Risk Management

Basic Approach to Risk Management

The DIC Group works to expand its operations in line with the growth scenario set forth in the DIC Vision 2030 long-term management plan. At the same time, in this age of unprecedented uncertainties, effectively managing risks is crucial to increasing corporate value. The Group strives to address changes in its operating environment and the diversification of risks in an appropriate and flexible manner. The Group also promotes initiatives aimed at promptly grasping the impact of latent risks on its businesses, preventing such risks from manifesting and minimizing the impact if they do.

Risk Management Policy

Based on the aforementioned basic approach, the DIC Group has established a risk management policy. This policy has two components.

  • The DIC Group shall identify, assess, prioritize and address any risks that may have a significant impact on its management based on potential impact on management and likelihood of occurrence, and respond in a deliberate, systematic and efficient manner.
  • The DIC Group shall establish a Group risk management system and ensure its effectiveness by repeating the plan-do-check-act (PDCA) cycle.

Framework for Risk Management

Under the guidance of the director in charge of risk management, the DIC Group has established the Risk Management Working Group, a subordinate entity of the Sustainability Committee, as part of its effort to strengthen its comprehensive framework for risk management.

Framework for Risk Management

Risk Management Initiatives

At the end of each fiscal year, directors and business group presidents conduct a risk assessment, the results of which are compiled and analyzed by the Risk Management Working Group. The working group’s findings are reported to the Sustainability Committee and the Board of Directors at the beginning of the subsequent fiscal year and significant risks facing the Group in the new period are identified. Each of these significant risks is assigned an owner, that is, the division or department responsible for implementing countermeasures. Risk owners report the progress and outcome of their efforts, as well as any resulting changes to the risk, among others, to the Risk Management Working Group as necessary. The working group responds by providing the risk owner with critical support, evaluating and verifying the results of countermeasures, and suggesting corrections and improvements. The results of these efforts are reported to the Sustainability Committee and the Board of Directors at fiscal year-end, based on which challenges and targets to be incorporated into the following year’s sustainability activity plan are determined. The risk management framework is also honed or modified as appropriate, laying the foundation for the subsequent year’s risk management assessments. Changes to the status of risks resulting from risk management initiatives, as well as from changes in the operating environment, are disclosed publicly as appropriate in the annual securities report, among others.

Overview of Risk Management

Led by the Risk Management Working Group, DIC uses the PDCA cycle on an annual basis to enhance the effectiveness of the DIC Group’s risk management.

Overview of Risk Management

Business Risks

The Group sets forth “Materiality” which are matters with the potential to negatively or positively affect its business performance over the medium to long term. These Materiality items are utilized in enhancing its business, with concrete and efficient handling. The Group continues taking decisive and efficient steps in response to these materiality issues pursuant to DIC Vision 2030,1 launched in 2022, working to ensure that these efforts are beneficial to the management of its businesses. The Group also undertakes risk management initiatives with the aim of appropriately and flexibly addressing changes in its operating environment and the diversification of risks, and of swiftly minimizing damage, led by the Sustainability Committee, an advisory body, and its subordinate entity, the Risk Management Subcommittee. From a wide range of risks, the Group uses risk assessments to evaluate likelihood of occurrence and degree of potential impact and identify major risks to its performance. Risk owners are appointed to take measures against particularly the material risks. These efforts are monitored appropriately and reported on to the Sustainability Committee and the Board of Directors.

The key risks described below are recognized based on the material issues2 identified by the Group, and the findings of a survey conducted by the Risk Management Working Group, and the potential impact of each risk, should it materialize, on the Group’s businesses and stakeholders are categorized into high, medium or low.3

Forward-looking statements herein are based on projections as of December 31, 2023, and the following risks do not cover all risks that could affect the Group.

Likelihood (Potential for future manifestation as of December 31, 2023)

High: Highly likely
Medium: As likely as not
Low: Unlikely

Time Horizon (Expected timing of/period before risk is likely to manifest as of December 31, 2023)

Long term: Five years or more
Medium term: Three to four years
Short term: Within two years
Unknown: Cannot anticipate the timing of its emergence

Risk Type (Categorization by origin as of December 31, 2023)

1: Externally caused risks that are beyond the Group’s control
2: Corporate risks that can be managed through Group management–led countermeasures
3: Business-related risks that should be handled by the relevant divisions/departments

Alignment (Relationship with business strategies outlined in the DIC Vision 2030 long-term management plan)

A: Business portfolio transformation to achieve growth
B: Strengthening of management infrastructure underpinning global environmental, social and governance (ESG)
management and safety management
C: Cash flow management
Other: No alignment with business strategies

Risks, the manifestation of which is likely to have an impact

・Risks associated with portfolio transformation ・Risks associated with exchange rate fluctuations
・Risks arising from the failure of acquisitions and capital alliances to proceed as expected ・Risks associated with product quality issues
・Risks associated with political and geopolitical changes ・Risks related to the creation of a sustainable supply chain for raw materials
・Risks associated with disasters and accidents ・Risks associated with information security
・Risks associated with the stagnation of innovation ・Risks associated with inadequate corporate governance
・Risks associated with response to climate change–related operating environment and ESH-related changes ・Risks related to intellectual property
・Risks arising from demands for the reduction of environmental impact ・Risks associated with water resources
・Risks associated with compliance violations ・Tax-related risks
・Risks associated with securing of human resources ・Pandemic-related risks
・Risks associated with interest rate fluctuations