• Our Approach & Structure
• Risk Management Initiatives
• Business Continuity Management and Planning

Our Approach & Structure

Approach

LIXIL and its group companies comply and conduct enterprise risk management (ERM) across the group in order to ensure business continuity and stable development. As part of this drive, we have compiled our Risk Management Global Policy for all employees and executive officers that are broadly based upon the international ISO 31000 standard for risk management systems and the international COSO ERM Framework. We have also established various operational rules and regulations to build an effective risk management system.

Structure

The Chief Legal & Compliance Officer (CLCO) oversees the management and development of the group’s risk management frameworks and systems. We have a Risk Management Committee that is chaired by the CLCO. The committee reports any important matter that emerges during its deliberations to the Board of Executive Officers as the immediate superior body. The Board of Directors receives regular reports from the CLCO and oversees the progress of risk management initiatives. The Audit Committee also receives reports from the Risk Management Department as part of its role in overseeing the effectiveness of our risk management.

The company has established ERM framework through the collaboration of the three lines (the three-line model), which includes daily risk management by risk owners in each department (first line), organization-wide risk management by the Risk Management Committee (second line), and independent oversight of the progress and structure by the Internal Audit department (third line).

Risk Management Committee

The Risk Management Department is independent from other business functions and serves as the secretariat for the Risk Management Committee. The committee, which is chaired by the CLCO, makes decisions on ERM-related issues, maintaining a firm grasp on the state of group-wide risk management, responses or actions toward risks, and the occurrence of any large-scale incidents. Committee members include executive officers and persons nominated by them or managers and persons nominated by the committee chair.

Risk Management Initiatives

The group identifies risks that might impact its business activities and conducts annual group-wide risk assessments. Based on the assessment results, we then select risks that are material to us as a group. The results of the risk assessments and the list of material risks are reported by the head office Risk Management Department to the Risk Management Committee for resolution. The Committee places the risks in order of priority and monitors them.

These risks are classified into strategic risks and operational risks. Strategic risks are broadly scrutinized from a medium- to long-term perspective in terms of management policy, business strategy, and Impact Strategy, as well as from the perspective of our stakeholders. In the case of operational risks, risk owners are responsible for promoting measures to respond to these risks. The group strives to enhance the transparency of its risk management by disclosing information on material risks and countermeasures with due consideration of the level of risk appetite and tolerance.

Business Continuity Management and Planning

The group recognizes the importance of business continuity and promotes business continuity management (BCM) to ensure the continuation and swift recovery of business in the event of an emergency while minimizing damages. We have also compiled rules and guidelines that serve as our basic crisis management policy, and have strengthened the business continuity plans (BCP) to be followed in the event of a crisis, such as a large-scale natural disaster or cyberattack. These policies and plans are reviewed and updated periodically. If a crisis were to occur that was considered to exceed a specific level in terms of scale or significance, a crisis response headquarters would be established at the head office to guarantee a prompt initial response and escalation.