Risk Management
Basic stance
In keeping with the global expansion of business, the DENSO Group is striving to strengthen risk management as part of its internal control system to help minimize risk. Specifically, emergence of circumstances with the potential to cause damage to corporate management are classified as risks (situations in which risks have not yet been realized) and crises (emergency situations in which risks have already been realized). For the former, efforts focus on nipping risks in the bud before they have the chance to manifest themselves; for the latter, DENSO strives to make an initial response and response for restoring business operations in a prompt and appropriate manner.
Promotion structure
We selected 58 risk items with the potential to impact life, credit, business activities or property; and designated a responsible department for each. Activities for ongoing improvement in the risk management system and structure and permeation of risk management are now the domain of the CSR Promotion Meeting, while the Risk Management Meeting deals with initial response when a crisis or emergency situation arises. We also form specialized contingency organizations depending on the extent of the situation and degree of urgency, which facilitates agile response to minimize damage.
We integrated the traditional roles of the general risk manager into those of the CSR leader at domestic and overseas companies subject to our managerial consolidation rules as well as Group companies in which DENSO Corporation is the largest shareholder, and appointed risk managers for each risk item under that umbrella. We are constantly working to upgrade our risk management based on support from key functional departments and regional headquarters.
Crises countermeasures structure
We have established procedures for setting up a crisis countermeasures committee for earthquake, typhoon and heavy rainfall to ensure swift response when a crisis arises.
Established procedures
| Earthquake | Typhoon | Heavy rainfall |
|---|---|---|
| In cases of an earthquake above level 5.0 on the Japanese scale in a city, town or village that DENSO has production facilities | In cases when the secretariat holds a meeting and recommends setting up a committee to a general manager if the typhoon looks set to strike land | In cases when the secretariat holds a meeting and recommends setting up a committee to a general manager after assuming the amount of rain will exceed 50mm an hour and a warning has been issued |
Expanding activities to spread and raise awareness
Since the awareness and conduct of the managers who are our workplace leaders are essential in risk management and crisis response, in fiscal 2012 we also conducted risk management training directed toward department managers as well as factory managers, managers of production department sections and managers at domestic Group companies. The training was attended by 56 managers. In addition, we continued to provide risk management education for associates scheduled for transfer as president of local corporations in order to strengthen risk management at overseas sites. A total of 21 associates took the course.
We also sought to ensure proper responses to fires, traffic accidents and earthquakes by requiring that all associates carry the Risk Management Handbook (first version formulated in 2004) with them at all times. The content of the handbook has been revised and distributed to all associates to further stimulate awareness at the individual level.
Strengthening earthquake disaster risk response
Prompted by the Great East Japan Earthquake in 2011, from the perspective of business continuity management, we began strengthening the entire DENSO Group’s earthquake disaster risk countermeasures based on the assumption of the simultaneous occurrence of three earthquakes, the Tokai, Tonankai, and Nankai earthquakes. In fiscal 2012, we focused on the following items as priority areas.
Preparations in both "soft" and "hardware" areas
Initial responses
Regarding our initial responses, we worked to raise effectiveness (ensure the safety of associates, raise headquarters functions) and enhance emergency equipment. We also began strengthening initiatives for drills and preparing manuals that will lead to improved disaster prevention awareness among associates.
| Implementation items | Details |
|---|---|
| Ensure the safety of associates | 1. Add functions to the safety confirmation system (confirm the safety of entire families) |
| 2. Start to use emergency earthquake early warning systems | |
| 3. Install seismometers | |
| 4. Install outdoor broadcast facilities | |
| Raise headquarters functions | 5. Upgrade and expand satellite telephones |
| 6. Strengthen functions of disaster response task force and take other measures | |
| Enhance emergency equipment | 7. Stockpile daily-use goods (daily-use goods and stockpile storage containers for stranded commuters) |
| 8. Disaster preparedness equipment and appliances (power generators, air jacks, other equipment) |
Facilities, equipment and information systems fields
Under a three-year plan, we will implement the following measures with the aim of adding the most recent damage assumptions that encompass tsunamis and liquefaction to measures that previously stopped at earthquake-resistance for buildings and plants, as well as establish infrastructures and measures for the restoration of operations.
- Earthquake-resistance measures for buildings (based on hazard maps of municipal governments)
- Tsunami and liquefaction measures (based on hazard maps of municipal governments)
- Internal infrastructure backup structures (based on the assumption of an energy supply disruption)
- Internal supply and drainage line measures (based on the assumption of internal damage)
Moreover, we will review methods for firmly affixing production facilities and strengthen the earthquake resistance of these facilities. For major risk facilities, we will also organize project teams and strengthen measures to prevent explosions and fires as well as prevent the leakage of hazardous substances.
Preparedness in procurement, production and technology
We have stratified risk for each production plant of our suppliers according to the dual aspects of “degree of difficulty in substitute products” and “location risk,” as we strive for the “visualization of latent risk.” On this basis, in accordance with the results of risk stratification, we are taking initiatives that include changing to specifications that will enable product substitution, enhancing mutually supplementary production structures globally and urging suppliers to adopt dual production (undertaking production at two plants). In the future as well, we will clarify the diverse risks in our supply structure and set priorities in undertaking activities.
On the other hand, for our domestic Group companies, we formulated earthquake disaster risk response guidelines and held explanation meetings in October 2011. Going forward, at each company we will consider specific measures and plan to strengthen responses over the two-year period encompassing fiscal years 2013 and 2014.
In 2011, numerous companies and plants were inundated by record-setting flooding in Thailand and this caused disruptions to the auto parts supply chain. Although the DENSO Group’s local plants escaped the flooding, many of its suppliers were exposed to the floods and were unable to carry out operations. Under such circumstances, DENSO Corporation collaborated with each Group company in working to ascertain information on damage and provide human and material support for quickly restoring operations.
Along with the globalization of the supply chain, the impact of major flooding in Thailand spread to other regions and is becoming a major risk. Therefore, we will review our risk countermeasures from the perspective of Group global management.
