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Risk Management
The Group’s View of Risk Management
The Group defines risk as “uncertainties that have both potential positive and negative sides that could have an impact on the achievement of targets by a company’s management.” The Company has positioned risk management as the “activity that increases corporate value by managing risks by reasonable and optimal methods from a company-wide perspective” to achieve sustainable corporate growth by addressing the positive side and the negative side of risk properly.
Enterprise Risk Management (ERM) Centered on the Risk Management Committee
J. Front Retailing has a Risk Management Committee, which is chaired by the President and Representative Executive Officer and comprises Executive Officers and others. The committee has a secretariat headed by an officer in charge of risk management. The secretariat shares important matters decided by the committee with operating companies to promote enterprise risk management (ERM). We position risk as the starting point of strategy and link risk with strategy so that risk management will enhance corporate value.
Risk Management Process
The Group promotes risk management through the following processes. Specifically, we are striving to ensure that risks of high importance to the Group are not overlooked, under the external and internal environmental analyses, and based on the recognition of the management team including Directors and the persons responsible for practical operation.
Over the medium-term, we have positioned “corporate risks” as having extremely high importance for the Group’s management, and have used these as starting points for the Group Medium-term Business Plan.
Furthermore, the risks for the fiscal year identified from “corporate risks” are summarized in the “JFR Group Risk List,” evaluated using a “risk map,” then ranked by priority before implementing countermeasures. For “corporate risks” and the “JFR Group Risk List,” changes in the environment surrounding risks and the progress of measures are monitored semiannually, and the Risk Management Committee discusses the matters and then reports their contents to the Board of Directors.
Recognition of Latest Environmental Changes and Risks
The impact of COVID-19, which has caused unprecedented damage to the Group’s management, has gradually lessened as the government has steered a course of both anti-virus measures and economic normalization. As the classification of COVID-19 under the Infectious Disease Control Law was lowered to category 5, the same as seasonal influenza, the economy is steadily moving into a post-COVID phase, where the infection status does not affect the economy.
The international community is facing high prices on a global scale, and policy rates have been raised, particularly in the U.S. and Europe. Although price hikes have slowed, due in part to the effects of these measures, geopolitical risks, such as the situation in Ukraine and the intensifying conflict between the U.S. and China, are increasing, and we recognize that the unstable and uncertain situation will continue for the time being.
On the other hand, Japan has kept low interest rates for a full-fledged economic recovery, which contributed to the rapid depreciation of the yen. This yen depreciation spurred higher prices, leading to even more stagnant consumption. Although the yen’s depreciation is coming to an end, prices remain high, and if this trend continues, personal consumption may not recover as expected and may also affect operating results of the Group profoundly.
The impact of COVID-19 has been further accelerating changes in consumer values, consumer behavior, what is required of the retail business, etc. People’s values, lifestyles and consumer behavior, and even the way that cities function are changing dramatically, and the Group cannot avoid evolving a new business model.
In response to this, we will establish a future vision for the Group to transform our business portfolio and will work on setting a clear “trajectory toward regrowth,” including transforming the business models of existing businesses, business growth in non-commercial fields, and the creation of new businesses, and strengthening management foundations for the achievement of medium- to long-term growth as well as accelerate key strategies and management restructuring aimed at a “prompt recovery in earnings power.”
As awareness of sustainable society is increasing due to the COVID-19 pandemic, many companies are also trying to redefine their existence. Fortunately, the Group has the corporate credos leading to sustainable management of “Service before Profit” and “Abjure All Evil and Practice All Good,” which have been kept for 300 years and 400 years, respectively, and will continue to move ahead steadily toward sustainable growth.
Strengthening Resilience
In response to natural disasters and other risks that threaten business continuity, the Group will develop a business continuity system from the perspective of securing key operations (funding and payment operations, etc.) and important infrastructure (systems, etc.) based on a business continuity plan and will strengthen the system by conducting periodic drills.
Based on an analysis of our response to COVID-19, in the event that a new infectious disease occurs in the future, we will respond based on our “New Infectious Disease Response Manual,” which stipulates items related to ensuring the safety of human life, minimizing the impact on business, and preparing systems during normal times. Furthermore, we will monitor infection trends, and if signs of spreading appear, we will analyze the impact according to multiple scenarios and respond dynamically.
Information Security Measures
This fiscal year, we will continue to promote the safe operation of information systems and the establishment of highly robust security. Cyber attacks are becoming more sophisticated and complex every year, and we believe that further efforts in both hardware and software are necessary.
In terms of hardware, we will reduce the risk of information leakage in the event of a password leak by expanding the use of multi-factor authentication for our systems, and we will also promote enhanced security by renewing the building's internal network. In addition, we will strive to create an environment that is less prone to security incidents by centrally managing IT assets within the Group and clarifying procedures for responding to vulnerabilities when they are discovered.
In terms of software, in addition to revising the Group’s security guidelines in response to changes in the IT environment, we will strengthen our security incident response system and promote initiatives to minimize risk, such as security checks when using external services. At the same time, we will improve security awareness and literacy by conducting incident response training for IT staff, and continuing information security e-learning and targeted attack e-mail training for all employees.
