bearing debt
- Risks associated with the spread of COVID-19
Risks Related to Economic Fluctuations
Likelihood of occurrence : Medium Degree of impact : Major
The Sodick Group is working to reduce risks related to economic fluctuations by expanding the food machinery segment and other businesses that are relatively less affected by economic fluctuations, and by acquiring new customers in elemental technology area. We also work to disperse risks by building up new businesses through R&D and strive to build a more stable business portfolio.
In addition, we continue to pursue steady cost reductions, review suppliers, and implement other measures, while also proactively developing production technologies like automation and labor savings, and introducing the latest technologies such as 5G, IoT, and AI. We are also seeking to build a production structure that can respond flexibly and efficiently to market changes.
Risks Related to Procurement of Raw Materials and Parts
Likelihood of occurrence : High Degree of impact : Major
We have established a basic procurement policy and globally procure the most suitable parts based on appropriate standards of quality, price, and stability with trusting relationship and mutual understandings. In order to ensure stable procurement of parts and materials, we have secured multiple procurement routes and suppliers in Japan and overseas to diversify our procurement sources and address risks such as shortages of parts and materials and soaring costs of materials and logistics.
Furthermore, in order to identify risks throughout the supply chain, we investigate suppliers’ business continuity plans (BCPs). Based on the results of these surveys, we diagnose, maintain, and update our BCP.
Risks from Major Fluctuations in Foreign Exchange Rates
Likelihood of occurrence : High Degree of impact : Major
The Sodick Group has continued to promote overseas production of its major products. This enables us to limit the impact of exchange rate fluctuations on profit due to the offsetting effect of revenue and expenses.
We are also promoting measures to reduce the impact of exchange rate fluctuations, such as exchange hedging by forward exchange contracts for major currencies like the US dollar and the euro. We also carefully examine the situation of foreign currency-denominated commercial distribution and expand the scope of forward exchange contracts as necessary.
Risks Related to Natural and Other Disasters
Likelihood of occurrence : Medium Degree of impact : Major
To minimize damage and ensure business continuity, the Sodick Group has formulated and is implementing a Business Continuity Plan (BCP).
We have built a disaster-resistant production system by decentralizing production centers, and introduced a safety confirmation system to help speed up post-disaster recovery activities. We also have various types of insurance to cover financial losses caused by natural disasters.
Risks at Overseas Businesses
Likelihood of occurrence : Medium Degree of impact : Major
We have established a local production for local use system where machines sold in Chinese market are manufactured locally in China in order to reduce the impact of trade policies in China and other countries.
In other regions, we are using technical centers to strengthen our sales structures and customer support in Europe and the United States, where we expect to gain a market share going forward. We will also promote sales in Southeast Asia and emerging countries like India and Mexico with growth potential and aim to reduce our reliance on the Chinese market by optimizing our breakdown of sales by region.
Information Security Risks
Likelihood of occurrence : Medium Degree of impact : Major
The Sodick Group strives to strictly manage confidential business and technological information through appropriate IT technology measures, establishment of internal systems, and employee training. In addition to thorough use of thin client as internal standard terminals, we have introduced comprehensive security management tools as a countermeasure against IT asset management, internal information leakage, cyberattacks, etc. To further strengthen our security system, we will also periodically carry out a vulnerability diagnosis, etc., using a third-party organization.
Risks Related to Corporate Social Responsibility
Likelihood of occurrence : Medium Degree of impact : Medium
In light of changing social demands, the Sodick Group has established a specialized committee, which is chaired by the President and Representative Director, to systematically continue its efforts on important themes such as compliance, social contribution, human resource development, quality control, and the environment. In addition, we are actively involved in manufacturing next-generation automobiles, vehicle weight reduction, and other measures to reduce environmental impact, thereby promoting business development that contributes to a sustainable society through environmentally friendly manufacturing. Moreover, a newly established specialized department leads the initiatives to strengthen our efforts on climate change in our business operation, including areas such as carbon neutrality, energy savings, and CO2 emission reductions.
Risks Related to Securing and Developing Human Resources
Likelihood of occurrence : Low Degree of impact : Major
We proactively engage in recruiting superior human resources in order to secure and develop engineers with highly specialized technical skills and human resources with excellent management skills such as management strategy and global organizational management. We also emphasize human resources development through systematic post-employment training, executive training, and position-specific training.
In April 2020, we introduced a new personnel system that represents an extensive reform of the previous system, with the aim of career development for each employee’s career goals and individual characteristics. Furthermore, we believe that the physical and mental health of each employee is vital for the sustainable growth of the Company. And, we established the “Sodick Health and Productivity Management Declaration” in January 2022. We will actively promote the improvement of the workplace environment and health promotion in order to secure and retain excellent human resources.
*Please refer to the securities report for more detailed information regarding major risks (available in Japanese only).