Risk Management

Business Foundation

Basic Concepts and Promotion System

ROHM considers all phenomena that may hinder the work and business performance if they occur to be "risks." In addition to working to minimize such occurrences, we also implement measures to ensure that it will be possible to either continue or restore the business smoothly even if disasters or similar events do occur.
Specifically, under the "CSR Committee" chaired by the president himself, "Risk Management and BCM Committee" is organized in which internal departments such as R&D, production, and administration divisions participate in a cross-sectional manner.
We extract, analyze, and manage important risks that may occur in the execution of business in ROHM Group. Furthermore, in addition to evaluating the activities of the departments responsible for each risk, it also promotes the formulation of a Business Continuity Plan (BCP) and works for its thorough implementation throughout the company so that efforts are made to implement all possible preparations and countermeasures in advance.
A Risk Management Office has been established in the Department of General Affairs as an internal organization for the elimination of antisocial forces. It coordinates and exchanges information with external specialist organizations such as the police department and expands and implements specific activities to eliminate antisocial forces.

[Implementation Structure]

[Activity Cycle for Risk Management]

Activity Cycle for Risk Management Activity Cycle for Risk Management

PLAN

Identify Critical Risks

  • Risk Management and BCM Committee anticipates all sorts of risks that may face businesses
  • This Committee identifies critical risks of ROHM Group through Divisions Responsible for Risk Management.

Appoint the Divisions Responsible for Risk Management

  • Appoint divisions that are responsible for preventing risk and responding to risk situations.

DO

Responding to the Risk

  • The Divisions Responsible for Risk Management to analyze and evaluate the risk, determine the response policy.
  • They implement countermeasures based on the response policy.

CHECK

Review and Evaluate the Risk Management Systems

  • Risk Management and BCM Committee to review and evaluate the risk management system status of the Divisions Responsible for Risk Management.

ACTION

Correct the Risk Management Systems

  • If there is a high possibility of a risk occurring, the committee instructs the relevant to take corrective action as necessary.
  • The Division Responsible takes corrective action.

Raise Awareness

  • Provide information on the risk events taken place and raise risk awareness within ROHM Group.

Reviews

  • Reports to CSR Committee.

Business Risks

The following are risks that may have a significant impact on the financial status and operating results of ROHM Group. References to future events are based on judgments made by ROHM Group at the end of current fiscal year.

