Our Group operates a wide range of businesses. We formulate risk management plans for each based on the Nishitetsu Group Risk Management Regulations. These plans help prevent the spread of damage and minimize losses should risks materialize, thereby allowing us to avoid risks. In addition, we strive to control risks for the entire Group by holding and adjusting assets and funds.

(1) Risk Management System

Our Group continuously reviews the execution and evaluations of the risk management plans formulated as part of our management plan.
The risk management entity is each Group company (or each business organization within Nishi-Nippon Railroad Co., Ltd.). The Corporate Planning Department, which oversees risk management, conducts the overall management of risk management plans and evaluates implementation status.
Matters concerning responses to significant new risks and risk management are deliberated upon and monitored by the ESG Promotion Committee, and we manage risks systematically across the entire company.

(2)Risks to Our Group

In light of the nature of the businesses operated by our Group and our management policies, the following are the primary risks that could have a significant impact on our Group’s financial position and operating results.
Note that among these risks, forward-looking statements are determined through the judgment of our Group based on information available as of the date of submission of the Annual Securities Report, and actual results may differ from these forecasts. In addition, the forecasts do not describe the likelihood or timing when such risks may materialize, as such factors are difficult to reasonably foresee.

Risk Classification

Risk Scenarios (Impact if risks materialize)

Measures to Address Risk(Excerpt and summary from the Risk Management Plan)

1. Risks related to natural disasters and extreme weather (earthquakes, heavy rain, typhoons, etc.)

• Casualties among employees and other related parties due to natural disasters or extreme weather events

• Business interruption or suspension caused by damage to facilities and equipment or infrastructure damage such as power outages

• Business interruption, suspension, or delays due to delays in the delivery of raw materials, equipment, or machinery

• Increased costs due to the enactment or increase of decarbonization taxes and stricter energy conservation regulations as transition risks in the movement toward a decarbonized society

• Continuously confirm and provide training for emergency response manuals

• Conduct regular patrol inspections of facilities and quickly detect and correct defects and hazardous areas

• Examine and secure alternative suppliers for raw materials, equipment, and machinery

• Secure multiple transportation routes and examine alternative routes in preparation for logistics stagnation

• Make efforts to create a decarbonized society and respond to climate change based on a roadmap aimed at carbon neutrality by 2050

2. Infectious disease risks

• Business interruption or suspension due to the declaration of a state of emergency or urban lockdowns

•  Damage to health caused by the infection of employees and other related parties

• Thoroughly take infection prevention measures

• Disseminate the business continuity plan (BCP)

• Secure multiple transportation routes and examine alternative routes in preparation for logistics stagnation

3. Geopolitical risks (war, conflicts, etc.) and country risks (changes in laws, regulations, policies, etc.)

• Damage to the lives, bodies, or property of employees and other related parties due to the occurrence of overseas wars, international conflicts, etc.

• Interruption or suspension of business due to the occurrence of overseas wars, international conflicts, etc. (such as delays in the delivery of raw materials, equipment, and machinery)

• Decrease in sales and profits due to a decline in tourists visiting Japan as a result of political instability within Japan

• Incurrence of response costs and operational delays, or confusion due to changes in laws, regulations, or policies in countries or regions connected to the business

• Incurrence of additional costs and damage to brand image caused by failure to appropriately respond to changes in laws, regulations, or policies in countries or regions connected to the business

• Understand and appropriately respond to laws, regulations, and policy trends in countries and regions where business is conducted through collaboration with local overseas lawyers and other experts

• Avoid dependence on specific countries or regions

• Gather information and quickly recognize risks based on changes in the international situation

• Examine and secure alternative suppliers for raw materials, equipment, and machinery

• Secure multiple transportation routes and examine alternative routes in preparation for logistics stagnation

• Continuously share information with overseas partner companies and review business plans

• Continue monitoring business in the meetings of bodies such as the Management Committee and Executive Committee

• Verify the effectiveness and appropriate operation of crisis management regulations

 

 

4. Risks related to the occurrence of accidents (transportation accidents, facility accidents, fires, explosions, etc.)

• Business suspension orders due to the occurrence of large-scale transportation accidents, payment of large amounts of compensation due to casualties, and damage to brand image caused by negative media coverage

• Damage to facilities and equipment, or business interruption or suspension due to the occurrence of large-scale facility accidents, fires, or explosions

• Casualties among employees and other related parties due to the occurrence of work-related accidents

• Improve safety management, such as by providing education and training to instill a safety-first mindset

• Disseminate and follow emergency accident response manuals

• Make the necessary capital investments based on daily inspections as well as long-term repair and maintenance plans

5. Risks related to flaws or defects in held assets and products

• Occurrence of customer damage due to defects in owned assets, products, and services, or due to operational deficiencies, or the incurrence of large amounts of compensation and litigation costs

• Loss of public trust due to inadequate management of assets, products, and services, or due to operational deficiencies, or damage to the brand image caused by negative media coverage

• Establish a checking system conducted by multiple employees and manage appropriately

• Manage hygiene appropriately based on relevant laws, regulations, etc.

