Strengthening Risk Management

Basic Concept for Risk Management

The CITIZEN Group is engaged in activities to identify, analyze, and evaluate risks while appropriately addressing and managing them to ensure the achievement of the Group-wide business targets and sound and sustainable development.

The CITIZEN Group considers risk management as 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

Strengthening Group Risk Management

The CITIZEN Group has established a Group risk and crisis management system in line with the Group Basic Policy on Risk Management, which is aimed at managing risks throughout the Group in a centralized way and promptly addressing them to promote sustainable management and ensure the achievement of the Group-wide business goals and sustainable development. This system includes subcommittees of the Sustainability Committee that address operational risks in normal times and related ESG risks, as well as committees that address legal, compliance, information security, disasters, and other risks.

The CSR Department of Citizen Watch Co., Ltd., which plays a central role in the Group risk and crisis management, cooperates with the departments of Citizen Watch Co., Ltd. and domestic and overseas Group companies to strengthen Group governance, check the progress of quality compliance enhancement measures and the state of significant risks for the Group, and identify and respond to emerging risks.

ESG risks and materiality risks, like other significant risks, must also be addressed to ensure the Group’s sustainable existence. Therefore, the Sustainability Committee has taken the lead in examining the impact of these risks on the Group and countermeasures for them, and the entire Group is working to foster awareness of risks, including risks specific to each Group company. We are also discussing preventive measures and other measures for emerging risks such as cyberattacks, information leaks, and revision to laws and regulations overseas, which could have a significant impact on the Group in the medium term.

Key Initiatives against Significant Risks

We have identified Group Significant Risks, important business-activity-related operational risks that are linked with the materiality (key issues) and are likely to affect the business of The CITIZEN Group as a whole and society. For FY2025, against the background of changes in the social situation and on external experts’ advice, we have added new risks to the list of the risks we identified, such as geopolitical, natural disaster, and sustainability risks, and have also reviewed the already identified risks.

In addition, we have reclassified the existing 11 risk fields (accounting/finance, information systems, human resources, general affairs, fair trade, safety assurance trade, intellectual property, environment, information management, CSR, and quality) into six new categories: compliance, financial/disclosure, natural capital/environmental, human capital, information/systems, and business continuity risks. These risks are managed by each Group Committee and by Citizen Watch Co., Ltd.’s CSR Department, which plays a central role in risk and crisis management for the Group, with support from the Management Committee. Moreover, the Sustainability Committee not only serves as a steering committee for sustainability initiatives throughout the Group but also regularly identifies, assesses, and reviews Group Significant Risks, devises countermeasures, and checks the status of risk management.

Furthermore, we ensure that information and knowledge about the Group Significant Risks and Group-company-specific risks, together with know-how for addressing them, are shared among all Group companies to achieve uniform risk management throughout the Group.

Actions Taken against Group Risks

Response to Crises

In preparation against major crises (natural disasters, terrorism, incidents/accidents, pandemics, etc.) that could occur in various parts of the world, The CITIZEN Group has constructed a global crisis management system, which allows top management to respond promptly to those crises.

To promptly and appropriately collect, judge, and disclose crisis information, The CITIZEN Group has established a system to minimize the impact on its business and stakeholders in the event of a major incident by clearly defining criteria for reporting to Citizen Watch Co., Ltd., holding emergency recognition meetings to judge the importance of the incident, and establishing a crisis response headquarters to consider specific responsive measures.

All crisis information, including information related to health, safety, and occupational accidents, is gathered in Citizen Watch Co., Ltd.’s Crisis Office and reported to the bimonthly reporting meeting for the President, the Management Committee, and the Board of Directors as appropriate, depending on the severity of risks concerning finance, human damage, or damage to corporate value, etc.

Crisis Report Line

Criteria for notification to Group companies and headquarters functional divisions

Crisis Levels

• IV: Consideration on a case-by-case basis (* serious case involving risks in easy notification)
• III: Notification on the same day as the report is received
• II: Monthly summary notification
• I: No notification required

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

Overseas Safety Management System

Terrorism, political unrest, natural disasters, pandemics, and other unforeseen events around the world can cause significant damage to employees and companies serving abroad. Regarding the overseas safety management of employees, The CITIZEN Group has a system in place whereby the Overseas Safety Management Office constantly keeps track of the whereabouts of business travelers and expatriates of the Group, including those who travel to multiple countries and regions, confirms their safety in the event of an unexpected incident or accident, and provides appropriate instructions according to the situation. The Office also monitors overseas safety information daily while proactively disseminating information to business travelers and expatriates.
In addition, as a specific measure to address geopolitical risks, the Group has established a framework that enables it to draw on the expertise of multiple specialists on an ongoing basis while also maintaining mechanisms that allow it to promptly receive advice and support when incidents occur.

Business Continuity Plan (BCP)

To prepare for the case of a major disaster, pandemic, accident, or other event that has a significant impact on management resources and causes or is expected to cause business suspension or interruption, The CITIZEN Group has formulated Business Continuity Plans (BCPs) that define the systems, roles, and response procedures necessary for business continuity and ensure the continuation of product and service supply or early restoration of operations.

The Group regularly reviews its BCPs with the aim of maintaining and enhancing their effectiveness and sophistication, taking into account changes in the social environment and risk landscape, as well as issues identified through training exercises.

In FY2025, in light of the evolving risk environment in recent years, the Group Business Continuity Management Committee provided opportunities to learn from examples of initiatives undertaken by other companies to strengthen employees' preparedness for disasters at home. Furthermore, Group companies shared the content of and innovations incorporated into their respective BCP exercises, thereby helping to strengthen the overall business continuity response capabilities of the Group. In addition, led by the Secretariat of the Group Business Continuity Management Committee, tabletop exercises assuming the occurrence of a major earthquake were conducted for the Watches, the Group’s main business. Key departments responsible for finance, order processing, labor management, etc. participated in these exercises. Through these exercises, participants reconfirmed the importance of verifying emergency response procedures, reviewing business operations, and making advance preparations for recovery.

Through these committee activities and training exercises, the Group will continue to deepen understanding of its BCPs and strengthen its ability to sustain business operations under a wide range of circumstances, going beyond simple recovery measures.

Trade Secret Management

At The CITIZEN Group, to protect trade secrets, which are information crucial to business activities, the Group Information Governance Committee promotes management and operations concerning trade secrets and works while sharing information and addressing issues. The Committee also provides officers and employees with training to ensure that they are all fully aware of the importance of trade secret management. In FY2025, just as in previous years, the Committee had meetings and offered e-learning courses on trade secrets to employees of the Group companies in Japan. These activities will be continued in subsequent years.

In addition, Citizen Watch Co., Ltd. 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 FY2025, there were no events falling under the category of serious incidents.