1. Risks Associated with Business Strategy and Market Changes
ROHM Group focuses upon the automotive market, the industrial equipment market and overseas markets, and places importance on markets expected to achieve more growth such as the key product areas of power, analog and general purpose devices, in addition to markets and technologies where ROHM Group can exhibit its strengths. Global competition may intensify in these key areas, and it is possible that ROHM will be engulfed by fierce development competition or pricing competition that exceeds the limits of cost cutting. Furthermore, there is also a possibility of market growth slowing or market contraction due to various changes in social needs. There is a risk that such market trends and changes in the competitive environment will have an adverse effect on the financial condition, management performance and cash flow of ROHM Group.
2. Exchange Risks
ROHM Group has expanded its stronghold in global development, production, and sales. Therefore, the financial statements prepared in each local currency are converted into Japanese yen in order to prepare consolidated financial statements. Accordingly, even if the values in local currencies remain the same, the profits and losses on the consolidated financial statements may be affected by the exchange rates at the time of conversion. While conducting production activities in Japan, Asian countries, the US, and European countries, ROHM Group sells its products on the global market. This means different currencies are used between production and sales bases, and consequently exchange rate fluctuations exert a continual influence on ROHM Group. Generally, a strong Japanese yen conversion adversely affects our business performance, while a weak yen conversion has a favorable impact.
3. Risks of Product Defects
As stated in the Company Mission, ROHM Group places top priority on quality, and develops products subject to stringent quality control standards. However, this does not guarantee that defective products will never be produced or that claims arising from product defects will never be sought by buyers in the future. If a buyer should make a claim for defects regarding ROHM products, company performance may be adversely affected.
4. Risks Associated with Production Activities
ROHM Group employs a vertically integrated business model, but a variety of materials including rare metals are required for the manufacture of electronic components. For this reason, the occurrence of restrictions on procurement from a particular supplier may have an adverse effect on production activities or cost structure.
5. Legal Risks
In order to manufacture products distinguishable from those of other companies, ROHM Group develops various new technologies, cultivates expertise, and manufactures and sells products worldwide based on these proprietary technologies. ROHM Group has a division that specializes in the strict supervision of in-house activities in order to ensure that the technologies and proprietary knowledge used by the Group do not infringe on the intellectual property rights of other companies such as patent rights. In addition , in all business fields in which ROHM Group is involved, the Group complies with all relevant laws and regulations with respect to the utilization and handling of exhaust air, drainage, harmful materials , waste treatment, surveys on soil/underground water pollution, and the protection of the environment, health, and safety. However , the Group may incur legal responsibilities in this respect due to unexpected events, which may possibly have an adverse influence on financial results.
6. Natural Disasters and Geopolitical Risks
ROHM Group performs development, manufacturing, and sales activities not only in Japan but also worldwide. To distribute the associated risks, the Group locates production lines at multiple bases worldwide. However, these production and sales bases may be damaged due to earthquake, typhoon, flooding, other natural disasters, the spread of infectious diseases, or man-made disasters such as political uncertainty or international conflicts. These risks could simultaneously occur in multiple regions, and this may have a significant impact not only on ROHM Group but also the entire supply chain including customers and suppliers.
7. Mergers and Acquisitions Risks
ROHM Group, taking into account future business prospects , considers it necessary to investigate and implement mergers and acquisitions worldwide with a focus on entering new fields that are relevant to our existing business, and to always make the utmost efforts to improve corporate value and expand the size of our business. In conducting mergers and acquisitions, we thoroughly study, review, and deliberate matters before any acquisitions are made. Nonetheless, due to unexpected circumstances or significant changes in market forces after an acquisition, an acquired business may not progress as expected and we may suffer losses in some cases as a result.
8. Research and Development Risks
At present, new technologies and products are being developed and diffused in different electronics fields. ROHM Group, as a part of electronics related industry, continually faces stiff competition in technology and product development and therefore must exert ourselves day and night in the research and development of materials and products in order to produce new products and technologies. Consequently, our research and development expenditures in the year ended March 31, 2020 were approximately 9 percent of our consolidated sales.
In these research and development activities, plans may be considerably delayed, and the opportunity to introduce them into the market missed, for example, due to a lack of technical capabilities or the ability to develop new products. And, there is also the possibility that the new products we develop may not receive favorable acceptance by the market as anticipated. If this occurs, it may affect our business performance.
9. Climate Change Risks
Global climate change causes unprecedented damage from extreme weather events, higher-than-expected costs associated with the introduction of carbon taxes and response to stakeholder requests, and a decline in brand value due to the emergence of risks. Etc., which may affect business activities.
ROHM formulated “The ROHM Group Environmental Vision 2050” in April 2021. We have set the goals of “climate change countermeasures”, “realization of a resource-recycling society”, and “harmony between the natural cycle and business activities”, and are proceeding with initiatives. Regarding climate change measures, we will strive to reduce GHG emissions by working on continuous energy conservation measures. Furthermore, we have been promoting climate change countermeasures such as by working on the introduction of renewable energy including solar power generation.
10. Other Risks and Risk Management System
Risks other than the above include various risks in advancing business activities, such as risks related to logistics, risks related to procurement of materials and energy, risks related to information leakage, risks related to information systems, and risks related to human resources. It may affect business performance. ROHM Group is working to strengthen its risk management system as a whole in order to avoid such risks or minimize their effects. Specifically, ROHM organizes a risk management and BCM committee under the CSR committee chaired by the president. This committee extracts, analyzes, and manages important risks that may occur in the execution of business in ROHM Group.In addition, we verify the activity status of each department in charge of risk, proceed with the formulation of a business continuity plan (BCP), and make every effort to ensure that all proactive measures and preparations are made.
11. Novel Coronavirus (COVID-19)
ROHM Group’s corporate activities have been restricted due the temporary stoppage of production and decreased operation rates as a result of restrictions on production and sales locations in regions worldwide such as China, the Philippines and Malaysia in response to COVID-19 that began to spread at the start of 2020. Operation has currently returned to normal, but any future spread of the disease may have an additional impact on the business activities of ROHM Group.
In addition to such direct effects on business activities, it is believed that the effect of the disease to the global economy will have a significant indirect impact on trends in the electronics market and ROHM’s orders received and net sales.
Under such conditions, ROHM Group puts the safety of employees, customers and business partners first, and is implementing a variety of measures to continually reduce the risk of infection, such as lowering the attendance rate, ensuring social distancing in the workplace, enforcing the wearing of masks, flexible work styles such as working from home and staggered working hours, and the introduction and promotion of utilization of IT tools for enabling these. The steps we have taken to maintain supply to customers are transferring some models to other ROHM Group locations and OSAT* in response to contraction or temporary suspension of operations, and also taking steps from a long-term perspective to mitigate potential risks, such as the development of flexible production lines and labor-saving production lines. In addition, considering the impact of COVID-19 continuing in the long term, we have also taken steps to ensure financial stability such as the establishment of a commitment line.
  • *
    OSAT (Outsourced Semiconductor Assembly and Test)
    Contracted manufacturers who perform assembly and testing in the back end of the semiconductor fabrication process.

