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Risk Management

Our basic approach and strategy

Unicharm pledges to continuously improve corporate value through global business activities and to sincerely conduct business activities in order to gain the trust of all stakeholders including customers, shareholders, business partners and local communities. In order to achieve this, Unicharm has established the Unicharm Ideals, the Five Great Pillars and Associate Principles of Action, the Beliefs and Pledges and Corporate Principles of Action and the Unicharm Group's Action Guidelines.

Gaining an appropriate understanding of the various risks that could have an effect to the realization of these objectives and preventing and minimizing the impact of such risks when they occur are positioned as important management issues. The Group has established a risk management system for the entire group that is implemented while continuously reviewing and improving ESG risk management.

In addition to overseeing the code of conduct and code of ethics, the Board of Directors also analyzes and evaluates major ESG risks that are reported from each unit leader in order to deliberate and decide on improvement measures, while members on the Audit and Supervisory Committee fulfill their roles by implementing various audits during their statutory term of office.

In addition, the ESG Committee learns about the importance of crisis management based on the theme of risk management. The main items that could become a business risk have been defined as follows and are deliberated by the ESG Committee.

Major risks of ESG

  1. Risks related to the sales environment in conditions of intense competition
  2. Risks related to the population structure
  3. Overseas business risk
  4. Raw materials price fluctuation risks
  5. Risks related to the reliability of products
  6. Risks relating to legal compliance violations
  7. Risks related to intellectual property including patents and trademarks
  8. Risks related to environmental problems
  9. Risks related to climate change
  10. Risks related to disasters and accidents
  11. Risks related to acquisition, partnership, business consolidation, etc.
  12. Information leakage risks

For the management of these risks, Unicharm uses the ISO framework that also incorporates quality and environmental risks as important business risks as a manufacturer. In addition, individual management is conducted for risks including business continuity at the time of disasters.

Primary reference frameworks

・COSO ・ISO 9001 ・ISO 14001 ・ISO 10002 ・ISO 13485 ・ISO 14971

Risk Management

Risk Management Risk Management

Management structure

Chaired by the Representative Director and the Director & Vice President acting as deputy chair, the “ESG Committee” is a cross-functional organization which considers sharing risk management issues and measures to be one of the important themes that need to be addressed. The themes deliberated by the ESG Committee and their results are reported to the Board of Directors by the head of the ESG Division, while supervision of risk management is implemented by directors and members of the Audit and Supervisory Committee.

In addition, the Unicharm Group Action Guidelines have been established as action guidelines for actions by employees in recognition of major risks including the prohibition of insider trading, compliance with antitrust laws, the elimination of child labor and forced labor and the protection of personal information. In response to risks of corruption that have a high probability of occurring in society including insider trading and bribery, efforts are made to prevent corruption that include the provision of cautionary information to employees on insider trading using the internal intranet, training for employees posted overseas and the provision of cautionary information through e-learning as strengthened compliance training for employees engaged in operations in regional business activities are conducted, as well as the implementation of internal audits.

Response to the occurrence of ESG risks

If a major crisis occurs, a Crisis Management Response Committee will be established and endeavor to respond quickly and appropriately and achieve a prompt recovery based on the Crisis Communication Manual established as a regulation related to crisis management.

An emergency in which the above risks are realized is considered a crisis and Unicharm positions the 12 items below as major crises. When such a crisis occurs, Unicharm fulfills its social responsibility by assessing the situation swiftly and accurately in accordance with the Crisis Communication Manual, working to prevent the expansion of damage and communicating appropriately with stakeholders.

A handy manual has been distributed to every employee for the purpose of responding promptly when an ESG risk has emerged and a crisis has occurred. In addition, a structure has been established to respond to risks by the Crisis Management Response Committee in cooperation with internal related departments.

