With the goals of reducing the risks that have grown as globalization accelerates and of further transforming and expanding the business of the Mitsui Chemicals Group, in fiscal 2020 we began deploying the Mitsui Chemicals Global Policy Platform (M-GRIP), which is a shared indirect operations platform for the Group. M-GRIP is the mechanism that lays out Global Policies (G/Ps) comprising measures that are common to the entire Group regarding indirect operations such as human resources, accounting, and logistics. By ensuring that each company within the Group implements those measures, it allows the execution of proper business operations and ongoing improvements. It is also intended to support the activities of affiliates through the effective use of the Group’s economies of scale. In fiscal 2022, amid the ongoing COVID-19 pandemic, we explained the details of this mechanism to all Group companies via individual online meetings. Through dialogue, we have also formulated three new G/Ps such as environmental preservation and occupational safety management, and since the start of deployment in fiscal 2020, the number of G/Ps has reached 17, and we are steadily moving toward the stage where they will become firmly established within the Group. By fiscal 2025, we plan to complete the formulation and expansion of necessary G/Ps which will mark a milestone of the deployment phase. By fostering a common awareness throughout the Group and supporting sustainability management and thorough crisis management, which helps improve corporate value, we aim to realize a corporate group that enjoys sustainable growth by working to reduce and avoid risk and improve business efficiency.
Risk Management
Policy and Basic Approach
Risks are becoming more complex as uncertainty in the business environment increases, such as worsening climate change, geopolitical conflicts and tensions, and global epidemics of infectious diseases. Under these circumstances, the Mitsui Chemicals Group believes that it is essential to comprehensively and integrally manage "risks," which are uncertainties and changes that could affect our management and business strategies, from a medium- to long-term and continuous perspective, while covering both threats and opportunities. Therefore, we are working to establish a new company-wide risk management system to minimize threats posed by risks and maximize opportunities.
The Group will pursue sustainable growth and increased corporate value by utilizing risk management in corporate management while continuously reviewing and improving its systems.
System and Responsible Officers
The Board of Directors is responsible for the development and supervision of the overall risk management system of the Mitsui Chemicals Group. Under the supervision of the Board of Directors, the President assumes the ultimate responsibility for the risk management of the entire Group, while the Chief Strategy Officer (CSO) is responsible for overseeing the risk management system and execution of the entire Group.
In addition, the President and CSO shall establish a “Risk Management Committee” as a specialized committee for risk management of the entire Group.
As a risk owner, each executive officer with a specific title is responsible for overseeing risk management in the business areas under their jurisdiction and responsibility, and executes risk management by utilizing the various committees (Corporate Sustainability Committee, Compliance Management Committee, Responsible Care Committee and Corporate DX Committee, etc.) and other committees under their control (Company-wide Strategy Committee, investment deliberation meetings, etc.).
First Line
The head of each division (Head Office divisions, Works, R&D sites, Branches, and Affiliates) and the head of the headquarters division in charge are responsible for the day-to-day risk management, under the responsibility of an executive officer with a specific title who is the risk owner of their own line. Specifically, they identify and assess risks based on the risk model twice a year, appropriately identify risks, and design and implement organizational controls to address those risks. They also supervise and provide guidance on risk management at affiliates under their jurisdiction.
Second Line
In order to ensure that each division manages risks, the heads of headquarters functional divisions with expertise in their areas of responsibility support the risk management of first-line-of-defense divisions, their own divisions, and affiliates from a professional standpoint, under the responsibility of executive officers with specific titles who are their own risk management owners. They also implement Group-wide risk management measures in the relevant area.
Third Line
The Internal Control Division independently audits operations in both the first and second lines and provides assurance to top management and the Board of Directors. The Internal Control Division conducts business audits and responsible care audits to maintain and strengthen the level of internal control in the Mitsui Chemicals Group and works to keep existing business risks at an acceptable level. At the same time, the Division conducts continual inspections and assessments of the design and operation of internal controls relating to financial reporting for the entire Mitsui Chemicals Group, as required under the Financial Instruments and Exchange Act, as the J-SOX assessment as a part of the statutory audit and directs its efforts to ensuring the correct and efficient execution of operations. The audit results are regularly reported directly to the Board of Directors and the Board of Corporate Auditors.
The business audit includes an internal audit process based on self-assessment of internal controls utilizing the compliance checklist. The compliance checklist includes items related to compliance with the competition law, prevention of bribery and corruption, insider trading and harassment, compliance with the securities export control regulations, appropriate handling of corporate and personal information, human rights, information systems security, risk management, credit management, fair accounting and tax administration, and organization and operation of appropriate internal controls. The checklist is revised every year. As process owners for each of the above items, the headquarters functional divisions are audited on the state of their operations. Additionally, audits are conducted based on topics selected each fiscal year from the risk status both in and outside the organization.
From among the responsible care audits (environment & safety audit, occupational health audit, quality audit, and chemical safety audit), the Internal Control Division is responsible for executing the environment & safety audit and the occupational health audit. The Internal Control Division also audits quality audit and chemical safety audit conducted by the headquarters functional divisions to determine whether they have been executed appropriately. In addition to on-site audits, we have established a remote audit system that can be conducted even when it is difficult to visit our sites because of infection control or other reasons.
Risk Management System
*M-Grip:
The abbreviation of “Mitsui Chemicals - Global Risk Management & Business Support Improvement Platform”.