Business Continuity Management

We have stated that part of our company mission is "to contribute to the advancement and progress of culture through a consistent supply, under all circumstances, of high quality products in large volumes to both the domestic and global markets". As ROHM Group is conducting development, manufacturing and sales activities in various locations around the world, we believe that one key issue for the management of the company is to establish Business Continuity Management (BCM). We have therefore formulated ROHM Group fire and disaster prevention policy for the implementation of activities. A part of this is the implementation of various measures to prepare for emergencies at our production sites in both Japan and overseas. For example, we identify the risks such as disasters and form countermeasure committees to handle them. We also propose Business Continuity Plans (BCP) and conduct training based on them.

Fire and Disaster Prevention Policy

"The policy shall be to prevent and be prepared for disasters by promoting the fire and disaster prevention based on the respect for the international norm, etc., and observance of laws and regulations."
ROHM Group shall provide the safe and secure work environment and be prepared for emergencies, such as a fire, and also seek to prevent any disasters that possibly affect the business continuity through the continuous approach to the fire and disaster prevention.

Main Activity Topics

[Action for Earthquake Risks]

1. ROHM Domestic Base : Introduction of “Building Safety Judgment Support System” to Prepare for a Domestic Earthquake Risk
In fiscal 2020, ROHM installed the "Building Safety Judgment Support System" at major domestic bases in order to protect the safety of employees in the event of an earthquake and to respond appropriately to business continuity risks. Earthquake risk is one of the highest risks when doing business in Japan. This system analyzes the shaking of the building immediately after the earthquake and judges the safety of the building structure in three stages. By utilizing this system, we can judge the safety of buildings in a timely, professional and objective manner, and can proceed with efforts to reduce and prevent earthquake damage.
2. ROHM Headquarters : Training in Anticipation of Earthquake
In October 2019, BCM Countermeasures Headquarters drills were conducted at ROHM head office for members of the line teams, which are subordinate organizations of the BCM Countermeasures Headquarters. The scenario was an earthquake (intensity 6 upper) on the Hanaore Fault, and each team identified the conditions, activities and issues anticipated from the day of the earthquake until 14 days later and prioritized actions in a desktop exercise from the perspective of clarifying the priority issues to resolve and make improvements upon as a company for the continuation and restoration of core business.
We were able to raise awareness of BCM/BCP and improve the overall level of responses by clarifying issues associated with the roles and activities of each team and reaffirming the order of activities.
In order to prevent the risk of coronavirus infection, it is difficult to conduct group training. However, even in this situation, we must restore our business activities promptly and appropriately in the event of an emergency. Therefore, since fiscal 2020, we have been conducting e-learning and remote training using remote work tools.
3. LAPIS Semiconductor : Training Based on the Lessons Learned from the Great East Japan Earthquake
As the date of the Great East Japan Earthquake, Miyagi production site has set March 11th as the Comprehensive Disaster Prevention Training Day to implement company-wide training including all the outsourced companies that are permanently stationed on the site.
The BCM Countermeasures Headquarters serves as the central role implementing this training. It conducted company-wide evacuation drills and established the Disaster Rehabilitation Headquarters to simulate the entire recovery process of the actual experience from the Great East Japan Earthquake, which allows employees to learn from real-life scenarios and know how to implement countermeasures against the risks of earthquakes in the future.
Comprehensive Disaster Prevention Training in 2019
4. ROHM Hamamatsu : Maintaining Functionality of the Disaster Prevention Headquarters and Strengthening of Information Management
The BCM Restoration Countermeasures Headquarters was relocated to the seismic isolation device in fiscal 2019. In addition, by connecting a disaster prevention generator in the event of a power outage, we worked to maintain the function of the headquarters. In March 2020, a seawall was completed along the coast of Hamamatsu City. As a result, disaster mitigation effects against tsunami can be expected.
5. ROHM Headquarters : Installation of a Seismic Base Isolation System in the Headquarters Server Room
In order to avoid the risk of earthquakes, ROHM Headquarters has built and utilized a mirror site for its core system to ensure a system for switching operations in the event of an emergency at the Headquarters. In January 2017, we completed the installation of seismic isolation devices in the server room. Similar seismic isolation measures are being taken in the server room that was relocated to the new building completed in 2021.
6. ROHM Electronics Philippines, Inc. : Construction of an Earthquake-proofed Production Wing
A new wing of the Philippines plant was completed in December 2018, and improvements were made in production capacity for the increased production of resistors and transistors. The new wing was designed on the basis of the latest NSCP 2015 (the National Structural Code of the Philippines; comparable to Japanese seismic design standards), and a production system that is prepared for the occurrence of earthquakes has been built.
7. ROHM Apollo Chikugo Factory : Construction of a New Building to Prepare for Disasters
In January 2021, a new building was constructed at ROHM Apollo Chikugo Factory for strengthening the production capacity of SiC power devices. In the completed new building, in addition to earthquake countermeasures by adopting a seismic isolation structure including ancillary areas, inundation countermeasures, gas fire extinguishing equipment, emergency generators, etc. are introduced, making it a factory prepared for various disasters.
Adoption of Seismic Isolation Structure Including Ancillary Areas

