Risk Management

In accordance with the Companies Act, the Kawasaki Board of Directors has adopted a basic policy for internal control systems. The policy makes it clear that risk management should be addressed in accordance with the Risk Management Regulations by seeking to anticipate and avoid loss caused by risks, and to minimize risks through appropriate preparation and operation of the risk management system.
In addition, to achieve sustained improvement of profitability and corporate value, the Kawasaki Group Mission Statement identifies risk management as a guiding theme of the Kawasaki Group Management Principles.
To support these policies, the Risk Management Regulations established in 2008 lay down the following basic policy for the Kawasaki Group in the field of risk management:

1. Aiming to realize its Group Mission—“Kawasaki, working as one for the good of the planet”—Kawasaki and the Kawasaki Group will facilitate global and sustained business execution by continuously implementing risk management.
2. In implementing risk management, Kawasaki and the Kawasaki Group will put in place a risk management system, for which ultimate responsibility lies with the company president, as a means of preventing risks that may hinder business execution.
3. In the event that a risk situation emerges, Kawasaki and the Kawasaki Group will work to minimize loss to customers, employees, local communities and other stakeholders, and to prevent recurrence.
4. Each individual corporate officer and employee will engage actively with risk management and will work to maintain the risk management system and improve response capabilities of risk management.

The Corporate Risk Management Manual sets forth the following procedures for Group-wide integrated risk management based on these basic policy and guidelines: the respective operating divisions will strengthen their risk management measures, identify major risks that may have a serious impact on operations (Group-level risks) every year, monitor the response to them, and from among such risks determine a few items especially requiring Group-wide actions (risks requiring Group-wide action), implement such actions, and after the head office division in charge monitoring the results, discuss them at the Corporate Risk Management Committee.
On the other hand, with regard to the risks associated with individual business execution, the relevant divisions carry out assessments and analyses and sufficiently examine countermeasures in advance in accordance with the Kawasaki Group's Board of Directors Regulations, Management Meeting Regulations, Approval Regulations, etc., and for important projects which may have especially great impacts on operations, not only at bidding and contracting for received orders but after starting the projects, too, necessary measures to further ensure risk management are taken in accordance with Kawasaki Group's Regulations concerning Risk Management for Important Projects, etc. including the head office and the respective business segments following up on them regularly.
Concurrently, the actions to be taken when a risk situation emerges are set out in the crisis management provisions of the Risk Management Regulations, which stipulate that emergency action guidelines should be clearly identified, a Crisis Management Officer should be appointed for each operating site, and a system should be established promptly and appropriately to respond to risks.

The Kawasaki Group defines the risk as “phenomena that hinder the conduct of business operations or the achievement of organizational goals,” and is committed to giving due consideration to strategic risks and other risk items, as well as to phenomena that have a beneficial effect on the organization.
In concrete terms, this means all risks listed below, classified into external risks and internal risks (strategic risk and business risk), is included in the scope.

The Kawasaki Group has established a Corporate Risk Management System to ensure a uniform level of risk management across the Group, through which it identifies and responds to major risks with potential serious impact on operations and works to enhance risk management as outlined in the Kawasaki Group Management Principles.
The Kawasaki system places ultimate responsibility for risk management with the company president, and responsibility for coordinating risk management operations with the Managing Executive Officer. The Kawasaki system also seeks to reinforce the risk management system by setting up a Risk Management Committee with the function of discussing important matters relating to risk management and monitoring implementation status. Meanwhile, a Risk Management Unit has been set up within the Head Office Risk Management Office to implement and support corporate risk management, and each business division operates a similar system, for which the general manager of the business division is responsible. These measures are designed to reinforce a system that takes a Group-wide approach to risk management.
In October 2011, risk management initiatives similar to those applied in each business segment were launched at key domestic subsidiaries, and with efforts extended to affiliated companies in Japan as well, a Corporate Risk Management System covering all the domestic companies in the Kawasaki Group was established by the end of fiscal year ended March 31, 2013. In addition, from 2015 we began rolling out measures at some overseas affiliated companies—model companies—similar to those introduced at domestic affiliated companies, and this process will continue to gradually unfold.

Under the Corporate Risk Management System, major risks that could have a potentially serious impact on Group-wide operations are identified each year using uniform metrics and subjected to continuous management from a Groupwide perspective using efficient and optimal methods.
In concrete terms, this means that management of major risks at the Group-wide level is carried out by applying the following Plan-Do-Check-Act (PDCA) cycle to Group-wide risk management programs:

1. screening and evaluation of risks;
2. identification of major risks and specification of risks requiring action;
3. formulation and implementation of risk response measures; and
4. monitoring.

Risk reviews are undertaken each fiscal year by division, and major risks are then pinpointed for each business segment by the Corporate Risk Management Committee.

Data on major risks identified at the business division level were collated, and the Corporate Risk Management Committee then identified major risks that could have a serious impact on operations under 18 item headings.
These risks are subject to monitoring in March of every year by the Head Office division responsible for monitoring. Meanwhile, taking Group-level risk as the basis, decisions are made on which risk items to disclose as “business risk and other risk” in the Securities Report, this report, and other information sources.
The risk items are subject to yearly review.

Within Group-level risks, we specified the five items listed below as areas where response was insufficient and Group-wide action was urgently necessary. To deal with these risks, a Head Office division responsible for action was designated to take the main role in formulating and implementing response measures.