Risk Management

The NST Group operates a wide range of businesses in Japan and overseas including various products, business investments, and provision of services. This involves continual exposure to various risks including political and geopolitical risks, investment risks, and risks related to business operations. These risks have in recent times become increasingly diverse, advanced, and complex. We recognize that risk management for suitably managing and addressing these various risks is essential to ensure the soundness of business management and to maintain and improve corporate value. We have prepared the necessary risk management system and management methods, and are addressing these risks.

Risk Management System

We have prepared a system to address changes in the macro political and economic environment that surrounds our company management. This involves reliable discussion and consideration of these changes at suitable times by the internal Management Meeting, ESG Committee, and other bodies, and quickly linking the results to action. Furthermore, aiming to manage the risks that surround our Group comprehensively and across the entire organization and take rapid action, we have established the Risk Management Committee, which is specifically intended for identifying, discussing, and studying risks. In order to improve our ability to respond to risks, this committee discusses and considers the specific action to take in response to an individual specific risk, and gives instructions for carrying out this action to related departments. Through this risk management system, we endeavor to prevent risks from manifesting, and take precise, rapid action in response when a risk does manifest.

Main risk items

External environment risks

  • Macroeconomic environment
  • Market risks
  • Country risks
  • Risks related to the environment and society
  • Risks related to natural disasters, infectious diseases, etc.

Business risks

  • Risks related to safety and quality
  • Credit risks
  • Business investment risks
  • Risks related to impairment of fixed assets

Business foundation risks

  • Risks related to legal regulations
  • Financing risks
  • Risks related to information systems and information security

Action Taken in Response to Business and Other Risks

External environment risks

Risk item Description Primary action in response
Macroeconomic environment
  • Effects of economic trends and changes in demand in major regions (Japan, North America, Asia)
  • Effects on existing business models
  • Implementing growth strategies through global strategies for capturing new demand related to SDGs and other social needs, and extending and expanding overseas business
Market risks (exchange rate risks, interest rate risks, product price risks, share price risks)
  • Risk of exchange rate changes in transactions conducted in foreign currencies
  • Risk of interest rate fluctuations in the procurement of business funds
  • Price fluctuation risk inherent in some of the products which we sell
  • Risk of valuation loss on securities resulting from changes in the price of shares which we own in business partners
  • Use of forward exchange contracts based on actual demand
  • Reducing interest rate fluctuation risks using interest rate swaps and other means
  • Reducing risks and preventing losses related to business transaction risks based on business management regulations
  • Regular monitoring of stocks which we own (share price)
Country risks
  • Risk that claims, loans, or investments may become impossible or difficult to recover due to policy changes or changes in the politics, society, economy, environment, or other area in countries where we engage in trade, overseas investments, or loans
  • Preventing unexpected losses resulting from increases in country risks based on the country risk management regulations
Risks related to the environment and society
  • Risks of business delays or interruptions, diminished corporate reputation, or other consequences in the event of a problem related to the environment or society
  • Identification of important issues (materiality) related to ESG management
  • Scenario analysis based on TCFD recommendations (now being studied)
  • Calculating CO2 emissions, setting reduction targets, and taking action to reduce emissions
  • Acquisition of environmental management system (ISO14001) certification
  • Formulation of policy to address human rights and formulation of human rights due diligence guidelines (now being studied)
Risks related to natural disasters, infectious diseases, etc.
  • Effects on business from earthquakes and other natural disasters, or from the COVID-19 pandemic
  • Effects from large-scale accidents, terrorism, or other unforeseeable events
  • Formulation of a BCP (Business Continuity Plan); implementation of disaster preparedness measures, disaster drills, etc.

Business risks

Risk item Description Primary action in response
Risks related to safety and quality
  • Effects on the lives and health of NST Group employees, as well as effects on society’s trust and other consequences in the event of a problem in health and safety, quality control, or similar area
  • Risk of expenses for product recall, repair, and other measures in the event of a quality problem occurring in the products which we sell
  • Group-wide activity to eliminate occupational accidents; ensuring quality based on regulations related to safety, reliability, labeling, and other matters for products which we sell; measures to secure the trust of customers and end users
Credit risks
  • Risk of deteriorating credit status at customers in Japan and overseas, and problems in meeting loan obligations to the NST Group
  • Quantitative and qualitative evaluation of customers based on credit management regulations and other regulations, setting credit limits (Expiration dates are set for credit limits, which are renewed regularly.)
Business investment risks
  • Investment recovery risk in the event that corporate value of an investee company declines due to worsening of business results
  • Investment management based on standards for new investment and standards for business assessments
Risks related to impairment of fixed assets
  • Risk of declining asset value resulting from a drop in the current price of business real estate, a decline in profitability, or other factor
  • Risk of declining asset value of other tangible or intangible fixed assets (including goodwill)
  • Regular monitoring of current commercial real estate prices and profitability

Business foundation risks

Risk item Description Primary action in response
Risks related to legal regulations
  • Risk of effects on NST Group business activities resulting from new or changed laws or regulations in Japan or overseas
  • Complete observance of laws and regulations related to our business activities based on the Compliance Manual
Financing risks
  • Risk of inability to procure funds from financial institutions and investors, and risk of increasing financing cost, in the event of a disruption in financial systems in major financial markets
  • Dispersing financing sources and diversifying financing means
  • Ensuring a certain amount of long-term funds through long-term bank loans and issue of corporate bonds
Risks related to information systems and information security
  • Risk of loss or leakage of important information, and risk of system stoppage, resulting from cyber attacks
  • Risk of system stoppage due to server or network damage
  • Risk of system stoppage due to natural disaster
  • Preparation of regulations related to suitable protection and management of information assets, and complete information security training for employees
  • Continual monitoring for cyber attacks by specialist security vendors
  • Strengthening measures against failure through duplication of important servers and networks, and through Cloud use