Business risks

At Yaskawa, the Executive Committee and the Board of Directors monitor risks associated with the execution of management, including economic and market conditions. In addition, we have established the Basic Rules for Crisis Management with the aim of promptly and appropriately dealing with risks that may arise in Yaskawa Group, and have established the Risk Management Committee and each expert committee in accordance with these rules. The Risk Management Committee is responsible for developing risk management systems, planning and promoting risk management education, and taking various measures in the event of a risk. The status of risk management is reported to the Executive Committee and the Board of Directors as appropriate. Important risks that may affect Yaskawa Group’s performance and financial position and the measures for them include the following. In addition, compliance, quality issues, recruitment, natural disasters (earthquakes, floods, etc.), terrorism, conflict, and legal regulations are also recognized as risks and measures will be taken. Matters concerning the future in the text are based on Yaskawa Group’s judgment as of the end of the fiscal year under review.

(1) Risks related to the management environment

Geopolitical risk（Changes in International Relations）

Description of the risk	Yaskawa Group has production bases in 7 countries, mainly in Japan and China, and provides products and services to customers on a daily basis through sales bases in 30 countries around the world. As a result, changes in international relations, such as those between the United States and China and the situation in Russia and Ukraine, as well as social and environmental changes and changes in laws and regulations that result from changes in international relations, may have an impact on our business activities. In particular, Yaskawa Group’s operating results and financial condition may be affected when development, production, logistics, and sales activities are restricted, which hinder supplying products to customers by restrictions on exports and technology transfer and tariff increase in each country.
Measures	In response to these risks, we regularly monitor political and economic conditions and trends in laws and regulations in each region through our business bases, and have established a system that enables us to quickly ascertain the impact on our business. In recent years, in order to strengthen the monitoring of changes in global laws and regulations which have a significant impact on our business, we have established a global control system centered on the legal department of the headquarters by assigning a person in charge of laws and regulations to overseas subsidiaries and other global bases in addition to the domestic bases and headquarters. In addition, when a wide range of business activity risks arising from geopolitical risks is materialized, the company takes prompt initial responses through the Risk Management Committee at the headquarters and works to minimize damage by building an effective global incident response system in cooperation with each expert committee and the management committee.

Description of the risk

Yaskawa Group has production bases in 7 countries, mainly in Japan and China, and provides products and services to customers on a daily basis through sales bases in 30 countries around the world. As a result, changes in international relations, such as those between the United States and China and the situation in Russia and Ukraine, as well as social and environmental changes and changes in laws and regulations that result from changes in international relations, may have an impact on our business activities.
In particular, Yaskawa Group’s operating results and financial condition may be affected when development, production, logistics, and sales activities are restricted, which hinder supplying products to customers by restrictions on exports and technology transfer and tariff increase in each country.

Measures

In response to these risks, we regularly monitor political and economic conditions and trends in laws and regulations in each region through our business bases, and have established a system that enables us to quickly ascertain the impact on our business.
In recent years, in order to strengthen the monitoring of changes in global laws and regulations which have a significant impact on our business, we have established a global control system centered on the legal department of the headquarters by assigning a person in charge of laws and regulations to overseas subsidiaries and other global bases in addition to the domestic bases and headquarters.
In addition, when a wide range of business activity risks arising from geopolitical risks is materialized, the company takes prompt initial responses through the Risk Management Committee at the headquarters and works to minimize damage by building an effective global incident response system in cooperation with each expert committee and the management committee.

(2) Risks related to the business environment

Risks related to materials procurement and logistics

Description of the risk	Yaskawa Group procures raw materials such as steel materials and various parts from a number of suppliers, but it may not be able to obtain necessary quantities continuously due to surging procurement prices or increasing demand in the industry. Furthermore, due to natural disasters, expansion of infectious diseases, accidents, and worsening business conditions, it may be difficult for suppliers to provide Yaskawa Group with parts and raw materials in a stable manner. Most recently, the risk of delivery delays became apparent due to the global semiconductor shortage and supply chain disruptions caused by COVID-19.
Measures	To address these procurement risks, Yaskawa Group is working to strengthen its procurement functions. For example, we are building relationships of trust through dialogue with suppliers, diversifying our suppliers globally, responding to demand fluctuations by ensuring appropriate inventory levels and promoting local production and procurement, and enhancing our responses to disaster risks through the formulation of Business Continuity Plans (BCP) for our domestic and main overseas bases. In addition, we are working to identify risky parts early and strengthen company-wide measures, and for parts that continue to be hard to come by, we are strengthening our response by changing the design to parts that are available.

