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Risk Management

The risk management of the Group is primarily focused on “achieving our medium-to-long-term strategies”. We thus consider risks as “uncertainties” that may impact achievement, both potential threats to business as well as potential opportunities. Based on this approach, we have established a risk management structure and have put into place measures for managing such risks appropriately and effectively.

We have placed the Risk Management Department in the head office which reports to CLO (Chief Legal Officer), and Risk Management Officers (RMOs) in each regional headquarters to centrally manage related information. The Global Risk Management & Compliance Committee, composed of corporate officers/regional CEOs and chaired by the CEO, meets on a regular basis to discuss risks and countermeasures.

Risk Management

In fiscal year 2020, risks with potential impact on “WIN 2023 Key Strategies*” execution were identified through Risk Management Department analysis based on risk perception interviews with the Group CEO, Executive Officers, Regional CEOs, and External Directors. Regional risk assessments and input from related functional divisions were also taken into consideration, as well as insight from external experts.

We then set three evaluation axes for the risks: “impact on business upon risk manifestation”, “likelihood and timing of risk manifestation”, and “preparedness toward the risk”. Through the above-mentioned Committees and related meetings, the risks were prioritized and status of countermeasures considered.

Reflecting our corporate policies, risk assessment plans have been designed to attach due weight to issues related to personal health (and safety), company assets, business continuity, and reputation.

Risk factors identified from risk assessment results have been categorized into four parameter groups, according to risk characteristics: “Consumer-related Risks”, “Social-related Risks”, “Operation & Fundamental Risks,” and “Other Risks”. We have also adopted a risk ownership approach, appointing a risk owner to each risk category to take on clearly defined responsibilities of implementing countermeasures and as a mechanism to enable regular monitoring by the Global Risk Management & Compliance Committee/Board of Directors.

Business and Other Risks[ PDF : 505KB ]

  • * WIN 2023 Key Strategies
Improve Profitability
  • 1. Rebuild profit structure through fundamental reforms
  • 2. Increase cost competitiveness and improve factory productivity
  • 3. Accelerate growth in Asia, especially China
Focus on Skin Beauty
  • 4. Build a powerful portfolio centered on skin beauty brands
  • 5. Accelerate innovation through external collaborations
  • 6. Develop the inner beauty category
Rebuild Business Foundation
  • 7. Become a truly sustainability-focused company
  • 8. Strengthen brands through innovate marketing and robust organization
  • 9. Build a digitally driven business model and organization
  • 10. Enhance talent and organization through diversity and upskilling

Based on 2020 risk assessment findings, the most impactful risks (Threats and Opportunities) for fiscal year 2021 in relation to WIN 2023 Key Strategies realization are: "Innovation Risks", "Changes in Consumer Values", "Business Structure Transformation", "Speed of Digital Shift", "Natural and Human-Made Disasters", and "ESC (Environment, Society and Culture) Unique to Shiseido”.

Business and Other Risks

Consumer-related Risks Social-related Risks Operation & Fundamental Risks Other Risks
  • Innovation Risks*
  • Changes in Consumer Values*
  • Speed of Digital Shift*
  • Natural and Human-Made Disasters*
  • Brand Image
  • Geopolitical Risks
  • Business Structure Transformation*
  • Information Security
  • Corporate Culture and Acquisition / Securing Outstanding Human Resources
  • Global Information Network
  • Supply Network
  • Compliance
  • Quality Assurance and Control
  • Organizational Management and Governance
  • Exchange Rate Fluctuations
  • Material Litigation
  • ESC (Environment, Society, and Culture) Unique to Shiseido*
  • * Most impactful 2021 risks (as of March 25, 2021)

Meanwhile, from a long-term perspective, we identified " Decline in purchasing demands for cosmetics " and "Tighter regulations on R&D, manufacturing and sales of cosmetics’’ as "Emerging Risks" of rapidly increasing importance to our business with potential long-term impact.

We are taking or have taken appropriate response measures to mitigate these risks as described below, along with other risks, including changes in our business model.

Emerging Risk Description Impact on business Mitigating actions
Decline in purchasing demands for cosmetics The values, behaviors, and preferences of consumers are rapidly changing and diversifying due to the development of a highly technological and borderless society.
In the midst of these changes, there is a risk that the purchasing demand for cosmetics, such as skincare and makeup, will decline.
If we are unable to appropriately respond to changes in consumers’ sense of values regarding beauty and to develop cosmetics and services that match demand, it may have a significant impact on our business.
  • ・Strengthen brand portfolio to respond to diversifying consumer values (e.g. Drunk Elephant, development of new brands and M&A).
  • ・Built Consumer and Market Intelligence Department to gather consumer information in an accurate and timely manner.
  • ・Accelerate value creation and business development through open innovation with other companies.
Tighter regulations on R&D, manufacturing and sales of cosmetics There is a risk that our technologies and cosmetics may become subject to regulations in various countries and regions, resulting in stagnation of research and development, or a ban on production and sales, as a result of stricter regulations on formulation development, UV care, containers and packaging, etc., due to growing global environmental awareness. Many proposals have been made to build a sustainable society in various countries and regions, such as the European Green Deal and the formulation of the Chemicals Strategy for Sustainability. The number of cosmetics and services offered by the Company may decrease and negatively affect the business plan if we are unable to formulate a unique strategy and effectively develop sustainable products in response to these tightening regulations. In addition, inadequate efforts in this area could result in a loss of trust from society and consumers.
  • ・Collaboration with global pharmaceutical affairs offices to quickly identify and respond to regulatory risks.
  • ・Active participation in regulatory consortia in each country and fair recommendations based on scientific knowledge and verification
  • ・Monitoring of not only regulatory but also reputational risks
  • ・Product development management for regulatory compliance across brands (creation of roadmaps for each product to minimize risk and business impact)
  • ・Plan medium-to-long-term research themes in anticipation of regulatory risks
  • ・Establish Social Value Creation Division, regular meetings held by Sustainability Committee, medium-to-long-term strategy development and setting of KPIs, and monitoring of strategy implementation progress involving related departments of HQ and RHQs
  • ・Sustainability/SDG-related activities for each brand (SHISEIDO, Clé de Peau Beauté, etc.)
  • ・Adopt eco-friendly packaging (co-develop Kaneka biodegradable polymer Green Planet™ and join “Loop” rollout in Japan)
  • ・Promote switch to certified palm oil and paper
  • ・Set and disclose medium-term targets for major environmental load reduction items (CO2, palm oil, paper, water, waste) and work toward their achievement
  • ・Support Task Force on Climate-related Financial Disclosures (TCFD); prepare scenario analyzing climate change risk impact on business and disclose information based on TCFD recommendations

