Risk Management System
Economic and political conditions, such social factors as environmental regulations and safety and security systems, natural disasters, and technological innovation in countries around the world have the potential to affect the Group's operations and financial results. Based on its risk management rules and risk management regulations, the Group comprehensively aggregates and controls business risk from a Groupwide perspective and has established a system for responding appropriately to risk.
Enterprise risk management (ERM)
Departments are in charge of risk management for business risks. Management departments and internal committees for each risk category monitor the status of risk management across the organization to perform a risk evaluation for the entire company. An inspection of the Internal Audit Chamber is also performed in order to manage risks more appropriately.
Meetings of the Risk Management Committee are held twice a year to enable chief executives of each department to report on the status of managing critical risks that can affect our company management to all corporate officers including outside directors and evaluate the status of management. The committee also investigates improvement related to company-wide risk management methods and new countermeasures. In fiscal 2019, we revised our risk management regulations in conjunction with the strengthening of the operation of internal controls. With regard to company-wide risks that may occur beyond the framework of the headquarters and Group companies, and which management recognizes as important, we have established a uniform management system that transcends divisions according to the nature of the risks. We have clarified our role in risk management by designating the Risk Management Division to serve as the banner for advising related divisions and Group companies and promoting risk responses.
Important risks that can significantly affect company-wide business management include operational risks such as major accidents involving vessels or aircraft; country risk; natural disasters and other external factors; and compliance risk such as antitrust law violations.
Information Security Measures
The NYK Group is seeking to enhance its cyber resilience by strengthening its multilayer defense measures and installing an Endpoint Detection and Response system for additional protection in the event of a security breach to minimize any damage and enable prompt recovery. The Company's preventive measures for cyberattacks include regular training drills and verification of its global systems. The Company also plans to construct a fully integrated worldwide system for centralized real-time response to a cyberattack.
In addition, in fiscal 2020, we introduced an education platform to strengthen security education at domestic and overseas Group companies in response to the recent risk of attacks aimed at the supply chain, and we are promoting greater awareness of security. Together, we will strengthen our ability to respond to security risks by using threat intelligence.
Efforts to Mitigate Climate Change / Task Force on Climate-related Financial Disclosure
The NYK Group recognizes climate change as an important management issue. In December 2018, we announced our support for the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and are taking steps to examine the content of our information disclosures and our disclosure measures to ensure they meet the TCFD's stringent expectations. In April 2020, we rebuilt our corporate governance framework to include more concrete indicators and goals as part of efforts toward mitigating climate change, and we have developed related activities on a companywide basis.
It is necessary to measure the impact of climate change on the NYK Group's business over the long term and factor these measurements into specific management strategies and other actions. Therefore, in April 2020 we established a management framework, headed by the president, for responding to climate change.
Framework for Climate Change Response Management
<Key Management Points>
- Under the framework for promoting ESG Management, matters related to climate change are reported to the Management Meeting by way of a task force comprising members from throughout the Company, and decisions are made after thorough discussion.
- The Management Meeting reports on climate change related matters to the Board of Directors about twice a year in accordance with the Rules of the Board of Directors.
- Executive officers in charge of ESG management participate in meetings of four important decision-making bodies-the Investment and Credit Council, the Risk Management Committee, the Investment Management Conference, and the Financial Policy Conference.
<Key Initiatives after Establishing Framework for Climate Change Response Management>
- An executive officer in charge of ESG management has participated in all meetings held by the four aforementioned bodies (at least one officer between the officer in charge and the assistant officer in charge).
- The Risk Management Committee has discussed risks and opportunities related to climate change.
- The Management Meeting has held discussions on greenhouse gas emissions reduction as a climate change countermeasure.
Strategy and Risk Management
The NYK Group recognizes the importance of scenario analysis to assess risks and opportunities related to climate change as well as the importance of understanding the impact of climate change on the Group's businesses, strategies, and finances. Taking a long-term perspective, we are factoring climate change into our original forecasts on transportation demand, in addition to taking steps to manage risks and grasp opportunities based on socially plausible scenarios. The Company uses the World Energy Outlook presented by the International Energy Agency (IEA) as a reference point for future energy-related trends and analyzes the IEA's main Stated Policies Scenario (STEPS) and Sustainable Development Scenario (SDS), which assume the Sustainable Development Goals (SDGs) of the United Nations will be fulfilled. We make independent calculations to measure the impact that risks and opportunities related to climate change will bear on energy transportation demand, and on seaborne trade demand in particular. In addition, the existence of necessary parameters, such as exchange rates, fuel prices, and carbon taxes, will be also reflected in the Group's business operations.
Ahead of other divisions, in the Energy Division we are making preparations for an effective scenario analysis by identifying any factors that could affect scenarios facing the division, quantifying them in terms of uncertainty and degree of impact, and then map-ping out each factor. We are looking into introducing scenario analyses for the Dry Bulk Division and the Car Transportation Division in the future. Based on the information brought to light through these efforts, we will proceed with disclosure to project our future vision and to show its resilience over the long term.
Major Potential Risks and Opportunities from Climate Change
The NYK Group is working to understand the various risks and opportunities that may arise from climate change. The Risk Management Committee monitors the risks facing the Group and its responses thereto and meets annually to confirm the impact of climate change on the Group's businesses from a long-term perspective.
Potential Risks and Opportunities
Countermeasures for Climate Change-Related Risks (example)
The NYK Group is moving forward with the following measures to mitigate risks related to climate change.
- Development of governance system
- Development of decision-making process for investments that factors in climate change
- Introduction of risk management methods that account for climate change and performance of scenario analysis
- Greater understanding of cargo demand, including fossil fuels, etc.
- Promotion of switch to LNG-fueled vessels
- Development and practical application of technology for switching to new types of fuel to power vessels
- Acceleration of fuel conservation activities
- Stable procurement of fuel oil compliant with IMO regulations
- Active ESG engagement with financial institutions and investors
A wide variety of economic, political, and social factors in countries throughout the world have the potential to impact negatively the NYK Group's mainstay shipping and integrated logistics operations as well as the Group's cruise and other businesses. Please click on the link below.
NYK has prepared business continuity plans (BCPs) for all the major operations in NYK headquarters, so if disasters, accidents, or other events disrupt operations, the Group will be able to maintain its important functions uninterrupted wherever possible, or to quickly restore them if interrupted.
In 2016, NYK included preparations for working from home in its revised BCPs, transferred to a more earthquake resistant data center, and introduced an IT platform that uses cloud computing to enable the sharing of information globally. We have also established an IT tool for information sharing in the event of a natural disaster and conducted a disaster drill using the IT tool.