Risk Management Scheme

INNOTECH, based on its Basic Policy on Risk Management, which was approved and adopted by the Board Meeting, comprehensively grasps, analyzes and assesses risks which may possibly affect its management at the Risk Management Committee, chaired by the President and the Representative Director. And countermeasures against high-priority risks are developed and executed in order to manage them and to minimize damage in case such risks become reality.

INNOTECH risk management process is implemented regularly and it is constantly updated in order to keep up with its ever-changing business environment. INNOTECH believes that for its mid-term and long-term sustainable growth of business and its corporate value, it is indispensable to handle material risks appropriately.

Basic Policy on Risk Management

Comprehensively and systematically manage risks surrounding INNOTECH at the organization level so that management resources will be maintained and effectively exploited and achieve mid-term and long-term sustainable growth of business and corporate value.
Enhance corporate ability to counter risks by raising and maintaining awareness of all employees and management members of INNOTECH for risk management through education, training and enlightening programs.
Put people’s life and safety first in the event of major crisis, such as natural disasters.
Minimize damage by appropriately and promptly responding to any crisis and continue its business to the extent possible to maintain trust from our stakeholders and achieve social responsibility as a company.

Scheme to Promote Risk Management

INNOTECH appropriately manages risks as the company pursues its operation by setting up the company internal rules for risk management and establishing the risk management scheme for which the Risk Management Committee, chaired by the President and Representative Director, plays a key role. The discussion content at the Risk Management Committee is reported to the Board of Directors and shared among group companies through Management Meetings and so on as necessary so that the companies work together and manage the relevant risks thoroughly as a Group.

The Risk Management Committee develops the Basic Policy on Risk Management, collects information, analyzes and assesses the risks which are extracted (and prioritizes them), and supervises management of risks by each organization and division as they operate. As for high-priority risks which may affect multiple business units, the Committee works with other committees of the company and their secretariats to pursue cross-organizational countermeasures.

Also, in order to prepare for possible major disasters, such as huge earthquakes, INNOTECH has developed the Business Continuity Plan (“BCP”).

Strengthen BCP (Business Continuity Plan)

Risk Management Implementation Process

Understand the Risks
Analyze and Assess the Risks
Identify Material Risks
Planning and Implementation of Countermeasures
Assessment and Follow-up Reviews of Countermeasures

＜Material Risks, Their Impact and Countermeasures＞
Area	Content	Impact	Countermeasures
Business	Dependency on Specific Customers	High	・Enriching product line-up ・Targeting for a larger market by cultivating new applications ・Close communication with customers ・Building optimized business model
	Dependency on Specific Industry	High	・Strengthening products and services for electric vehicles ・Expansion of sales channel to overseas manufacturers
	Dependency on Specific Supplier	High	・Good relationship with suppliers ・Optimization of business portfolio
Politics, Economy, Society	Amendment of Laws and Regulations	Mid	・Thorough collection of Information
Politics, Economy, Society	Country-specific Risks	Mid	・Building precise sales strategies leveraging local distributors and partners
Climate Change	Refer to our ESG website, “Disclosure based on the TCFD framework”. （https://www.innotech.co.jp/english/esg/environment/tcfd/）
Labor Management	Securing Personnel	High	・Active hiring including engineers overseas ・Maintenance and enhancement of technical expertise by stronger education program ・Leveraging services from outside partners
Finance	Exchange Rate Fluctuations	Mid	・Utilizing foreign exchange reserves
Finance	Interest Rate Fluctuations	Mid	・Various methods of fundraising ・Setting maximum value for the D/E ratio
Legal Compliance (Litigations)/Compliance	Quality Issues	High	・Taking the Product Liability Insurance Policy and so on ・Establishing the Quality Assurance Committee and organizations in charge of quality assurance ・Obtaining ISO9001 certification
Legal Compliance (Litigations)/Compliance	Inadequate corporate governance and internal control systems	High	・Providing necessary rules ・Setting up the “Policy on Internal Control” and “Code of Conduct and Ethics” ・Providing the External Reporting Office ・Strengthening governance as INNOTECH Group by transferring management-level employees to work for group companies and/or having such employees concurrently work for group companies as well.
Accidents/Disasters	Natural Disasters Pandemic Realizations of Geopolitical tension	High	・Multiple sourcing ・Parallel evaluation of replacement parts and components ・Securing parts and components in advance ・Using common components for different products ・BCP review and improvement of the management scheme ・Introduction of safety confirmation system ・Conducting emergency drills ・Prevention measures of infection and spreading of infectious diseases, working with occupational health physicians
Information Security	Cyber Attacks	Mid	・Strengthening Firewalls
	System Failure	Mid	・Providing a Backup System
	Information Leakage	Mid	・Strict application of the Basic Policy on Information Security