[Action for Water Risks]

1. Identification of Water Risks by Using the World Resources Institute's Aqueduct
ROHM Group has used the “WRI Aqueduct”, a global assessment tool, to identify water risks. The semiconductor industry uses large amounts of water. Securing water is very important for semiconductor manufacturing. In addition, all factories in Japan have the function of the pre-process (wafer process) of semiconductor manufacturing. Therefore, we have set long-term water intake securing and water consumption reduction targets with "drought risk" as a priority issue. In addition, we have been proceeding with a water intake plan that is linked to production plans and environmental targets.
At overseas factories that have post-process functions for assembly and inspection, "flood risk" is identified as an issue. The 2011 flood in Thailand caused the group's factories to shut down. In addition, the loss of facilities and equipment and the economic loss due to the suspension of production had a great impact both inside and outside the company. To prevent such problems from occurring again, we use "WRI Aqueduct" as a flood risk assessment tool for each factory. Then, the risk assessment and analysis extracted by the Risk Management and BCM Committee will be conducted. From the perspective of BCP, we are working to reduce the risk of production suspension due to floods by formulating and managing a BCP inventory design that reflects the expected number of suspension days.
2. ROHM Integrated Systems (Thailand) Co., Ltd. : Training Based on the Experience of Flood
In September 2019, ROHM conducted drills for the BCM countermeasures head quarter as preparation for flooding at our production site in Thailand.
Based on an action plan that was prepared by using the experiences of the flood that occurred in 2011, the implementation items were checked for hypothetical situations assuming "upstream flooding" and "flooding equivalent to that in 2011 with a flood wall in the industrial park being washed away." In addition, the following exercises were also conducted : flood wall assembly drills (prepared in case of flooding), drain pump operation drills, boat-handling training, checking of goods for use in case of flooding, and training on other necessary skills.
Training Based on the Experience of Flood Site in 2019
3. Construction of Factories that will Withstand Flooding in Malaysia
In October 2016, ROHM Group's largest factories were completed at the site in Malaysia. Preparations are underway for the increase in diodes production along with the doubling production capacity of the existing factories. Learning from the flooding that occurred in 2014, the first floor height of the new factory was set at the mean sea level plus 5.1 meters. For the electrical power supply, a backup system was implemented by adopting a double power supply, and a system to prevent long-term operational suspension was developed.

