Risks associated with business activities

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 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. 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

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 the Russia-Ukraine issues and the trade friction between the United States and China, 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.

 

Risk of impacted by COVID-19

Description of the risk As Yaskawa Group operates globally, the further spread or prolongation of COVID-19 pandemic or the emergence of new variants could have an impact on Yaskawa Group’s business results and financial position. Specifically, if an infection occurs in an employee or his/her family and spreads on a large scale, there is a possibility that production and other business activities may be affected. If restrictions on movement such as lockdowns are imposed in countries or regions where parts suppliers are located, there is a possibility that production activities in Yaskawa Group and parts procurement by suppliers will be affected.

Measures

In response to these risks, Yaskawa Group established a task force in 2020 and has been promoting the active use of telework and video conference. We take measures to ensure the safety of employees and business continuity, such as repeatedly implementing in-house measures against infection. In case that an employee becomes infected, a system has been established to enable relevant departments centering on the task force to share information in a timely manner and measures are taken according to the situation.
In addition, in light of the uncertain outlook in COVID-19 pandemic, Yaskawa Group will continue to implement thorough cost reductions excluding necessary growth investments. At the same time, we will strive to expand our business by taking advantage of new automation demand in the new normal following COVID-19 pandemic.

 

(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.
In particular, the risk of delivery delays is increasing due to the prolonged 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.
We have also established Supply Chain Management Division at the headquarters to quickly identify risk parts and strengthen company-wide measures. In addition, for parts that continue to be difficult to procure, we have strengthened our response by changing the design to use 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, 2022, the foreign exchange sensitivity (Effect of 1% change from historical exchange rate (USD: 111.5 JPY, EUR: 130.4 JPY, CNY: 17.33 JPY, KRW: 0.096 JPY)) on revenue was approximately 870 million JPY in USD, 740 million JPY in EUR, 1.22 billion JPY in CNY, and 240 million JPY in KRW, while that on operating profit was approximately 210 million JPY in the USD, 200 million JPY in EUR, 420 million JPY in CNY, and 170 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.

 

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