Major crises

1. Quality 2. Environment 3. Representations 4. Occupational safety 5. Human rights 6. Supplier/vendor related 7. Top/executives related 8. Disaster 9. Information accidents 10. Reputational damage 11 Pandemics 12. Disputes/political changes

Diagram of structure in response to occurrence of a crisis

Diagram of structure in response to occurrence of a crisis Diagram of structure in response to occurrence of a crisis

Rigorous information security

To ensure rigorous information security, Unicharm has set out information security principles and procedures such as the Information Security Policy and the Information Management Security Rules. We also have Personal Information Protection Rules and Specific Personal Information Handling Rules in place to safeguard personal information provided by our customers and we strictly manage this information and take precautions to prevent information leaks. To ensure these rules are strictly observed and to prevent information leaks, Unicharm has established an Information Management Security Committee which develops groupwide information management security initiatives and carries out employee education and ongoing monitoring. One day every month has been earmarked as an information management day when we highlight a different security topic each month to remind employees about the risk of specific information leaks.

Meanwhile, as a physical measure to prevent against information leaks through the loss or theft of devices, we completed the adoption of PCs that cannot store data, the development of a cloud environment in which data and systems can only be used on a server and the creation of an environment in which systems can be used anywhere, at any time, without needing to take office PCs out of company premises, thereby making it possible to impose restrictions on taking office PCs out of the office.

Protecting intellectual property

The Intellectual Property Division centralizes the management of the Unicharm Group's intellectual property assets and formulates and executes intellectual property strategies linked to Unicharm's business and development strategies in an aim to put in practice an IP landscape in which intellectual property is useful for management decision making.

As a patent application strategy, we intend to protect and utilize business and development results, along with reinforcing overseas patent applications in line with the global development of our business. As a result, we have captured a top-class share in the industry with the application rate for global patents at 72.3%(2016) and the registration rate for Japanese patents at 96.8%(2018) (data taken from the “Patent Administration's Annual Report 2019”). In addition, as Unicharm is focusing on the development of environment-friendly products and technologies, we have acquired patents related to technologies for ozone treatment in obtaining sanitary and safe high-quality pulp from used disposable diapers and patents related to treatment for cleaning used disposable diapers in reducing environmental impact in FY2019. Going forward, Unicharm will work to protect and use intellectual property at the same time as the development of technologies for practical application. Meanwhile, Unicharm has applied for and secured trademarks that protect the Group's brands in more than 160 countries around the world and we are also protecting our rights to proprietary packaging.

As part of our efforts to build and strengthen our intellectual property portfolio in Japan and overseas, we actively use the Japan Patent Office's “Patent Prosecution Highway Program” in order to raise the quality of our intellectual property rights, as well as work on acquiring rights such as sound trademarks in China, Taiwan-Greater China, Korea and Thailand.

Unicharm also takes a firm stance on protecting its intellectual property rights, including filing lawsuits against their infringements or unauthorized use. Its IP division closely cooperates with business and product development divisions as well as overseas subsidiaries and works with local governments to eliminate unauthorized and counterfeit products in Japan and overseas such as Asia, the Middle East and Africa and online in e-commerce. Unicharm is committed to cultivating a corporate culture that promotes the respect and protection of intellectual property rights of Unicharm and other companies, as articulated in the Unicharm Action Guidelines, by conducting employee training through a combination of on-the-job training, off-the job training and e-learning to ensure that employees in Japan and overseas are fully aware of internal compliance issues related to such things as patents, trademarks and misleading representations, etc.

As part of our public activities, we seek to provide advice on and influence international policy with respect to intellectual property by actively exchanging opinions with patent offices in Japan and Asia.

Business Continuity Plan (BCP*)

Unicharm has been strengthening risk management since fiscal 2005. We have formulated a business continuity plan (BCP) to help us prepare for a major emergency that could occur in Japan such as an earthquake directly underneath Tokyo or a large-scale interconnected earthquake involving the Tokai, Tonankai and Nankai plates. We have assumed the scenario of an earthquake (intensity of approximately upper 6) with an epicenter under the Tokyo metropolitan area in an area that includes the head office, adjacent plants and sales offices, and we have prepared impact assessments and damage assumptions, etc., considered alternative measures and established organization structures and backup structures to ensure the safety of employees and their families and continue business if an actual emergency occurs, and conducted ongoing evacuation drills assuming the occurrence of such an emergency based on this scenario.

