Risk Management
Basic Approach
In Kanadevia Group, risks related to compliance, the environment, safety, disasters, information security, and other potential operational risks are continually assessed and monitored by the divisions responsible for each type of risk. These divisions also carry out related training and guidance programs. Risks with the potential to materially affect the financial position or operating results of the Company or any Group company are reported to the Board of Directors. The Company has established systems in advance, including rules for communication and response methods and management systems, to enable a prompt and appropriate response in the event that a major risk materializes. The Company’s internal audit division audits the effectiveness and adequacy of these systems and regularly reports its findings to the Company’s Board of Directors.
Major operational risks recognized and managed by the Company
Risks potentially arising during normal business activities
| Potential Impact | Risks arise from ignorance of, or unwillingness to comply with, laws, regulations and socially accepted norms. Since public works projects account for a certain percentage of the Group's sales volume, in the event of bid-rigging or other violations of the Antimonopoly Act, the Group could be penalized with fines, damages, suspension of nominations, or loss of social credibility, which could result in losses that would materially affect its financial position and operating results. |
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| Our Response | Kanadevia Group upholds compliance as a basic business policy and regards strict compliance as one of its critical management tasks. Accordingly, the Group continuously implements a wide range of measures to promote compliance management. To prevent violations of the Antimonopoly Act, we established the Marketing Compliance Committee as a subordinate organization of the Compliance Committee to provide guidance and supervision for marketing activities. In 2021, we revised our “Antimonopoly Act Compliance Guidebook (for officers and employees)” while continuously implementing internal training programs to ensure compliance with the law. |
| Potential Impact | The natural and human environments of the communities in which our business operations are located may be severely affected by the release of pollutants or noise. |
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| Our Response | Based on "the Environmental Conservation Promotion Plan", our Group is working to conserve the environment in the regions where each of our offices and factories are located and at the sites where construction and other work is carried out. In addition to laws and regulations, we set voluntary standards for the management of air, water, and soil pollutants, as well as noise, vibration, and odor, and monitor them for preventive maintenance in environmental protection activities at each of our offices and factories. |
| Potential Impact | As Kanadevia Group's business activities involve engineering and manufacturing, we face the risk of causing personal injury to third parties and occupational accidents to employees directly or indirectly as a result of lack of safety measures, unsafe practices, incorrect operation, or equipment failure. |
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| Our Response | Under the basic policy of “Safety first and a compassionate, pleasant workplace for everyone,” we continuously monitor the conditions of our workplaces in order to implement appropriate measures to ensure that safety comes first in our business operations. Furthermore, we promote various events and measures to protect the mental health of our employees in order to maintain their health and prevent illnesses. |
| Potential Impact | Information security risks include tampering with corporate websites, destruction or alteration of data, information leaks, denial-of-service (Dos attacks) due to virus infections, unauthorized access, and account hijacking. |
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| Our Response | We have ensured the security of our information assets by establishing the Kanadevia Information Security Policy. We conduct regular training of officers and employees to prevent information leakage from within. For attacks from outside our organization, we implement various preventive measures for each of our networks, servers, and clients, and practice multi-layered defense. We have conducted an assessment of external threats and are promoting understanding of cybersecurity risks and measures to deal with the consequences. We are also consolidating our Computer Security Incident Response Team (CSIRT) infrastructure and addressing appropriate post-incident responses. |
Risks that cannot be managed by conventional systems
| Potential Impact | Human casualties and property damage caused by earthquakes, typhoons, or pandemics may adversely affect the business performance and financial condition of the Kanadevia Group. |
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| Our Response | In order to minimize human casualties and property damage in the event of a disaster, we have established Business Continuity Plan (BCP) and carry out inspections and training to respond to such a disaster. We also maintain emergency communication systems. In addition, we are working to commercialize both remote monitoring and operation support technology and unattended operation technology. |
- *Please refer to the 126th Annual Securities Report for information on other risks (lower order prices due to price competition, higher material prices, higher interest rates, exchange rate fluctuations, etc.).
Risk Management System for Individual Projects
Kanadevia Group primarily engages in build-to-order manufacturing and emphasizes risk management for individual construction projects. If actual costs exceed estimated costs, this will affect the Group’s operating performance, financial condition, and cash flows. In addition, under the new medium-term management plan Forward 25, we are planning business investments of approximately ¥75.0 billion, and we newly established the Investment Committee with the aim of ensuring thorough risk management specific to business investment projects.
Risk Management for Ordered Projects
Order acceptance decision-making and risk management process
In order to realize the expected profit after receiving an order, the relevant department in charge of estimation identifies and evaluates risks related to technologies, estimation, delivery dates, and contracts, takes appropriate measures, and thoroughly implements risk management when accepting orders for individual projects through risk review meetings and other means.
- 1Identify and evaluate all potential risks associated technology, delivery, business, and customer credit
- 2Examine risk avoidance measures
- 3Envision residual risks after implementing risk avoidance measures and propose to decision-maker whether the risk is tolerable
For example, we add potential pre-order risks for new products and new technologies as well as products without long-term track records as targets for consideration, applying lessons learned through previous difficulties.
Risk management process after accepting an order
As part of the risk management of individual projects, we are working on the profitability management of major large-scale projects of all Group companies and affiliated companies.
- 1Each business division holds monthly follow-up meetings and conducts continuous monitoring of the progress status and profitability forecasts of important projects. Proposals for improvement and advice are made by the participants, including those in the risk management division.
- 2Follow-up and reports on countermeasure implementation conditions and profitability status; expansion to other projects
- 3Reports on three to five important matters every month to the Top Management Review Meeting chaired by the president
- 4Meetings for completed projects are held to share project results, including the positive aspects, areas for improvement, challenges, and lessons learned for the future, including those prior to receiving the order. This information is then utilized to strengthen profitability and preemptively mitigate issues in ongoing and future projects.
Risk management of individual construction projects of overseas Group companies
Decision-making regarding orders received by major overseas Group companies is delegated depending on the amount and conditions of the order, but for large-scale projects and those requiring attention to risks, approval by Kanadevia management is mandatory. In particular, for projects with high risks, the final decision is made by the Management Strategy Committee. In 2018, Kanadevia Inova established a dedicated department to strengthen risk management for individual projects. Objective analysis and evaluation based on numerical data has led to higher income margins on large projects, increased market confidence, and further orders.
Risk Management for business Investment Projects
In April 2023, we established "the Investment Committee" for the purpose of risk management of business investment projects and timely investment decisions and monitoring. The Investment Committee examines various risks associated with investment projects, advises the relevant department, and makes decisions and recommendations on whether or not to invest based on the investment amount. Such risks include sponsor risk, completion risk, offtake risk, raw material supply risk, operational risk, market risk, cash flow risk, financial risk, country risk, and withdrawal risk.
Interim Monitoring Process
For projects in which investments have already been made, we examine the profitability and cash flow of the business on a semi-annual basis, focusing on whether there are any conflicts with the withdrawal conditions, and if there is a foreseeable conflict with the withdrawal conditions or a problem with the profitability of the business, we examine measures to remedy the situation.
Withdrawal Decision Process
The final decision to withdraw is made by the Management Strategy Committee or the Board of Directors.