ESG Library

Risk Management

Basic Approach

The DOWA Group engages in making its risk management more sophisticated to prevent situations that could have a major impact on its business and to prevent or mitigate damage in the unlikely event such a situation comes to pass. In addition, we will continue efforts to enhance and perfect our risk management flow, which involves identifying apparent and potential risks at each operating company, implementing countermeasures, reviewing them, and conducting audits.

Promotion System

The Group has established a risk management system based on the Four Lines Model for internal control, modeled on three lines of defense. The Operating subsidiaries responsible for production and other operations (first line) and the Operating companies that oversees them (second line) develop a risk management cycle that includes periodic risk assessments. In contrast, each DOWA Holdings division (third line) as the holding company provides necessary instructions, supervision, and support. The Internal Audit Department of DOWA Holdings (fourth line) conducts internal audits to evaluate the effectiveness of these measures. The risk management system is operated by the Sustainability Subcommittee, chaired by the director in charge of corporate planning, which is separated from the Audit & Supervisory Board.

Risk Management System Diagram
Risk Management System Diagram

Definition and Assessment of Risk

The Group classifies risk into four major categories: economic risk, strategic risk, operational risk, and hazard risk. Each classification includes scenarios and integrated risk management regarding COSO and JISQ2001. The Corporate Strategy Committee and the Business Management Committee monitor all business risks, with a particular focus on strategic risks. In addition, the Sustainability Committee assesses and identifies risks classified as economic risks, operational risks, and hazard risks and then examines and discusses countermeasures. Any matters deemed important based on discussions at each committee are then reported to the Board of Directors, which accordingly supervises the response to these matters.

In FY 2022, each site identified and assessed the risks expected to impact business promotion in a manner consistent with these risk definitions. Responses to deal with priority risks were incorporated into the FY 2023 budget.

Classification of the Group’s Risks and Details of Discussions at Each Meeting
Classification of the Group’s Risks and Details of Discussions at Each Meeting
Risks That May Affect the DOWA Group’s Operating Results, Share Price, and Financial Position

Classification Description Specific Risks Response
Strategic Risks Market Fluctuation Risks
  • The economy may deteriorate in major markets where our products are utilized and in areas of demand.
  • Industrial frameworks could change, leading to a drop in demand.
  • Diversify risks throughout the Group and ensure stable business results by building a unique business portfolio comprising multiple businesses with differing market risks and risks involving changes to business structure.
Climate Change Risks
  • Severe weather events could cause plants to shut down and raise facility management costs.
  • Carbon taxes and other forms of carbon pricing may be introduced.
  • The institutionalization of information disclosure related to climate change may impact the investment environment.
  • Formulate the DOWA Group’s Climate Change Policy and set long-term targets aimed at realizing carbon neutrality by 2050.
  • Set FY 2030 targets to reduce greenhouse gases.
  • Disclose information and consider countermeasures in line with TCFD recommendations, which have been endorsed by the Group.
  • Upgrade to energy-conserving equipment and convert to renewable energy at major manufacturing plants.
  • Establish a system headed by the Board of Directors for deliberating climate change and other sustainability issues.
Economic Risks Price Fluctuation Risks
  • Prices of nonferrous metals could drop or the yen may continue to appreciate for an extended period of time.
  • Avoid and mitigate the risks of fluctuating metal prices and foreign exchange rates through derivative contracts, including nonferrous metal forward contracts and foreign exchange forward contracts.
Operational Risks Operational Risks
  • Natural disasters, power outages, accidents, or infectious diseases could cause a significant drop in production.
  • Develop a business continuity plan for natural disasters and states of emergency.
  • Formulate standardized facility design rules for accident prevention.
  • Implement thorough safety guidance and facility inspections and establish a system for sharing information related to safety and operations.
Environmental Risks
  • Business activities could generate environmental pollution.
  • Develop environmental management systems at major domestic and overseas plants.
  • Implement monitoring using internal standards stricter than those put forth in environment-related laws and regulations.
  • Implement periodic inspections to maintain stable conditions at suspended or closed mines and related facilities.
  • Prevent environmental pollution stemming from mine wastewater, cave-in, landslides, and other mine-related damage.
Quality Risks
  • There could be serious quality defects or abnormalities.
  • Obtain ISO 9001 certification at major manufacturing plants.
  • Maintain compliance with the quality assurance guidelines established by the Japan Mining Industry Association and other groups.
  • Ensure quality of procured products through supplier surveys and audits.
Labor Shortage Risks
  • There may be labor shortages at manufacturing bases in Japan due to a drop in the domestic working population as a result of the declining birth rate and aging population and greater competition in hiring.
  • Extend the age of retirement and establish a motivating work environment by implementing workstyle reforms and establishing and enhancing systems that enable diverse and flexible workstyles.
  • Promote Group-wide business efficiency and labor savings by utilizing digital technology.
  • Improve the ability of each employee by enhancing the Group’s human resource development system.
Regulatory Risks
  • Environment- and recycling-related laws in Japan and overseas, antitrust laws, or other laws and regulations could be introduced, which cannot be predicted at the present time.
  • Preserve rights in Japan and overseas through legal means.
Hazard Risks Information Security Risks
  • Confidential or personal information possessed by DOWA could be leaked, falsified, or destroyed, leading to a loss of trust, claims for damages, and other penalties.
  • Sign nondisclosure agreements and comply with information regulations
  • Introduce and implement malware countermeasures, multifactor authentication, and other information security systems
  • Enhance employee training


Business Continuity Plans

In order to avoid or minimize any risks that could affect our ability to conduct business in times of emergency, we have formulated business continuity plans (BCPs) for each region and business location in the event of damaging earthquakes; other natural disasters, such as typhoons and torrential rains, which have been occurring with increasing frequency in recent years; and widespread pandemics. In addition, we regularly conduct drills based on scenario planning for large-scale disasters, such as an earthquake directly under the Tokyo metropolitan area, to prepare for crisis response as an organization. Since the DOWA Group primarily engages in business-to-business transactions, disruptions along the supply chain will have a severe impact on the production and sales activities of customers receiving our services or products. Therefore, through CSR procurement, we regularly confirm with our major suppliers that they have in place a BCP to ensure that we can restore and continue business promptly. In FY2023, outside experts will conduct a location risk survey at all production sites in Japan, assuming a wide range of natural disasters such as earthquakes, tsunamis, windstorms, floods, and landslides, and based on the results, we are reviewing the BCPs at each site.

Strengthening of Information Security

The strengthening of information security is positioned as one of the Group’s most important management issues. Under the leadership of management, we are working to address information security risks from both software and hardware perspectives. In FY 2021, we established a dedicated team to respond to cybersecurity incidents, and it quickly began tackling the issue. In FY 2022, we migrated to a security system that can centrally monitor the security status of computers used at each of the DOWA Group’s bases. We are also working to systematically improve employees’ understanding of security through methods that include raising awareness through training and study sessions.