RiskManagement

Milbon’s Approach to Risk Management

The Milbon Group (including Milbon Co., Ltd. and its consolidated subsidiaries, hereinafter collectively referred to as “Milbon”) defines “risk” as matters that could have a significant negative impact on the realization of its management philosophy and business continuity, and has established a basic risk management policy to reduce the likelihood of these risks occurring and to prevent the spread of any damage in the event that a risk materializes and a crisis occurs. Milbon is working to develop and improve its risk management promotion system and framework.

Management Structure

Milbon Co., Ltd. has established a Risk Management Committee, chaired by the President & CEO and composed of internal board directors, Standing Audit & Supervisory Board members, and executive officers. In principle, the committee meets three times a year. From among the risks surrounding Milbon, the committee designates “company-wide risks” as those risks that should be tackled on a company-wide basis, based on their level of importance and priority, the likelihood and timing of their manifestation, and the likelihood and impact that they may hinder the achievement of the medium-term management plan. For each company-wide risk, a member of the Risk Management Committee is then appointed to be responsible, and measures are advanced on a company-wide basis. The Risk Management Committee is subject to supervision and monitoring by the Board of Directors, and reports semiannually to the Board of Directors on the progress in addressing company-wide risks. In addition, the List of Risks (a summary of the potential risks at Milbon) is reviewed, and any risks that have arisen through the execution of operations are identified, addressed, and reported quarterly to the Management Meeting—which is comprised of internal board directors, Standing Audit & Supervisory Board members, and executive officers. With respect to climate change risks, these are managed by the TCFD Working Group within the Sustainability Committee.

Risk Management System

Identification of Company-Wide Risks

Company-wide risks defined by the Risk Management Committee in 2022 are mapped out according to importance and priority. Following discussion by the Risk Management Committee, the risk map is revised annually. The figure below shows the company-wide risks (as of December 2023) that have been determined by the Risk Management Committee as warranting particular consideration, and for which measures have been considered, as they have the potential to affect Milbon’s operating results, stock price, and financial position.

Note: The risk assessment is not based on general indicators, but is an independent assessment of the situation within Milbon.

List of Risks, Estimated Likelihood and Impact

Based on the revised risk map and the risk questionnaire administered to business division heads, Milbon will continue to promote risk reduction activities throughout the company.

Specific Initiatives for FY2023

Production and logistics cost risks

Three projects were implemented: measures for raw material costs, measures for logistics costs, and examination of selling price increases.

Overseas subsidiary
governance risks

Reviewed the division of business duties, strengthened mutual parent-subsidiary understanding by holding regular meetings, and strengthened the global support system.

Operating information risks

Conducted study sessions on Premiums and Misleading Representations Law and on Pharmaceuticals and Medical Devices Law. Tested software that automatically searches for unacceptable words in productions for hair salons.

Large-scale earthquake and BCP risks

Updated the Yumegaoka Factory BCP Manual and conducted drills. Confirmed the state of the communication network in the event of a disaster to the logistics network. Confirmed the state of product inventory and supply in the event of a one-month shutdown at the Yumegaoka Factory, and formulated measures. Confirmed the BCP measures of suppliers. Confirmed the impact of a disaster on suppliers of raw materials and other materials. Confirmed risks at overseas production bases.