At the same time, compliance programs are being or have been prepared for four priority areas: personal data protection, anti-bribery, anti-cartel, and supplier risk reduction.

Shiseido Group Compliance Initiatives[ PDF : 129KB ]

Shiseido Group Policy on Anti-Corruption[ PDF : 202KB ]

Incident Response

Shiseido has established the Shiseido Group Crisis Management Policy, a guide for incident response to enable swift and appropriate actions, effective damage control, and early recovery. In Japan, departments in which an incident occurs take initial actions to understand the situation and prevent damage from spreading while promptly reporting to the Risk Management Department. After determining the incident level from the perspectives of severity of damage, possibility of spread, social impact, and other factors, the Risk Management Department assigns members from necessary HQ functions to organize a task force. The task force examines a range of actions to prevent damage from spreading, respond to those affected, and disclose information, while continuously monitoring investigation into cause, progress, and response results, and implements reoccurrence prevention measures. Outside of Japan, regional CEOs and RMOs are responsible for leading incident response activities. Significant incidents, such as those which pose a high risk of affecting operations in other regions, are immediately reported to the Risk Management Department at headquarters to enable quick action.

Shiseido Group Crisis Management Policy

1.Ensure the safety of employees and their families

2.Preserve company assets

3.Continue operations

4.Ensure the trust of stakeholders

Business Continuity Management (BCM)

We have formulated a Business Continuity Plan (BCP) to prepare for major natural disasters and other emergency situations. To enable prompt and appropriate actions by employees according to the BCP in the event of an emergency, we provide regular training and education programs and use the findings from these programs to periodically revise the BCP.

Business Continuity Plan (BCP)

Our BCP is formulated based on the Shiseido Group Crisis Management Policy and the Shiseido Group BCP Concept as described below.

Shiseido Group basic approach to formation of BCP

  • 1. Protect lives as the most important objective; place the highest priority on ensuring the safety of employees and their families and confirm that they are safe.
    When conducting business operations, consider the safety of employees and take action to prevent secondary disasters.
  • 2. Protect finances, IT systems, buildings, equipment, and other company assets.
  • 3. Perform operations essential to recovery and operations that should be continued in the event of an emergency within the target time, without fail.
  • 4. Through the above, minimize impact on customers, business partners (clients and suppliers, etc.), shareholders, employees, society, and other stakeholders; prevent damage to corporate value; and ensure the trust of society by providing various forms of support to the local community, etc.

Our BCP consists of a “basic plan” serving as a general guide and “action plans” to specifically describe recovery activities to be carried out by each department.

The BCP is designed primarily for natural disasters and other emergency situations, such as large earthquakes, that can seriously affect business continuity. In order to minimize damage and facilitate early recovery, the plan describes “restoration tasks” (necessary actions to restore basic operations) and “business continuity tasks during an emergency” (actions that must be taken to maintain business operations during disaster situations), and sets “recovery time objectives” to complete said tasks. The plan also specifies in phases the information to be collected, items to be decided, and reporting lines. This plan is executed under the leadership of the HQ Emergency Task Force, appointing a risk management corporate officer appointed as director and members from necessary divisions to address issues related to employees, facilities, communication systems, information disclosure, funding, and consumer relations. The task force undertakes overall management in cooperation with two other special functions: the Product Supply Continuity Task Force (to recover and sustain supply networks) and the SJ Emergency Task Force (to be responsible for Japan Region operations). In addition to the BCP, for sudden and unexpected incidents such as earthquakes, we have separately developed a business continuity plan for emergencies with gradual/long-term impact, such as infectious disease outbreaks, which sets matters to be considered and implemented by each phase (infectious disease BCP).

HQ Emergency Task Force Drill

The HQ Emergency Task Force Drill is held on a regular basis as training for effective command and appropriate execution of the BCP. Findings from the drill are used to review and revise existing action plans and BCP-related documents. Relevant parties are notified of changes, ensuring the BCP is up-to-date and prepared all for immediate action.

Emergency education for employees

To promote individual employee awareness and knowledge of emergency preparedness, we run various training and education programs around the globe. BCP briefings are given to heads of departments/offices to increase their understanding and ensure swift action by all staff under their leadership in the event of major emergency, under HQ Emergency Task Force instructions. Additionally, safety confirmation tests are conducted for all employees twice a year, and new hire orientation programs include lectures to raise awareness of emergency preparedness.