Total Risk Management
Basic Approach
The Teijin Group positions risk management, alongside compliance, as a key pillar of its internal controls, supported by a comprehensive Total Risk Management (TRM) structure that covers all of its business operations. While improving corporate value, Teijin believes its mission is to undertake business activities that satisfy shareholders and other stakeholders. In achieving this mission, we must address all risks (uncertainties) that pose a threat to its realization. Accordingly, we have adopted an organizational and systematic approach to comprehensively and efficiently identify, assess, and manage the risks affecting the entire Group, and to integrate these insights into Group management. The Board of Directors supervises risk management throughout the entire Teijin Group. It positions the assessment of both "strategic risks," which originate from the formulation of management strategies and plans, strategic actions, and decisions on individual investment projects, and "operational risks," which involve various adverse events that could negatively impact the Company, as critical factors in decision-making. In addition, we require our Group companies and their executive officers to fully understand this approach and to address any risks that could threaten our business activities.
Risk Management Structure
The Group Strategy Committee, chaired by the CEO and tasked with deliberating key business execution issues, promotes strategic risk management (SRM) initiatives. The Risk Management Committee, chaired by the CEO, is responsible for operational risk management (ORM), with oversight assigned to the Chief Sustainability Officer. This committee sets policies for managing operational risks and promotes and monitors progress on related initiatives.
Major Risks
Strategic Risks
The main risks we are aware of, as of June 2026, include fluctuations in energy prices and the impact on the procurement of raw materials and the international logistics network due to the destabilization of the situation in the Middle East, the continuation and escalation of geopolitical tensions between major countries, and the uncertainty of trade, industrial, and economic security policies in major countries. The Group also considers various risks to our medium- to long-term management strategy, such as hostile takeovers, the impact of business structure reviews on the Group as a whole, structural changes in the industry driven by advances in digital technologies such as AI, and shifts in the economic environment caused by the fluidity of the international order.
Operational Risks
The Risk Management Committee has identified nine risk areas: large-scale disasters, information, geopolitics and economic security, quality, compliance, human resources, safety, environment, and society. The committee assesses the risks in each risk area based on (1) impact, (2) probability of occurrence, and (3) expected timing of occurrence, and identifies significant risks that would have a significant impact on management if they occurred. To further improve the effectiveness of risk management, a Risk Management Owner (responsible executive officer) is appointed for each risk among the identified significant risks that is deemed to require intensive management focus (which are designated as priority risks), and response policies are formulated based on the main anticipated risk scenarios for the current fiscal year. For FY2026, we have designated information security, supply chain disruptions, major natural disasters, leaks or fires, leakage of technical information, serious quality-related fraud/falsification, and serious misconduct as priority risks. Under the supervision of the Risk Management Committee, each Risk Management Owner is working on countermeasures, as well as developing a rapid response framework for when risks occur.
Significant Risks in FY2026
| Risk area | Key risks |
Risk description | Response Policy | Impact (a) | Proba- bility (b) |
Time frame | Risk Evalu- ation (a×b) |
Priority |
|---|---|---|---|---|---|---|---|---|
| Wide-area disasters | Major natural disasters | Major natural disasters (including a Tokyo Inland Earthquake, a Nankai Trough Earthquake, and an eruption of Mt. Fuji) may cause suspension of operations, disruption of logistics, difficulties in securing personnel, interruption of management functions, and other events that could have a significant impact on business continuity. | Strengthen operational preparedness through the review of disaster response manuals and the development of SOPs. | 3 | 2 | Short- to long-term | 6 | ● |
| Information | Information security | Increasingly sophisticated cyberattacks targeting the entire supply chain, including business partners, may trigger a cascade of risks, including information leaks, operational shutdowns, equipment failures, and safety incidents, making business continuity difficult. | Continue initiatives to enhance security levels across the Group and conduct BCP training. | 3 | 3 | Short-term | 9 | ● |
