Risk Management

To avoid losing corporate value and the trust of the public, the azbil Group strives to accurately understand and minimize risk factors having the potential for serious impact on operations.

Risk Management System

The azbil Group’s Comprehensive Risk Management Subcommittee, composed of department managers, conducts an exhaustive investigation to identify risks that may have a significant impact on operations. Following this, the azbil Group Comprehensive Risk Committee, headed by the executive officer in charge of risk management, compiles a list of risks that are especially in need of action, risks deemed important to the azbil Group, which are then deliberated on and confirmed by the Board of Directors. For the key risks, the Management Meeting and the azbil Group CSR Promotion Committee establishes systems with a PDCA cycle as a countermeasure, monitors their progress, and reports the outcomes to the Board of Directors.
In addition to the above, the Board of Directors of each Group company determines its own important risks and implements measures to counteract them.


The azbil Group’s Risk Management

To minimize the risk from possible future events, we carefully review risks every year, identify the key risks, and construct a system for countermeasures incorporating the PDCA cycle.The state of progress is monitored within the framework of our CSR activity.
Also, we have established a crisis management response system to help us respond to crises and emergencies, with the aim of minimizing the impact of any crisis that occurs.We are also building and strengthening the response structures of our “management of major emergencies.” Furthermore, we have formulated many kinds of detailed BCP as we continuously strive to improve our systems as part of our business continuity management.

Risk Management System

Business-Related and Other Risks

Risks that may affect the business results and financial position of the azbil Group are summarized below. These risks are deliberated on by the azbil Group Comprehensive Risk Committee and the Board of Directors, and are managed comprehensively.In addition to this overall management, related Risk Management System departments also take measures to mitigate risk. Information in the table that pertains to the future was judged by the company to be valid as of the end of FY2020. The risks that are listed are described in the 99th Annual Securities Report under “Business-Related and Other Risks.” Please refer to the securities report for details on how each potential risk was addressed and evaluated.