Description of the risk

Yaskawa Group procures raw materials such as steel materials and various parts from a number of suppliers, but it may not be able to obtain necessary quantities continuously due to surging procurement prices or increasing demand in the industry. Furthermore, due to natural disasters, expansion of infectious diseases, accidents, and worsening business conditions, it may be difficult for suppliers to provide Yaskawa Group with parts and raw materials in a stable manner.
Most recently, the risk of delivery delays became apparent due to the global semiconductor shortage and supply chain disruptions caused by COVID-19.

Measures

To address these procurement risks, Yaskawa Group is working to strengthen its procurement functions. For example, we are building relationships of trust through dialogue with suppliers, diversifying our suppliers globally, responding to demand fluctuations by ensuring appropriate inventory levels and promoting local production and procurement, and enhancing our responses to disaster risks through the formulation of Business Continuity Plans (BCP) for our domestic and main overseas bases.
In addition, we are working to identify risky parts early and strengthen company-wide measures, and for parts that continue to be hard to come by, we are strengthening our response by changing the design to parts that are available.

Risk of exchange rate fluctuations

Description of the risk	Yaskawa Group is exposed to the risk of exchange rate fluctuations because it operates globally, and its business partners are located all over the world. In addition to selling and providing products and service and purchasing raw materials and parts in local currencies such as USD, EUR, and CNY, Yaskawa Group also exports products in local currencies. Unexpected fluctuations in exchange rates could weaken the competitiveness of Yaskawa Group’s products and adversely affect its operating results and financial condition. In addition, as Yaskawa Group holds assets and liabilities denominated in local currencies, foreign exchange rate fluctuations may have an adverse effect on Yaskawa Group’s financial position, which is reported in JPY. For the year ended February 28, 2023, the foreign exchange sensitivity (Effect of 1% change from historical exchange rate (USD: 134.1 JPY, EUR: 139.8 JPY, CNY: 19.68 JPY, KRW: 0.103 JPY)) on revenue was approximately 1.19 billion JPY in USD, 820 million JPY in EUR, 1.35 billion JPY in CNY, and 330 million JPY in KRW, while that on operating profit was approximately 260 million JPY in the USD, 170 million JPY in EUR, 400 million JPY in CNY, and 200 million JPY in KRW.
Measures	In order to address the risk of exchange rate fluctuations, Yaskawa Group is working to build an earnings structure that is resistant to exchange rate fluctuations by promoting local production and procurement in addition to executing forward exchange contracts and currency hedging.

Description of the risk

Yaskawa Group is exposed to the risk of exchange rate fluctuations because it operates globally, and its business partners are located all over the world. In addition to selling and providing products and service and purchasing raw materials and parts in local currencies such as USD, EUR, and CNY, Yaskawa Group also exports products in local currencies. Unexpected fluctuations in exchange rates could weaken the competitiveness of Yaskawa Group’s products and adversely affect its operating results and financial condition. In addition, as Yaskawa Group holds assets and liabilities denominated in local currencies, foreign exchange rate fluctuations may have an adverse effect on Yaskawa Group’s financial position, which is reported in JPY.
For the year ended February 28, 2023, the foreign exchange sensitivity (Effect of 1% change from historical exchange rate (USD: 134.1 JPY, EUR: 139.8 JPY, CNY: 19.68 JPY, KRW: 0.103 JPY)) on revenue was approximately 1.19 billion JPY in USD, 820 million JPY in EUR, 1.35 billion JPY in CNY, and 330 million JPY in KRW, while that on operating profit was approximately 260 million JPY in the USD, 170 million JPY in EUR, 400 million JPY in CNY, and 200 million JPY in KRW.