Role of the Risk Management Committee
- Deliberation on basic policy proposals, strategy proposals, plan proposals, various policy proposals, and other important matters related to risk management for the entire Mitsui Chemicals Group (including improvement of risk management processes and tools, and measures to enhance employees' risk management awareness and literacy)
- Discussion of proposed key risks through Group-wide Risk Review
- Discussion of individual key risks and their impact on the Group and the response policy
- Reporting and discussion of the status of risk management for the entire Group
Composition of the Risk Management Committee
| Chair | President |
|---|---|
| Vice Chair | CSO |
| Members | Executive officers with specific titles |
| Observer | Corporate Auditor |
| Secretariat | Corporate Planning Division (Corporate Sustainability Division, Corporate Administration & Legal Division, Human Resources Division, Finance and Accounting Division, Production & Technology Planning Division, RC & Quality Assurance Division) |
Risk Management Process
Under the risk management system, the following process will be used to determine key Group-wide risks, and the PDCA cycle will be implemented.
- Each officer in charge (risk owner) shall comprehensively and thoroughly understand the risks in their area of responsibility, prioritize them based on the degree of impact (scope, profitability/costs, credit, human resources, compliance), timing of occurrence (long, medium and short term), and potential business impact (probability of occurrence), and report to the Risk Management Committee on risks that are deemed to be of Group-wide importance.
- The Risk Management Committee shall evaluate the materiality of risks reported by each officer in charge from a Group-wide perspective and formulate a draft report on key Group-wide risks.
- Key Group-wide risks are deliberated by the Management Committee and determined by the Board of Directors.
- The key Group-wide risks are used to develop strategies, annual budgets, and action plans. They are visualized as risks to be taken or avoided, and utilized for decision-making in business operations and resource allocation.
- Changes in risks as a result of environmental changes are considered. In particular, important risks are monitored by the Risk Management Committee on a timely and continuous basis, and specific countermeasures are discussed and determined.
M-GRIP, a platform for globally strengthening governance of affiliates and sharing best practices
M-GRIP Deployment Chart
The headquarters functional divisions, the regional headquarters, the affiliates, and the Affiliates Coordination Division are working together, each playing its respective role.
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Yamamoto Chemicals that has so far continued to make progress and will celebrate its 100th anniversary and take on the challenges towards the new century
When M-GRIP started, it was a time of serious compliance violations. As a member of the Purchasing Division at Mitsui Chemicals' head office, I promoted the Group's development of the Global Policy (“G/P”) because simply believing in the innate goodness of humankind was not sufficient for procurement operations and I recognized the need for a major change in the way of thinking. In 2021, I moved to my current affiliate and was honestly happy when I saw that the G/P I had developed had been established in the form of an entity policy (individual company rules). We will not leave it as an empty promise, but will continue on the long road of creating and maintaining an effective system, while keeping in mind the sense of crisis at the Mitsui Chemicals head office when M-GRIP was launched, and taking into account the circumstances of each individual company. As a specific example, we have revised our purchasing rules to make them more specific and easier to understand regarding multiple inquiries. As a result, it is recognized within the company that the Group-wide policy has been reflected and the matters to comply with have been clarified. Yamamoto Chemicals will celebrate its 100th anniversary in October 2025. All of us will keep in mind that compliance takes precedence over everything else, as does safety, and we will reach our anniversary day without incident.
SUGIURA Kenji,
General Manager of Administration Division,
Yamamoto Chemicals Inc.
Response to the occurrence of risks
In the event of an emergency situation* that may have a significant impact on the Group or society and requires an organized response, each responsible division will assess the situation in accordance with the Crisis Management Regulations and related company rules. Based on the results, the officers in charge of the Corporate Administration & Legal Division and the Production & Technology Center shall submit a proposal to the President & CEO regarding the measures to be taken by the Company from a Company-wide standpoint and whether or not a headquarters for corrective action should be established. When a headquarters for corrective action is formed by a decision of the President & CEO, it will issue guidance and advice on the corrective action needed to resolve the situation.
*Examples of emergencies:
- Accidents or incidents in the Mitsui Chemicals Group that cause damage to the lives, health, property, and living conditions of people or that are likely to have an impact on the environment in the surrounding area.
- An event causing grave losses of human and tangible assets or damage to the credibility of the Group and resulting in a significant decline in business performance or in serious claims for damages.
Business Continuity Plans (BCPs)
Due to ever-present risks (such as large-scale disasters, an outbreak of a critical infectious diseases, and large-scale accident at a production site), the Company prepares for crises that may have serious consequences for the Group. The Company has established a system to promptly and appropriately respond to each function, such as Head Office, production site, or supply chain, and formulated a Business Continuity Plan (BCP) to fulfill its supply responsibility to customers.
For the BCP to be executed in the event of a major earthquake in the Tokyo Metropolitan area, the plan establishes certain systems and outlines that, in the event that the Company’s Head Office is unable to operate properly, its functions will be transferred to a main base such as the Osaka Works. Additionally an emergency headquarters will quickly establish a chain of command, and emergency customer response centers will be established to provide our customers with support quickly and effectively. BCPs have also been put in place in preparation for an outbreak of a critical infectious diseases and for a large-scale accident at a production site.
With regard to some of the important raw materials, we are purchasing from multiple sources and ensuring back-up sources to safeguard the supply chain, building a production system at multiple business sites for the Group’s main products, and maintaining a certain level of inventory.
In addition, Mitsui Chemicals relocated its headquarters in March 2023. The new headquarters building, equipped with high BCP functions, will provide the headquarters with better business continuity.