[Action for Fires and Other Risks]

1. ROHM Group : Correspondence to Rire Risk
ROHM Group regards fire risk as one of the top risks and is working to reduce it. In the fire-specific risk survey that started in 2021, we conducted online hearings on the status and activities of fire prevention measures at each group factory and held discussions based on fire cases at other companies to confirm our efforts regarding fire prevention. We will continue fire prevention measures for the entire group and strengthen awareness of employee safety and business continuity.
2. ROHM Headquarters : Formation of Self-defense Fire-fighting Teams, and Fire and Disaster Prevention Drill
ROHM has organized a self-defense fire brigade organization in preparation for disasters, and deploys small power pumps, chemical protective clothing, disaster prevention fire protection clothing, rescue equipment, etc. according to the situation of each company. We also carry out practical fire extinguishing training assuming fires and earthquakes, training in clean rooms that handle dangerous materials, and earthquake occurrence prediction training so that we can carry out quick and appropriate activities in the event of a disaster. Since the number of employees going to work at the company has decreased due to the introduction of telecommuting, we have drastically revised the self-defense firefighting system to give top priority to evacuation. Evacuation drills were also conducted in each district, and a total of 1,200 employees participated in each of the fire and earthquake assumptions. We also conduct nighttime evacuation drills every shift, assuming nighttime holidays. From the perspective of BCP, it is stipulated that the self-defense fire brigade will be dispatched and firefighting equipment will be provided in the event of a surrounding fire.
Formation of Self-defense Fire-fighting Teams, and Fire and Disaster Prevention Drill
3.ROHM Headquarters : Fire and Disaster Prevention Management System and Internal Fire Protection Patrols
ROHM has built and operated a fire prevention management system through voluntary inspections by fire source managers, fire extinguisher managers, earthquake countermeasures, etc. appointed for each workplace. In addition, a specialized subcommittee on fire prevention is organized into an office area and a clean room area, and member patrols on "general fire prevention", "hazardous materials", "distribution board / wiring (for clean room areas)”, and "earthquake countermeasures" are carried out. By doing this, we have been promoting the reduction of fire and disaster risks. In addition, as a countermeasure against corona sickness, we have started conducting patrols using webcams since FY2020.
4.ROHM Integrated Systems (Thailand) Co., Ltd. : Practical Training on Initial Fire Extinguishing for Local Communities
In May and June 2019, production site in Thailand implemented classroom learning and training on initial fire-extinguishing for 154 people from local schools and temples. The fire prevention committee at the production base took a central role to implement these activities in response to feedback received during stakeholder dialogue with local residents. Through these kinds of activities, we will continue to promote countermeasures for fire prevention, not only by the company, but also by the region as a whole.
Practical Training on Initial Fire Extinguishing for Local Communities in 2019
5. Action for COVID-19
The COVID-19 pandemic has not affected production in domestic plants, but some overseas plants have been forced to temporarily suspend operations or reduce the operating rate in accordance with orders and guidance from local governments. At present, the safety and health of employees is put first in all plants by creating a disease prevention system including temperature checks, wearing masks and sanitary management, and we are continually striving to create a worker friendly environment.
  • Ensuring Social Distancing in the Cafeteria
    Ensuring Social Distancing in the Cafeteria
  • Wearing Masks and Setting up Partitions
    Wearing Masks and Setting up Partitions
  • Temperature Checks Using Thermography
    Temperature Checks Using Thermography

We must become a company that is able to protect its employees and enduringly provide value to society even in the event of an unprecedented situation such as this pandemic. In order to become a “company that solves social problems” and “a company where employees work enthusiastically by improving their contribution to humanity and intelligence” as stated in the Company Vision established in 2020, ROHM Group will review business continuity risks for ROHM Group from a medium- to long-term perspective, and take steps to manage and mitigate those potential and manifest risks that have a significant impact on companies and society.

6. Risk Measures in Supply Chain System
ROHM continues to conduct surveys among business partners regarding alternate production methods, increased clarification of methods for procuring critical raw materials, and maintaining safety stock. Moreover, ROHM Group will continue to promote its approach to supply chain BCP through CSR procurement self-assessment tools, visits to verify the status of CSR procurement, and other initiatives.