Measures

In order to address the risk of exchange rate fluctuations, Yaskawa Group is working to build an earnings structure that is resistant to exchange rate fluctuations by promoting local production and procurement in addition to executing forward exchange contracts and currency hedging.

Risk of increased competition

Description of the risk	Yaskawa Group has strong competitors in each of its business areas. In the face of intensifying price competition in particular, there is no guarantee that Yaskawa Group will remain competitive in the future, even in areas where it has a high market share. Intense price competition may adversely affect Yaskawa Group’s performance and financial position. In addition, it is necessary to launch products in a timely and appropriate manner in order to secure competitiveness in technology and quality. If the competitiveness of Yaskawa Group’s products is relatively weak or if the timing of product rollout is inappropriate, Yaskawa Group’s performance and financial position may be adversely affected.
Measures	To address the risk, Yaskawa Group is continuously strengthening R & D across its divisions centering on YASKAWA Technology Center. In addition to developing innovative products that are the world’s first and the world’s best, we are working to shorten the development time by thoroughly improving efficiency and to bring highly cost-competitive products to market in a timely manner. At the same time, the company is working to differentiate its products and services and increase added value by providing optimal solutions for customers through i³-Mechatronics.

Description of the risk

Yaskawa Group has strong competitors in each of its business areas. In the face of intensifying price competition in particular, there is no guarantee that Yaskawa Group will remain competitive in the future, even in areas where it has a high market share. Intense price competition may adversely affect Yaskawa Group’s performance and financial position. In addition, it is necessary to launch products in a timely and appropriate manner in order to secure competitiveness in technology and quality. If the competitiveness of Yaskawa Group’s products is relatively weak or if the timing of product rollout is inappropriate, Yaskawa Group’s performance and financial position may be adversely affected.

Measures

To address the risk, Yaskawa Group is continuously strengthening R & D across its divisions centering on YASKAWA Technology Center. In addition to developing innovative products that are the world’s first and the world’s best, we are working to shorten the development time by thoroughly improving efficiency and to bring highly cost-competitive products to market in a timely manner. At the same time, the company is working to differentiate its products and services and increase added value by providing optimal solutions for customers through i³-Mechatronics.

Risks related to sustainability issues (climate change and human rights)

Description of the risk	With regard to climate change, there is a possible risk of “transition” caused by changes in policies, regulations, and other climate change measures, as well as changes in social demands. Examples include increases in fuel and material procurement costs resulting from the introduction of carbon prices and carbon taxes by national governments, and increases in costs such as purchasing green power resulting from the introduction of national carbon emissions policies and emissions trading and the tightening of emissions regulations. In the case of human rights, there is a need to address issues such as forced labor and child labor by not only companies but also their business partners. Response is required as a social requirement. Inappropriate responses to these risks may affect corporate value.
Measures	In response to these risks, Yaskawa Group has expressed its support for the TCFD recommendations on climate change, promoted various activities, including participation in a project to support scenario analysis of climate risks and opportunities in line with the Ministry of the Environment’s TCFD, and disclosed climate-related information based on the TCFD recommendations. We will continue to enhance the disclosure of climate-related information, and continue to conduct business activities that are even more environmentally friendly in order to contribute to the realization of a sustainable society and further enhance our corporate value. In addition, as a system, the Sustainability Committee, chaired by the president, monitors our activities, and for overall implementation, including other measures, we are working to improve the quality of our activities through the PDCA cycle under the environmental promotion system run by the environmental promotion officer appointed by the president. With regard to human rights, we have established respect for human rights in the Yasukawa Group Code of Corporate Conduct based on the Universal Declaration of Human Rights and the United Nations Guiding Principles on Business and Human Rights, and we are promoting measures that respect the human rights of all people. The promotion system is led by the department in charge of sustainability, the department in charge of general affairs and the department in charge of procurement, and we are working to respect human rights in Yaskawa Group and in the supply chain. In regard to these initiatives, the Sustainability Committee deliberates and monitors measures on a regular basis. Through these initiatives, we will continuously respond to the ever-changing social demands and issues related to human rights.

