Cross-talk Between the CSuO and On-site Staff in Charge -Taking on the Challenge of Establishing Integrated Risk Management
Risk management is an initiative where companies systematically manage risks to avoid or mitigate losses as they conduct their business. In the fluid "age of uncertainty," the importance of risk management is increasing for companies to achieve sustainable growth.
This time, in identifying and prioritizing “companywide key risks themes” for the first time, CSuO, Matsuko reviewed the process with the responsible persons from each department.
Personnel in charge of risk management: Tsutsuzaki and Shinki (Risk Management Dept.)
Person in charge of corporate planning: Sato (Corporate Planning Dept.)
Personnel in charge of chemicals management: Kumaki (Chemicals Management Dept.) and Aoki (Quality Assurance Promotion Div.)
Person in charge of sustainability: Ueyama (Sustainability Dept.)
"The Resonac Companywide Key Risk Map" Revealed Through Cross-Organizational Collaboration
Matsuko: Under the leadership of senior managers and based on the examinations conducted by the Risk Management Committee (chaired by the CEO), Resonac has specified its key risks on a companywide basis and categorized them as three S-rank risks and five A-rank risks. With regard to this, please describe the present situation and how you have reached it, as well as the initial challenges that you faced in the process.
The Resonac companywide key risk map
Tsutsuzaki: Tsutsuzaki: We have specified eight companywide key risks. We started to work toward a new risk management system following the integration of the two companies and have finally visualized our thinking with regard to risks. Based on the recognition that susceptibility to risks differs by business unit, we have established a framework for making risk-related decisions from a managerial viewpoint and incorporating them into corporate strategies, thereby enhancing our management cycle from the viewpoint of risks.
Sato:It is quite difficult to make invisible things like risks visible. Basically, we deal with the risks identified by personnel in charge at each business unit. They identify operation risks and hazard risks relatively easily. However, they do not identify the risks caused by external factors, such as those related to regulations on per- and polyfluoroalkyl substances (PFAS)* and to decoupling, although they are aware of these risks due to their topicality.
This might be partially because the business units are too busy dealing with their customers to visualize medium- to long-term risks that they might be exposed to in view of social trends. Also, it is generally difficult to report on risks that are yet to emerge. We therefore thought it necessary for us administrative staff to grasp such difficulties and help members of the business units to deal with such risks with ownership. Accordingly, as the first activity of the secretariat, we created a picture—a bubble chart— to visualize the risks posed to Resonac so that the members of the business units could address them with ownership.
Shinki: We were finally able to align the views of the management team and on-site workers in both a bottom-up and a top-down manner. There were two challenges to be met for the analysis of risks caused by external factors. First, as we had never done such analysis before, we had to grope around for an appropriate method. Second, it was difficult for us to define the risks caused by external factors. The bubble chart was genuinely useful in terms of fostering discussions to meet these challenges.
In past risk inventory activities, we had already made efforts to include external environment-related risks, but in the reports submitted by on-site staff there were few such risks listed or, if they were listed, they were not appropriately specified. In response, we decided to list up the risks that might be caused by external factors to prevent their omission by on-site staff and asked the on-site workers to make a report in reference to the list, which indeed did help them specify the risks. There were indeed a range of risks to be examined. But we were able to do it by promoting internal communication with a focus on listening to the opinions of on-site workers, which was truly effective.。
Ueyama: Climate change is a kind of natural disaster and in this sense is an operation risk. However, the impacts caused by climate change to our businesses can clearly be said to be risks caused by an external factor. As for climate change-related risks, we needed to respond to the request for the Task Force on Climate-Related Financial Disclosures (TCFD)-recommended disclosures made by the Financial Services Agency and so we conducted examinations for the disclosure in cooperation with the business units before addressing other risks. In the process, we conducted various examinations in cooperation with the risk management team for future risk analysis and were able to position climate change as one of the key risks posed to us by external factors.
Tsutsuzaki: We have finally set the eight companywide key risks thanks to the co-creation activities conducted earlier with the Corporate Planning Dept. and the Sustainability Dept. Going forward, we will examine these risks in depth to analyze their impacts on our businesses and products and for the formulation of countermeasures as part of our management agenda.
Fostering a Culture that Encourages Challenges
Matsuko: What are the next challenges to meet? How to meet them? Matsuko: So what are our next challenges? As the first challenge, we need to further foster integrated risk management on a global scale, for which we are on our way. What else?
Kumaki: Regarding regulations on PFAS, we need to deal with this issue as one of the challenges to be met by the entire company beyond the framework set for the management of chemical products. It is not easy to replace these substances with alternatives and, even if we can do it, we must ensure that the substitutes are at least of equal quality, which is very difficult technologically. I would like to create a corporate culture that encourages our development personnel to continue embracing challenges with high motivation and a never-give-up spirit.
Sato: It is impossible for any single company to control regulatory trends, but we will work to enhance our ability to obtain information about new trends on regulations and others. Also, we will work to visualize the internal information held by each of our business units and bases and build a system to share such information across the company.
Risk Hedging as the Foundation of Business
Matsuko: Finally, how can we enhance our earning power through these measures?
Shinki: I associate risk management with “economic fundamentals” rather than with earning power. Companies that cannot make appropriate responses to risks are disqualified to compete in the market. Based on this recognition, I give first priority to raising the awareness of employees about risk management and will continue to provide them with necessary education and awareness.
Aoki: Recent regulations have tremendous potential to be game changers. It is important to promptly deal with as much information as possible to analyze risks appropriately and turn them into opportunities, which will help enhance our earning power.
Kumaki: It is necessary to go beyond doing something within one plant and rather share new technologies and manufacturing/equipment know-how between plants, which will lead to total optimization and the enhancement of our earning power. I am convinced of this. This kind of change in mindset is needed on-site as well as at the headquarters.
Ueyama: For the promotion of environmental measures, such as those to curb climate change, I would like to grasp environment-related business opportunities to boost our earning power and corporate value. To this end, we will foster two types of measures. First, we will analyze our environment-related opportunities and risks in cooperation with the business units by conducting scenario analysis as recommended by the TCFD, thereby supporting the formulation of business strategies by the company. Second, we will search for more co-creation opportunities by summarizing and sharing information about our products that contribute to the environment.
Tsutsuzaki: Based on the assumption that risks do exist, we will identify the risks we are exposed to and hedge against them to give our customers and other external stakeholders a sense of security. This in turn will give us a foundation from which to sell our products and extend our sales agreements and will thus help us enhance our earning power.
Matsuko: It is important to implement both “offensive” and “defensive” measures. Let us formulate these two types of measures from medium- to long-term viewpoints to generate synergies among them, thereby enabling Resonac to earn more through risk management and devotion to sustainability and also to help Resonac prevent risks from damaging its corporate value.
※ PFAS is one of the chemicals that is increasingly regulated worldwide. In Japan, regulations are being advanced by various ministries, and currently, regulations concerning water quality management, importation, and manufacturing have been established.
Our efforts in risk management are introduced in the RESONAC REPORT 2024.