Risk Management

Approach and Policy

Policy

The SMM Group engages in risk management (RM) under the following Six Principles established to achieve our long-term vision in becoming the world leader in the non-ferrous metals industry.

1. The organizational leader confronting the risk is the responsible party
2. Compliance is the foundation
3. Recognize that potential risks can materialize and take necessary risk countermeasures
4. Risks recognized as a result of change are shared among all parties involved
5. Implement RM in daily operations, considering the organization’s hierarchy, size, role, and maturity, regional and cultural factors, and the knowledge, views, and values of stakeholders
6. Conduct ongoing reviews and improvements of management framework and initiatives

Approach

The definition of risk at our Group includes both that which is beneficial to our goals and that which is detrimental to them. We see risk as something that will have an effect on the achievement of business and organizational goals and that makes the protection or creation of value uncertain. Through risk management, we are able to revise goals and measures to maximize those risks which are beneficial, and inspect and improve processes to minimize those risks which are detrimental. This helps us achieve our 3-Year Business Plan, and ties into further ensuring the realization of our Vision for 2030 and our long-term vision.

Promotion Structure

RM will be promoted through the efforts of the president, who bears ultimate oversight responsibility for RM, and the head of each business division and business site as the person responsible for RM within their unit.
The Risk Management Working Group, operating under the Sustainability Committee and is served by the Safety & Environment Control Department as secretariat, has a system in place to respond to risks and changes in the Group’s business environment by promoting and monitoring Group-wide policies and priority measures.
In addition, the Risk Management Promotion Meeting serves to promote and monitor the Group’s risk reduction and operation and improvement of RM.

■ Promotion Structure

Review of Company-wide Risk Management

In reflecting on the JCO criticality accident that occurred in 1999, our RM system (RMS) was established with the president bearing ultimate oversight responsibility, focusing mainly on the prevention of serious accidents at our sites, and has been effective in preventing industrial accidents and other accidents that have a large societal impact. On the other hand, in response to the changing demands from the business environment and society, as well as increasing complexity and sophistication of risks associated with growth and business strategies, we have repositioned RM from the prevention of major accidents at business sites to the creation and protection of the organization’s value. We have reviewed and updated Group-wide RMS based on three frameworks (see diagram below). Further, we have established a system to address the risks and changes surrounding our Group through the Risk Management Working Group, which promotes and monitors Group-wide policies and priority measures.

Framework

Business Risk Management

Regarding management and business risks associated with our Group’s growth and business strategies, we have a mechanism to address critical Group-wide risks, deemed particularly important for the achievement of not only initiatives such as management meetings, various committee meetings, medium-term plans, budgets, settlements and monthly activities, but also for the achievement of strategic goals (3-Year Business Plan). The critical Group-wide risks are discussed in management meetings attended by executive officers, including the president, and deliberated by the Board of Directors. Response policies are established, and each department’s initiatives are monitored and promoted through the Risk Management Working Group.

Operational Risk Management

At each business site, in addition to focusing on specific risks addressed annually, risks inherent in regular operations are also identified and assessed based on internal and external conditions, and are managed as individual risks (see table below). There are over 1,400 individual risks, and as a means of reducing risks daily, when there are any changes to environments and conditions that serve as prerequisites for identified risks (business environments, work environments, people, equipment, work procedures, quality standards, etc.), these risks are reviewed and updated, or handled as new risks. A periodical risk review is also undertaken during the RM Promotion Campaign every September.

Crisis Management

In preparation for crises beyond assumed scenarios of management and site-risk management, as well as instances where on-site handling is challenging, a standing Crisis Management Committee chaired by the officer responsible for crisis management was established. The committee works toward the sharing of crisis information, the formulation and improvement of proactive measures, and the maintenance and strengthening of crisis management functions through training. It also deliberates on initial response to emergencies, and transition into Group-wide response headquarters which takes appropriate actions and provides support based on the level of crisis. The president has ultimate responsibility for crisis management as a whole.
At every business site, we are advancing measures to address earthquakes, tsunamis, flooding, soil liquefaction, landslides, volcanic eruptions, and other natural disasters, in line with the hazard level. We are undertaking seismic reinforcement of buildings, improvement of seawalls, strengthening of wastewater treatment capacity, expansion of water storage tanks, stockpiling of food and drinks, and enhancement of emergency supplies, among other measures. We also conduct training for earthquakes, fires, environmental accidents, and overseas terrorism, riots, and kidnappings, among other scenarios. In addition, we are working to address issues such as unfamiliarity with materials and equipment, insufficient understanding of rules and procedures, and inadequate manuals, and to improve the decision-making capabilities of local task force members.

Future Initiatives

For FY2023, we will continue with the FY2022 RM policy of “Assess and respond to changes in risks caused by changes inside and outside the Company,” and based on revisions to Group-wide RM, will focus on reassessing risks and reviewing crisis measures, including major Group-wide risks and disasters as priority initiatives.
Revisions to Group-wide RM in FY2022 primarily focused on system aspects, and in FY2023 we are in the execution phase of these measures. In doing so, the entire Group will reassess risks and review crisis countermeasures to improve and streamline activities.
Further, events such as Russia’s invasion of Ukraine and the U.S. Speaker of the House’s visit to Taiwan have escalated tensions between Western countries and China-Russia. In Japan, we have seen instances of attacks during election campaign speeches, targeting both former and current prime ministers. Considering the heightened risks toward national security, we will focus on enhancing overseas crisis management, with emphasis on preparedness for a Taiwan contingency, and prevention of and response to unlawful detention in China, etc. With regard to natural disasters, in light of ongoing threats with earthquakes on the Noto Peninsula in June 2022 and May 2023, with a seismic intensity of under 6 and over 6, respectively, and the “Damage Estimation in Tokyo resulting from a Tokyo Inland Earthquake (May 2022)” released by the Tokyo Metropolitan Government, we will work toward enhancing the Group-wide disaster preparedness measure based on the diversification of work styles, changes in values and social norms, and advancements in equipment and materials.
In tandem with these efforts, our top management continues to lead activities to prevent issues such as compliance breaches, environmental accidents, occupational accidents, and quality issues, to ensure success in new business and projects, and achievement of business goals.