Business-Related and Other Risks

Category Risk Awareness Countermeasures and Risk Mitigation
Business environment
  • Risk that changing market conditions in specific regions and key business sectors, including construction and manufacturing, may have an impact on capital investments; risk of medium- to long-term decline in demand for offices due to changes in the environment; and a major economic recession could all have an adverse impact on the Group’s operations, business results, or financial position
  • Aim for growth by expanding life-cycle business, the demand for which is relatively stable in the event of economic fluctuation.
Growth in competitive environments
  • Risk that inadequate responses to business opportunities that may arise from changes in societal conditions, technological innovations, and the like could lead to the loss of competitive advantage
  • Risk that the loss of competitiveness—caused by misreading of technological trends, slow R&D progress, or failure to respond to open innovation and technological developments—or delays in launching new products, sluggish sales, and the like could affect the Group’s operations or business results
  • Upon recognizing new risks, develop new subscription models and similar offerings and engage in strategic collaboration.
  • Develop business by forming deeper alliances (including M&As) with other companies.
  • Make appropriate technology R&D investments and create a new organizational structure dedicated to specialized fields, such as IT solutions and cloud services; take action to verify new business models; improve systems by using the Azbil Academy personnel training organization to help train employees and help them change jobs; continue pursuing M&A opportunities; update and strengthen core information system and roll out across the Group; and take other measures to avoid delays in addressing changes in the environment and competitive disadvantages.
Product quality
  • Risk that costs incurred by defective products, systems, or services and the resulting damage to our corporate reputation could affect the Group’s operations, business results, or financial position
  • Use a dedicated organization to check quality at the product development and manufacturing stages
  • Manage and improve production lines to maintain proper inspection work processes; check legal compliance statuses related to factory operation; and strengthen quality control for construction management, etc.
  • Conduct inspections using a dedicated organization that specializes in safety in addition to checks at the design and production stages.
Global operations
  • Risk that unforeseen situations, such as regional political and economic upheaval, changes to laws, and terrorism, as well as differences in business practices or the occurrence of an epidemic such as COVID-19 could affect the Group’s operations, business results, or financial position.
  • Risk that delays in planned business expansion for reasons such as regional peculiarities could affect the building automation (BA) business.
  • Risk that sharp foreign exchange fluctuations may impact net sales, prices of raw materials and parts, SG&A expenses, etc.
  • Prepare disaster response, BCPs, etc. Introduce flexible ways of working such as working from home.
  • In the BA business, establish bases mainly in Southeast Asia and China; secure in-house engineers and partner companies to establish a robust business execution system; and start providing services aimed at launching life-cycle business overseas.
  • Hedge against foreign exchange fluctuations appropriately and expand overseas production to mitigate risk.
Securing and developing human resources
  • Risk that obstacles to securing, educating, and smoothly deploying human resources needed to address business structural changes could lead to declines in productivity or other performance indicators
  • Risk that delays in securing, educating, or deploying personnel needed for overseas business development may inhibit achievement of business growth targets
  • Secure and allocate the personnel necessary to address changes in business structure.
  • Take steps to establish a new personnel system
  • Implement measures for securing and training human resources for overseas business development tailored to the situation of each business location.
Information leaks and IT security
  • Risk that leaks of confidential business information or personal information due to unforeseen circumstances could affect the Group’s business performance or financial position, or cause damage to its corporate reputation.
  • Risk that unexpected cyber-attacks, possibly using new methods, could affect the Group’s business operations.
  • Ensure confidentiality of important information and comply with laws on personal information protection (establish and implement internal regulations and education for employees)
  • Create a strong IT environment and implement employee training.
  • Establish a new inspection department that specializes in information security.
  • Thoroughly enhance information security management, including support for network transmissions to entities outside the company, limits on the sending and receiving of potentially dangerous e-mail attachments, and changes to VPN methods.
Environment,climate change,and natural disasters
  • Risk of damage to production and supply of products and services stemming from large-scale disasters or other unforeseen events
  • Risk that events beyond those assumed in the BCP will have a negative impact on business continuation, which could have a major effect on the Group’s business results or financial position
  • Risk that climate change could lead to long-term market structural changes or impact the Group’s core businesses
  • Risk that long-term market structural changes or decline in sales generated by customers in core businesses could affect the Group’s business results
  • Decentralize the production network to reduce risk of concentration
  • Verify business continuity period without limiting it to specific events; prepare the necessary funds, product inventories and materials, personnel, and production equipment.
  • Formulate a long-term vision to achieve “substantially zero emissions” of greenhouse gases associated with our business activities by 2050; reduce our environmental impact (obtain Science Based Targets Initiative (SBTi) certification and formulate long-term vision aimed at “substantially zero emissions”).
  • Identify various events that may be caused by climate change and check the details of the risks and potential impact on operations, then undertake scenario analysis and respond accordingly (disclosure according to the Task Force on Climate-related Financial Disclosures framework).
Compliance
  • Risk that violations of laws (antitrust laws, construction industry laws, labor laws, bribery laws, etc.), including violations resulting from failure to address characteristics of newly entered regions and industries and delays in responding to new laws and revisions of existing laws, may result in administrative penalties and fines; risk that inappropriate acts by the company and/or its business partners will lead to harmful rumors and damage the Group’s reputation.
  • Conduct regular monitoring in Japan and abroad to check compliance with laws and internal rules; engage in rigorous compliance education.
  • Place top priority on legal compliance and conduct regular monitoring in Japan and overseas to check compliance; strengthen system for concluding contracts while also informing and educating all employees.
Changes in how employees work
  • Risk of undesirable changes in how employees work as a result of efforts to introduce new ways of working, increased telecommuting, and support for remote work as a countermeasure for infectious disease.
  • Risk of regulatory problems.
  • Risk of negative effects on employee health such as mental health problems, lack of exercise, etc.
  • Revise various internal rules and standards in line with changes in systems and business processes.
  • Conduct disease prevention seminars, health promotion programs, and employee surveys, and issue alerts.


Improving Disaster Prevention Capabilities and Business Continuity Plan (BCP)

BCP

The azbil Group takes various disaster prevention measures to minimize potential damage to its operations and improve its disaster response capabilities. For example, we regularly verify the earthquake resistance levels of our buildings and work to strengthen them. We also conduct hazard inspections, stockpile inspections, and disaster prevention drills, and we are developing an emergency communication infrastructure. Through our BCP, we aim to fulfill our responsibility to society by ensuring that the survival of the entire azbil Group is not threatened, while also preventing serious suspensions and delays in operations, with a top priority of guaranteeing the safety of human life. Our basic policy is to normalize corporate activities without causing delays to the restoration of society. We have created various disaster scenarios, based on which we analyze the current situation and formulate countermeasures for each business, production, and administrative function while conducting relevant training. We have also secured offices, restored important systems and networks, and performed financial simulations.With respect to the COVID-19 pandemic, we are making Group-wide responses based on plans that we have prepared so far, with a top priority on ensuring the safety and security of customers and employees. We will also continue working to improve our BCP responses.

Reinforcing Our Information Management System

We are using IT systems in various ways, such as enhancing the environments in which employees can work safely from external locations. Our aim is to maintain high levels of safety and security even for employees working from home.In addition, we conduct information security training annually for all Group employees. We also address information management issues identified via our compliance awareness survey, and we have a system to ensure proper compliance with laws and regulations on the protection of important information, including personal information, in each country/region. In these and other ways, we are working to improve and strengthen our Group-wide information management system.