Governance
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(as of end-March 2024)
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 2023, we considered measures including responding to the Counter-espionage Law of the Peopleʼs Republic of China, whistleblower cases, and a policy for the use of generative AI. We also reported the details to the Board of Directors.
Cybersecurity
We strive to strictly manage confidential business and technological information through appropriate IT technology measures, the establishment of internal systems, and employee training. To strengthen our security measures, we conducted a third-party vulnerability diagnosis in 2022.
In 2023, we carried out training for thoroughly preventing the use of illegal software.
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 Related to Economic Fluctuations
Likelihood of occurrence : High Degree of impact : Major
In addition to expanding the food machinery segment, which is relatively less affected by economic fluctuations, we are working to acquire new customers. We are also building a business portfolio for stable financial performance regardless of product sales volume. We aim to achieve this through creating new businesses, expanding the after-sales service businesses of regular maintenance services and consumables sales, and providing solutions for product automation and labor savings.
We are also carrying out ongoing cost reduction activities, reviewing suppliers, and incorporating the latest production technologies for automation and labor savings. We aim 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
Under our basic procurement policy, we create mutual relationships with our suppliers and procure optimal parts globally with appropriate standards for quality, price, and stability. To ensure stable procurement of parts and materials, we have secured multiple procurement channels and suppliers in Japan and overseas to diversify our procurement sources and address risks including shortages of parts and materials and soaring costs for materials and logistics. We are also regularly inspecting inventory and writing down book values to prevent inventory assets from becoming unusable or being held too long time.
We investigate suppliers’ business continuity plans (BCPs). Based on the results, we diagnose, maintain, and update our BCPs.
Risks from Major Fluctuations in Foreign Exchange Rates
Likelihood of occurrence : High Degree of impact : Major
The Group has continued to promote overseas manufacture of its major products and is working to create production and sales structures that limit the impact of exchange rate fluctuations on profit with the offsetting effect of revenue and expenses. Nevertheless, given the challenging management environment under recent rapid depreciation of the yen, we have shifted and reduced production at the Suzhou Factory and consolidated production at the Amoy Factory. We review our production structure to respond to exchange rate fluctuations from a medium- to long-term perspective.
We are also promoting measures to reduce the impact of exchange rate fluctuations, such as foreign exchange hedging by forward exchange contracts for major currencies like the U.S. 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
The Group has formulated a Business Continuity Plan (BCP) to minimize damage and ensure business continuity. 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 an internal system that can follow closely and respond flexibly to the global situation and legal and regulatory changes in the world. In the Chinese market in particular, we have a structure in place for sales in China to be covered by production in China. This enables us to reduce the effect of trade policies in China and other countries. We are also reviewing our production structure by consolidating production at the Amoy Factory in China.
We are using technical centers to strengthen our sales structures and customer support in Europe and the United States as we expect to increase our market share in the future. We are also reinforcing our sales structures in other regions where growth can be expected, including Southeast Asia, India, and Mexico, to reduce our dependence on China.
Information Security Risks
Likelihood of occurrence : Medium Degree of impact : Major
The 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
We have established a Sustainability Committee chaired by the Representative Director and are pursuing initiatives toward compliance, social contribution, human resources, quality management, and the environment. In addition to promoting work style reforms, we are striving to create comfortable working environments through setting the designation days to take paid leave and encouraging the reduction of overtime work. We also work on initiatives to enforce the Sodick Group Corporate Ethics Charter and Corporate Code of Conduct (Compliance Guidelines), establish a human rights and compliance reporting desk and an external reporting hotline, and provide harassment-prevention training.
Regarding the environmental initiative, we are proactively developing technologies that reduce the environmental impact at manufacturing sites, including the shift to EVs and lighter weight vehicles, reducing plastic, and decreasing food waste. We have also established a specialized department to promote initiatives including carbon neutrality and CO2 emission reductions.
Risks Related to Securing and Developing Human Resources
Likelihood of occurrence : Medium Degree of impact : Major
We proactively recruit skilled human resources to secure and develop engineers with highly specialized technical skills and human resources with excellent skills in management strategy and global organizational management. We also emphasize human resource development through systematic post-employment training, executive training, and position-specific training. We have identified “diversification of human resources” as one of our materiality issues and are promoting a corporate culture in which diverse employees can actively work in comfort and with satisfaction. Furthermore, we believe that the physical and mental health of each employee is vital for the sustainable growth of the Company. We established the “Sodick Health and Productivity Management Declaration” in January 2022 to promote the improvement of the working environment and health promotion, as well as to secure and retain excellent human resources.
*Please refer to the securities report for more detailed information regarding major risks (available in Japanese only).