Description of the risk

With regard to climate change, there is a possible risk of “transition” caused by changes in policies, regulations, and other climate change measures, as well as changes in social demands. Examples include increases in fuel and material procurement costs resulting from the introduction of carbon prices and carbon taxes by national governments, and increases in costs such as purchasing green power resulting from the introduction of national carbon emissions policies and emissions trading and the tightening of emissions regulations.
In the case of human rights, there is a need to address issues such as forced labor and child labor by not only companies but also their business partners.
Response is required as a social requirement.
Inappropriate responses to these risks may affect corporate value.

Measures

In response to these risks, Yaskawa Group has expressed its support for the TCFD recommendations on climate change, promoted various activities, including participation in a project to support scenario analysis of climate risks and opportunities in line with the Ministry of the Environment’s TCFD, and disclosed climate-related information based on the TCFD recommendations. We will continue to enhance the disclosure of climate-related information, and continue to conduct business activities that are even more environmentally friendly in order to contribute to the realization of a sustainable society and further enhance our corporate value. In addition, as a system, the Sustainability Committee, chaired by the president, monitors our activities, and for overall implementation, including other measures, we are working to improve the quality of our activities through the PDCA cycle under the environmental promotion system run by the environmental promotion officer appointed by the president.
With regard to human rights, we have established respect for human rights in the Yasukawa Group Code of Corporate Conduct based on the Universal Declaration of Human Rights and the United Nations Guiding Principles on Business and Human Rights, and we are promoting measures that respect the human rights of all people. The promotion system is led by the department in charge of sustainability, the department in charge of general affairs and the department in charge of procurement, and we are working to respect human rights in Yaskawa Group and in the supply chain. In regard to these initiatives, the Sustainability Committee deliberates and monitors measures on a regular basis. Through these initiatives, we will continuously respond to the ever-changing social demands and issues related to human rights.

Information Security Risks

Description of the risk	We hold personal information, including customer and business partner information and employees, in Yaskawa Group’s business fields. A server or system shutdown caused by a cyber attack, computer virus infection or unauthorized access may cause a business shutdown. In addition, if information held by Yaskawa is leaked outside the company or false rumors about Yaskawa are spread via SNS or other means, the credibility of the market, including customers, may be lost and Yaskawa’s business continuity may be adversely affected.
Measures	Since peacetime, we have been promoting activities to strengthen our information security infrastructure, monitoring and gathering information on the latest sophisticated and sophisticated cyber attacks, trends in vulnerability information that occur daily, and brand surveys on a global basis. When information security risks involving Yaskawa are foreseen and discovered, the risk management system and the CSIRT system, which can take immediate and appropriate actions, work together to conduct incident response, and we continue to maintain and strengthen resilient information systems that can predict, recover from, and adapt to risks. Through these activities, we strive to minimize risks related to Yaskawa’s information security and provide customers with highly reliable products and services.

Description of the risk

We hold personal information, including customer and business partner information and employees, in Yaskawa Group’s business fields. A server or system shutdown caused by a cyber attack, computer virus infection or unauthorized access may cause a business shutdown. In addition, if information held by Yaskawa is leaked outside the company or false rumors about Yaskawa are spread via SNS or other means, the credibility of the market, including customers, may be lost and Yaskawa’s business continuity may be adversely affected.

Measures

Since peacetime, we have been promoting activities to strengthen our information security infrastructure, monitoring and gathering information on the latest sophisticated and sophisticated cyber attacks, trends in vulnerability information that occur daily, and brand surveys on a global basis. When information security risks involving Yaskawa are foreseen and discovered, the risk management system and the CSIRT system, which can take immediate and appropriate actions, work together to conduct incident response, and we continue to maintain and strengthen resilient information systems that can predict, recover from, and adapt to risks. Through these activities, we strive to minimize risks related to Yaskawa’s information security and provide customers with highly reliable products and services.