Total Risk Management

Basic Concept

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 operations. While improving shareholder 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 oversees risk management throughout the entire Teijin Group, recognizing 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. These are viewed 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

Strategic risk management (SRM)

The Group Strategy Committee, chaired by the CEO and tasked with deliberating key business execu tion issues, promotes SRM initiatives. Specific risks that are currently under review include the potential impact of trade policies resulting from the transition of the U.S. presidency, regulations on carbon fiber in Europe, trends in PFAS regulations, and other case-specific analyses and discussions. The Group also considers various risks such as hostile takeovers, the impact of individual business divestments across the Group as a whole, structural changes in the industry driven by advances in technologies such as AI, and shifts in the global economic framework caused by the fluidity of the international situation and order, thereby responding appropriately to the relevant strategic risks.

Operational risk management (ORM)

The Risk Management Committee, which operates under the CEO, is responsible for ORM, with over sight assigned to the Chief Human Resources Officer / Chief Sustainability Officer. This committee sets policies for managing operational risks and promotes and monitors progress on related initia tives. The CEO chairs the committee, and its members include the Chief Human Resources Officer / Chief Sustainability Officer and others appointed by the CEO.

FY2025 TRM Basic Plan for Operational Risks

In FY2025, following deliberations by the Board of Directors, the Company has established a policy for managing operational risks.

The Risk Management Committee addresses operational risks that could significantly impact management if they were to materialize.
For the countermeasures against each risk, we clarify the Risk Management Owner (the responsible executive officer) and the organizations and committees that support them, and work toward highly effective implementation.
Among the significant risks facing the Group, those deemed most critical are classified as "Major Risk A" and prioritized for countermeasures.

Based on the above policy, the Group identified nine key risk areas in FY2025: major natural disasters, information, geopolitics (economic security), quality, compliance, management (human resources), safety, environment, and society. For each area, we evaluated risks based on (1) impact, (2) probability of occurrence, and (3) expected timing of occurrence. The most significant key risks listed in the table on the next page were identified, and a Risk Management Owner (responsible executive officer) was appointed for each, with clearly defined responsibilities and scope. To further improve the effectiveness of risk management, the Group designated a subset of these key risks as "Major Risk A," indicating the highest-priority risks that require intensive management focus.

Operational Risks: Key Risks and Basic Response Policies

Risk area	Key risks	Risk description	FY2025 Response Policy	Impact	Probability	Time frame	Evaluation^*
Major natural disasters	Tokyo Inland Earthquake	A Southern Central Tokyo Earthquake may cause the largest-scale damage in the Tokyo metropolitan area.	Review and implement training according to the BCP for core management functions.	Large	Medium	Short- to long-term	A
	Nankai Trough Earthquake	A magnitude 9 earthquake may cause damage to factories in the Chugoku-Shikoku and Kansai regions.	Update assumptions regarding potential damage to Teijin Group facilities and review BCP measures at each site.	Large	Low	Short- to long-term	B
	Eruption of Mt. Fuji	Mishima Factory may be completely destroyed by lava flow.	Examine BCP measures in the potential event of a complete destruction of the Mishima Factory.	Large	Low	Medium- to long-term	C
Information	Information security	Disclosure of critical information due to cyberattacks and suspension of operations during system downtime.	Assess and improve support for security levels across the Group.	Large	High	Short-term	A
Information	DX/AI	Shortage of DX talent within the Group is leading to a decline in overall competitiveness.	Develop training programs for IT personnel and continue implementing Group-wide DX talent development programs.	Medium	Medium	Medium-term	C
Geopolitics (economic security)	Supply chain disruption	Disruption in the supply chain is leading to the suspension of the raw material supplies.	Collaborate with businesses to secure multiple suppliers and put countermeasures in place.	Large	High	Short-term	A
	Technical information Leakage	Targeted attacks that exploit vulnerable areas in management may lead to the disclosure of critical technical information.	Assess the current management status and examine the implementation of stronger controls at factories.	Medium	High	Short-term	B
	Sharp currency fluctuations/rising energy costs	Rising energy costs may be caused by military conflicts, economic disputes, and other factors.	Pursue ongoing responses through business profit-and-loss management.	Medium	Medium	Short- to medium-term	C
Quality	Major quality fraud/ falsification	Noncompliance with laws and regulations during manufacturing or inspection processes.	Conduct corporate quality compliance audits and corrective measures.	Medium	High	Short-term	B
Compliance	Serious misconduct	Delayed initial response may lead to intense media coverage and damage to reputation.	Develop a rapid response framework in the event of an incident.	Medium	High	Short-term	B
Management (human resources)	Talent outflow/ recruitment	Weakened management foundation caused by the ongoing outflow of talent or challenges in recruitment.	Promote workplace improvements (job-based roles and career autonomy support) while regularly monitoring turnover rates at key Group companies.	Medium	Medium	Medium- to long-term	C
Safety	Fire/explosion	Long-term suspension of manufacturing and supply caused by fires or explosions at factories, leading to loss of customers or potential lawsuits.	Verify and diagnose site-specific measures to prevent major disasters, such as leaks or fires, and review disaster prevention management.	Medium	Medium	Short-term	C
Environment	Climate change (transition risk)	Delays in responding to environmental regulations, information disclosure obligations, or customer demands for CO2 reduction could lead to customer loss and investor defection.	Pursue ongoing monitoring of global regulatory trends and respond promptly.	Small	Medium	Medium- to long-term	C
Society	Supply chains/ human rights	Inadequate response to regulatory tightening or discovery of human rights violations could lead to reputational damage, customer loss, litigation, and talent attrition.	Address and monitor issues in high-risk businesses based on external risk assessments (surveys).	Medium	Low	Medium-term	C

*Evaluation: A = Major risk A, B = Major risk B, C = Other risk