Disaster response pocket manual Disaster response pocket manual

Disaster response pocket manual

Main overview of the business continuity plan (BCP)

(1) Basic requirements

  • Basic policy
  • Assumed risks
  • Impact assessment
  • Assumed damage
  • Main elements

(2) Confirmation of safety and well-being of employees and their family members

  • Ensuring and saving lives

(3) Concrete measures for business continuity

  • Organizational structure and command structure
  • Securing important bases
  • External information dissemination and information sharing
  • Backup
  • Provision of products and services

(4) Important items that should be supported along with business continuity

  • Cooperation with and contributing to the community

(5) Measures necessary for implementing the business continuity plan (BCP)

  • Education and training
  • Inspections, corrective action and reviews

Our BCP Manual describes steps to ensure the safety of our employees and their families, deliver Unicharm products that are necessities for daily living to people in disaster-affected areas as well as to those people who require them as soon as possible and recover important corporate operations of Unicharm, particularly head office functions. We are working to further enhance workplace safety through various initiatives.

Specifically, we conduct e-learning sessions for all employees to raise awareness and encourage proactive responses and we distribute a disaster response pocket manual for immediate reference during an emergency to all employees. We have put systems in place that allow us to contact employees using smartphones, which they must carry at all times, to help us to confirm their safety and maintain business continuity during emergencies. In addition, we conduct disaster training drills at each business site, hold basic survival courses and provide training that is tailored to the function of each division and we carry out first response drills with an emphasis on confirming employee safety and the capabilities of disaster response headquarters including checking the safety of all Unicharm employees in Japan.

Since 2017, we have conducted ongoing training and drills including drills assuming the nighttime evacuation of production bases. Going forward, we will develop systems for responding to all incidents that can be assumed by strengthening risk countermeasures on a global level that incorporate risks such as uprisings or terrorism overseas.

* BCP: Plan for the continued operation and rapid recovery of core business activities after an emergency

Crisis response training

Drills assuming the nighttime evacuation (Shizuoka Plant)

Survival course at the head office

Operation of a smart factory in Kyushu that aims to effectively integrate people, knowhow and equipment

In March 2019, the Group's first smart factory, Kyushu Plant began operation. The plant, designed to integrate “people, knowhow and equipment”, adopts Internet of Things(IoT) technology that permits communication of factory on-site data in a timely manner, which is capable of enhanced levels of safety and productivity. In terms of environmental protection, the new plant features over 70 energy-saving machines that help to reduce carbon dioxide emissions. With regard to reducing water consumption, by switching over from water-cooled equipment to air-cooled equipment for the plant's ancillary equipment, the plant has succeeded in reducing the amount of waste water discharged to zero. In addition, by adopting driverless transporter vehicles and robots, we have “autonomated”* the movement of heavy items within the plant and related materials supply operations, thereby reducing the amount of effort that workers need to exert and enhancing efficiency.

We have secured a supply system in addressing potential risks associated as Unicharm's main production facilities in Japan are located in Fukushima, Shizuoka and Shikoku, which means that they are at risk of being damaged in the event of a major earthquake occurring in the Nankai Trough(it is anticipated that an earthquake of this type could cause serious damage in Western Honshu and in the Chubu region). In the future, we will move ahead with ways to extend the adoption of smart technologies to our existing plants and realize effective business continuity planning(BCP) through our new production system which effectively diversifies risks.

* “Autonomation” is a form of automation that aims to integrate the expert skills and knowhow that human workers possess with digital technology.

Risk management information website

In FY2017, we added a Risk Management Information Website to our corporate Intranet, focused on potential risks to the lives of Unicharm employees working within and outside Japan. The site specifies clear guidelines and criteria for responding to natural disasters, pandemics, occupational accidents, large-scale equipment-related accidents (all of the above are defined as safety risks), kidnapping, intrusion into and damaging of company facilities, terrorist attacks, riots, coups d'état and civil war. Information provided by Ministry of Foreign Affairs of Japan and by a risk management company that we have contracted with for this service is updated on a daily basis and, in FY2019, we compiled “Domestic Natural Disaster Response Manual” and “Headquarters Special Organized Crime Response Manual” and added pages to the various manuals included in our corporate Intranet as we continue to strive to keep up with current environmental changes and information concerning safety.

Risk management information website Risk management information website

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