| AI/Digital risks | Delayed adoption or misuse of AI (including the use of misinformation, input of confidential information, and erroneous decisions), as well as inadequate responses to AI and data regulations, may result in deficiencies in the design and operation of business and control processes, leading to a cascade of risks such as information leaks, quality defects, and business interruptions. | Develop education programs for information technology personnel, clarify career paths, and continue providing DX talent development programs. | 2 | 2 | Short- to medium-term | 4 | - | |
| Geopolitical risks and economic security | Supply chain disruptions | Expanding geopolitical conflicts, sanctions and export controls, and prolonged constraints on logistics and energy supplies resulting from increasing instability in the Middle East and other factors may continuously restrict the procurement and transportation of specific materials and products, leading to delays or shortages in raw material supplies, rising costs, and significant impacts on production, product supply, and business continuity. | Strengthen resilience against unforeseen events by establishing a stable procurement framework and developing countermeasures based on outcome scenarios. | 3 | 3 | Short-term | 9 | ● |
| Technical information leakage |
Unauthorized access, insider misconduct, and other incidents may result in the leakage of critical technologies and confidential information, undermining competitive advantages and potentially leading to sanctions or other penalties related to economic security. | Enhance information management by taking inventory of critical technical information and its management status, and develop and implement measures to strengthen information management. | 2 | 3 | Short-term | 6 | ● | |
| Sharp currency fluctuations | Rapid exchange rate fluctuations may significantly affect import and export costs and the earnings of overseas operations, with a material impact on business profitability and financial planning. | Continue responses through business profit-and-loss management. | 2 | 2 | Short- to medium-term | 4 | - | |
| Quality | Major quality fraud/ falsification |
Major quality fraud or falsification may cause significant harm and losses to customers, resulting in business suspension orders and substantial compensation liabilities, and lead to reputational impacts on other businesses. | Strengthen internal audits focused on quality compliance. | 2 | 3 | Short-term | 6 | ● |
| Compliance | Serious misconduct | High-profile compliance incidents may attract intense media attention and damage the Group's reputation, resulting in customer loss and making business continuity difficult. | Strengthen responses in regions and Group companies where oversight is more challenging. | 2 | 3 | Short-term | 6 | ● |
| Human resources | Talent outflow/ recruitment |
Prolonged talent outflow and recruitment challenges may undermine the continuity of critical functions, including specialized technologies, maintenance, and quality management, resulting in reduced operational capabilities and a weakened management foundation. | Promote improvements to the working environment (including the introduction of job-based systems and career autonomy support programs) and regularly monitor employee turnover rates at major Group companies. | 2 | 2 | Medium- to long-term | 4 | - |
| Safety | Fire/leakage | Equipment failures or operational errors may cause leaks or other abnormalities to develop into fires. Such incidents may lead to shutdowns of manufacturing processes and loss of market confidence, thereby worsening the business environment. Repeated leaks may also affect external parties and the environment, resulting in the suspension of operations. | Verify and assess site-specific measures to prevent major incidents, such as leaks and fires, and review disaster prevention management. | 3 | 2 | Short-term | 6 | ● |
| Environment | Climate change (transition risks) | Delayed responses to environmental regulations, information disclosure requirements, and customer requests for CO2 emissions reductions may lead to customer loss and investor defection. | Continue monitoring global regulatory trends and respond without delay. | 1 | 2 | Medium- to long-term | 2 | - |
| Society | Supply chains/human rights | Inadequate responses to strengthened regulations or the discovery of human rights violations may lead to reputational damage, customer loss, litigation, and talent outflow. | Address issues in high-risk businesses and monitor progress based on external risk assessments (surveys). | 2 | 1 | Medium-term | 2 | - |
- *The degree of impact and the probability of occurrence are each assessed on a three-point scale from 1 to 3. Among Significant Risks, those with a risk score of 6 or higher, calculated by multiplying the degree of impact by the probability of occurrence, are identified as "priority risks." The expected timing of occurrence is treated as reference information, as it is conceptually included in the probability of occurrence.
Emerging Risks
Emerging risks are also becoming a growing concern, such as the increasing instability in the Middle East, the continuing and escalating geopolitical tensions among major countries, the resulting fragmentation of supply chains, and large-scale natural disasters in Japan. We are addressing these risks as key strategic risks and priority risks through appropriate measures and initiatives.