• Help employees to develop crisis awareness and quality control awareness through sharing past cases, etc.

6. Risks related to information system failures and the use of digital technology

• Suspension of core systems due to ransomware attacks, leaks of confidential information or personal information outside the company, data loss, and business interruption or suspension

• Data loss and business interruption or suspension due to intentional falsification, unintentional falsification, or operational errors by employees

• Malfunction or business interruption or suspension due to a failure in system construction or post-construction maintenance

• Delays in responding to changes in the business environment caused by factors such as delays in incorporating digital technology, resulting in a decline in competitiveness, loss of business opportunities, and reduced operational efficiency

• Confirm response status to system failures, etc., and develop and operate ICT controls in the Nishitetsu Group ICT Management Committee

• Strengthen cybersecurity in preparation for cyber risks

• Disseminate responses in the event that a system failure becomes apparent, and improve response capabilities through regular training, etc.

• Provide information literacy education to prevent inappropriate operations and errors by employees

• Promote operational efficiency and sophistication through the use of internal generative AI services, etc.

• Reform business and transform organizational culture through the promotion of productivity improvement measures in the cross-departmental Productivity Innovation Project

7. Risks related to compliance violations (legal violations, scandals, etc.)

• Loss of trust due to compliance violations or business interruption or suspension

• Business suspension orders due to violations of laws and regulations, payment of large amounts of compensation, and damage to brand image caused by negative media coverage

• Incurrence of large amounts of compensation or litigation costs, and loss of social trust due to the inappropriate conduct of employees who violate ethics or social norms

• Provide regular compliance training to improve employees’ compliance awareness

• Provide education and training based on relevant laws and regulations, and confirm and improve the compliance system through internal audits, etc.

• Develop and appropriately operate various rules and regulations, etc.

8. Risks related to respect for human rights and DE&I

• Lawsuits and liability for damages, loss of social trust, and damage to brand image caused by harassment or human rights issues

• Health damage to employees, decline in workplace morale, increased turnover rate, or business interruption or suspension due to long working hours and inappropriate labor management

• Promote business activities based on respect for human rights throughout the value chain in accordance with the Nishitetsu Group Human Rights Policy

• Foster human rights awareness and prevent inappropriate behavior through workplace training on human rights, caste-based discrimination, harassment, people with disabilities, LGBTQ issues, etc.

• Develop an environment that improves job satisfaction and promotes work-life balance

9. Risks related to fluctuations in interest rates, exchange rates, etc.

• Incurrence of large foreign exchange losses due to rapid exchange rate fluctuations

• Difficulty in securing low-interest, stable funding due to rapid interest rate fluctuations, and a decrease in profits

• Decline in real estate sales prices and decrease in investor willingness to purchase properties due to rapid interest rate fluctuations

• Consider diverse financing methods to respond to changes in the interest rate environment

• Continuously scrutinize cash and deposit levels, etc., to minimize the impact on cash flow

• Strengthen relationships with existing customers and develop new customers

10. Risks related to price fluctuations (land prices, material prices, fuel, etc.)

• Significant divergence in costs and earnings due to rapid increases or decreases in prices (land prices, material costs, fuel, etc.), impact on business plans and asset values, and business interruption or suspension

• Examine and secure alternative suppliers for raw materials, equipment, and machinery

• Secure multiple transportation routes and consider alternative routes in preparation for soaring transportation costs

• Increase the added value of products and services offered, and consider and implement price pass-throughs

• Formulate and execute plans for preventive maintenance and equipment renewals to suppress cost increases due to unexpected repairs, etc.

11. Risks related to human resources strategy (labor shortages, talent acquisition)

• Delays in operations and deterioration of management efficiency due to insufficient hiring and development of human resources

• Increase in industrial accidents, decline in product and service quality, and deterioration of management efficiency due to failure to pass on appropriate technologies and skills

• Strengthening recruitment activities

• Improve compensation and take measures to enhance engagement in order to retain human resources

• Take measures to streamline operations and improve productivity by utilizing DX, etc.

• Conduct initiatives for human resource development aimed at the succession of skills and technology

• Formulate and implement planned recruitment strategies based on medium- to long-term business trends