Strengthen Risk Management

Basic Concept for Risk Management

The CITIZEN Group assesses, analyzes, and evaluates risk and engages in activities to appropriately manage risk based on the results of its efforts in order to achieve Group-wide business targets and ensure sound and sustainable development.

The CITIZEN Group considers risk management to be a management concept that combines two processes: risk management to prevent crises from occurring and "crisis management" to minimize risks when crises do occur.

Group Risk Management

Enhancement of Group Risk Management

To achieve Group-wide business objectives and ensure sustained growth, The CITIZEN Group has developed a structure to enable centralized risk management and swift responses across the Group. This structure includes sub-committees of the Sustainability Committee that address operational risks in normal times and related ESG risks, as well as committees that address legal and compliance, information security, disaster, and other risks.

The CITIZEN WATCH CSR Office, the core of the Group risk-/crisis-management structure, cooperates with individual sections of CITIZEN WATCH and Group companies in Japan and overseas to advance and check on efforts to enhance Group governance and quality compliance, check on the state of responses to priority risks in the Group, and respond to emerging risks.

In addition, measures against ESG risks and materiality risks, like other important risks, are essential for the sustainable existence of the Group. Therefore, the Sustainability Committee has taken the lead in examining the impact on the Group and countermeasures, and the Board of Directors of each Group company has also taken steps to deepen risk awareness, thereby fostering risk awareness throughout the Group. We are also discussing preventive measures and other measures for emerging risks such as cyber-attacks, information leaks, and changes in laws and regulations overseas, which could have a significant impact on the Group in the medium term.

Key Initiatives for Significant Risks

In FY2023, we reviewed significant risks that may affect the business of the entire The CITIZEN Group and society, and formulated 11 risks (accounting/finance, information systems, human resources, general affairs, fair trade, safety assurance trade, intellectual property, environment, information management, CSR, and quality). Top management will now address the issue while incorporating the opinions of third-party experts. In addition, we aim for uniform risk management across the Group by sharing information on important risks common to the Group and risks specific to each company across the Group and sharing knowledge and know-how, for example, by incorporating into Group-wide risks (human resources) the violation of the duty of care for safety related to the working environment.

In addition, in FY2023, among the significant risks, we regard the two items of “environment” and “quality” as the most important risks, and work to expose these risks and strengthen countermeasures. Regarding the environment, we will strengthen measures such as introducing a process safety management system to thoroughly prevent unexpected leaks and large-scale disasters in the handling of hazardous chemical substances. Regarding quality, we will continue to monitor the status of measures and risks to prevent quality compliance violations by conducting quality compliance audits of all group companies using the audit checklist created in 2022.

Actions Taken Against Group Risks

Response to Crises

In preparation for major crises (natural disasters, terrorism, incidents/accidents, pandemics, etc.) that could occur in various parts of the world, The CITIZEN Group is working on constructing a global crisis management system.

To promptly and appropriately collect, judge, and disclose crisis information, we have established a system to minimize the impact on our business and stakeholders in the event of a major incident by clarifying reporting standards to CITIZEN WATCH, holding emergency situation recognition meetings to judge the importance of the incident, and establishing a crisis response headquarters to consider specific responses.

All crisis information, including information related to health, safety, and occupational accidents, is gathered in CITIZEN WATCH's Crisis Office and reported to the President's Bimonthly Reporting Meeting, the Executive Committee, and the Board of Directors as appropriate, depending on the severity of the risk, such as financial or human damage or damage to corporate value.

Regarding the Covid-19 pandemic, we operate a Crisis Information Collection System that enables immediate reporting and response in the event of an emergency, and the New Coronavirus Emergency Response Headquarters, headed by the President of CITIZEN WATCH, quickly assesses the infection situation overseas and the impact and risks to our business, employees, and other stakeholders. Through information-sharing, including response measures, we work to minimize the impact on all Group businesses.

Crisis Report Line

Criteria for deployment to Group companies and head office functional departments

Crisis Level

• IV: Consideration on a case-by-case basis (*since this is a serious case, there are risks involved in easy deployment)
• III: Deployment on the same day as the report is received
• II: Monthly deployment
• I: No deployment required

• * Crisis levels are determined in accordance with the Crisis Level Criteria Table (by event/impact), provided separately.

Overseas Safety Management System

The CITIZEN Group promotes safety management for employees overseas. There has been an increase in the number of employees working abroad, and unforeseen circumstances such as terrorism, political unrest, natural disasters, and infectious diseases have occurred around the world. Any of these circumstances could have a significant adverse impact on our business operations.
We have put in place a system wherein the Overseas Safety Management Office is constantly aware of the location of staff on business trips or residing overseas. In the event of unexpected incidents or accidents, the office can confirm the staff’s safety and, if necessary, provide suitable instructions.
The office also monitors overseas risk information on a daily basis and actively provides the information to staff on business trips or residing overseas.

As of March 2023, due to the impact of Covid-19, employees who are unavoidably traveling or stationed in areas where the infection has been confirmed are periodically confirmed of their safety through online meetings.

Business Continuity Plan (BCP)

To prepare for an event where management resources are significantly impacted by a large-scale natural disaster and business must be halted or suspended, or an event in which the possibility of business suspension is high, The CITIZEN Group has determined the necessary systems, tasks, and procedures to continue or quickly restore business operations, and has formulated a BCP.

Subsequently, we conduct BCP training and maintenance in order to adjust to changing risks and pursue effectiveness and sophistication.

We prepare for disaster risk throughout the group-wide value chain by conducting BCP training not only at production sites but also at domestic and overseas logistics sites, such as fire simulation training.

In light of the Covid-19 pandemic in Japan and overseas, we are also strengthening our BCP system to be able to respond even more quickly and appropriately.

Trade Secret Management

In order to protect trade secrets and the information crucial to our business activities, the Group Information Governance Committee promotes management and operations concerning trade secrets, and works on information-sharing and addressing any issues raised. Along with these activities, the Group also conducts employee education to ensure that employees are well informed these matters.

In FY2022, the Group Information Governance Committee continued to hold meetings, and an e-learning course on trade secrets for CITIZEN WATCH employees was held. The participation rate was 99.0%. From FY2022, we started an e-learning course on trade secrets at domestic Group companies using the same content as CITIZEN WATCH. We will continue these activities in the future.

In addition, CITIZEN WATCH receives annual reports on trade secrets from each department within the company, and internal audits based on the reports are conducted to correct the situation as appropriate. In FY2022, there were no incidents falling under the category of Serious Incidents.