Risk Management

Response to the Risks Surrounding Management and Business

We have established our V2030 growth strategy setting forth basic strategies such as aggressive investment, the shift from product-only sales to products and integrated solutions business model, capturing global growth, and the promotion of digital transformation (DX). In this context, we have identified the creation of new businesses as a key strategy. To accomplish this, it is vital that we make full use of a diverse range of methods to create businesses. In addition to conventional trading (buying and selling activities), these include methods such as business investment, trading that incorporates the provision of solutions, and cross-border business utilizing our overseas and domestic networks. These entail an increase in the scale and complexity of transactions and a rise in DJK’s business risks. In response to such business risks, we have established an enterprise risk management (ERM) system that identifies, weights, and prioritizes risks across the Group, responds to those risks, and then monitors and makes improvements in order to pursue sustainable growth while fulfilling our corporate social responsibilities.

New Risk Management System

We have established an organized and systematic approach to comprehensively and efficiently identify, evaluate, and manage all risks (uncertainties) that threaten the realization of sustainable growth. We recognize events (both positive and negative) that may have an impact on our strategies and the achievement of our business objectives as risks, and have established mechanisms and processes to manage them appropriately across the entire organization. After clarifying our approach to the amount of risk we are willing to accept (risk appetite), we comprehensively identify risks, conduct qualitative and quantitative assessments of each risk from such perspectives as its impact, frequency, and predictability, and consider countermeasures from the perspectives of avoidance, reduction, transfer, acceptance, etc.

ERM implemented the following initiatives.

1. Restructured the Risk Management Committee
2. Formulated our Basic Policy on Risk Management
3. Revised the risk management rules
4. Revised the Policies of Dividing Duties to clarify the roles and responsibilities of business divisions and administrative divisions
5. Formulated our business risk model and risk catalog
6. Formulated a risk management manual
7. Risk management training (ERM awareness raising)

We have established a risk management system based on the three-line model shown in the diagram below.

First line	Assign an ERM manager to each division who is responsible for the risks in that division
Second line	Corporate divisions to have the ability to provide advice and draft additional measures
Third line	Evaluation of risk management activities by the Internal Audit Division