The CCBJH Group has implemented an Enterprise Risk Management (ERM) program, which is being embedded into the corporate culture. ERM is a business enabler that drives business growth by identifying and leveraging business opportunities as well as identifying and managing foreseeable risks.
Our system of ERM and internal control actively monitors operational, strategic, financial, legal and regulatory risks with the ERM program specifically designed to manage risks and opportunities at all levels within the business. The focus is on leveraging opportunities to support our growth, and for identified risks, to implement counter measures to ensure that we achieve our organizational goals and business plans. Cultural integration of the ERM concepts is key, and through training and awareness across the business we are actively fostering our overall culture of risk management.
In 2020, against the backdrop of COVID-19 our ERM program was given greater emphasis. The Group increased the involvement of management across the business by conducting risk interviews with the members of the leadership team, appointing senior leaders to be responsible for risks, and conducting risk identification surveys with all the corporate functions. Functions are addressing identified major risks under the direction of the executive leadership who are responsible for monitoring the progress of the actions and initiatives taken. The effectiveness of the initiatives is monitored regularly to ensure that they are fit for purpose. The risks and mitigations are reported quarterly to the Audit & Supervisory Committee and the Board. The program is subject to independent review by Internal Audit against global best practices ensuring that the program actively grows.
During 2020, in response to the potential impacts on our business of COVID-19 we implemented our crisis response routines setting clear priorities on the protection of our people, safeguarding our product supply, responding to changes in customer and consumer demand and supporting our local communities.
In 2021, the Company appointed a Head of Risk Management (Chief Risk Officer), who as a member of the leadership team reporting to the President, is tasked with leading the risk and resilience transformation and strengthening the integration of the overall program.
Our risk management system incorporates a variety of processes including regular risk discussions by the Executive Leadership Team; process integration into our annual and strategic business planning cycles; continual monitoring of our internal and external environment for issues that may alter our risk profile and create opportunities; and education and training to increase ERM awareness across our business functions. The risks management policies, procedures, risk prevention activities are overseen by our Risk Management Committee which also aligns annually on our strategic reportable risks. Integrated into the program is our Crisis Management Committee that leads the decision-making and response to a serious event or accident that requires crisis management focus. A Disaster Countermeasures Task Force performs deliberation and decision-making on business continuity plan (BCP) activation in the event of a large-area, large-scale disaster that has a significant impact on our business activities.
Through the Coca-Cola system's proprietary Incident Management & Crisis Resolution (IMCR) process, the Company cooperates with relevant business departments within the Company, Coca-Cola (Japan) Co., Ltd., and other bottler companies to carry out information collection and deliberation on initial response and solutions. The Company further executes measures for the restoration of normal business operations, and investigates measures to prevent future occurrences.
The Company has constructed a business continuity plan (BCP) for large-area, large-scale disasters. The Company checks and improves the plan through regular training, and continuously strives to improve its effectiveness.
The major risks that may have a material impact on the CCBJH Group’s financial condition, business performance and cash flow are listed in the table below in the order priority. The risks listed in this table do not necessarily cover all the risks and may be affected in the future by new unexpected risks or other risks that are currently considered less important or of a lower operational priority.
|Risk category||Description||Potential Impact||Priority Note 1||Key mitigations|
|Natural disasters||Risk of death and injury of employees and damage to business facilities for production, logistics and sales operations caused by severe natural disasters, such as, earthquakes and floods||
Slowdown or suspension of business activities
Slowdown or suspension of supply chain operations
Reduced sales opportunities
Additional costs required for recovery
Strong Business Continuity Plan (BCP) and crisis response plans enabling structured and streamlined responses
Regular crisis and disaster response training and simulations
Identified alternative shipping locations and secure transportation capacity in preparation for a disaster that damages the logistics centers
Secure earthquake coverage
|Changing Consumer mindset||Risk of changes in consumer preferences caused by growing concerns over sugar consumption and increased health awareness||Acquisition or loss of consumer base
Winning or losing trust from consumer
|High||Focus on product innovation and portfolio expansion
Strengthen range of low and no calorie beverages.
Diversification in pack sizes
Promote active life-styles through consumer engagement program
|Risk of increased stakeholder concerns caused by the consumers’ negative sentiment over the use of plastics and the toughening of government regulations on plastics||Acquisition or loss of consumer base
Winning or losing trust from shareholders
Increase of costs for responding to environmental and social issues
|High||Achieving CSV goals contributing to the development of a sustainable society
"World Without Waste" initiatives including, increasing the use rate of recycled PET resin, developing more light-weighted packages and collecting used PET bottles more effectively
|Evolving Commercial and Competitive Landscape||Risk of changes in the retail market environment led by a surge in Internet mail orders and the development of private brands by major retailers including convenience stores||Acquisition or loss of consumer base
Winning or losing trust from consumers
Reduced sales profit
Reduced portfolio availability
|High||Enhancing the product portfolio and accelerated productivity further to deliver products that meet the needs of the retailers |
Enhancing Right Execution Daily (RED) to drive operational excellence
Expanding the online channels to respond to the surge in Internet mail orders
(Attraction and Retention)
|Risk of not being able to secure, retain and develop sufficient human resources and build constructive relationships with labor unions in and aging and tight labor market||Slowdown or suspension of business activities
Slowdown or suspension of supply chain operations
Inability to achieve growth plans
|High||Implement strategic people development plans and develop a new salary payment structure
Recruit diverse talent and commitment to people development
Implement unmanned plant operations, online transactions, and outsourcing of shipping operations
Enhance the workplace environment to improve employee satisfaction
|Financial Risks||Risk of deterioration in financial conditions cause by an increase in funding costs and retirement benefit obligations||Increased cost base
Loss of stakeholder trust
|High||Promote growth of cash flow through sales activities to maintain and improve creditworthiness
Establish Pension Governance Committee to strengthen the monitoring function of retirement benefit obligations
|Cyber Security and System Availability
|Risk of business activities being suspended and confidential information leaking caused by system failures or cyber incidents||Losing trust from consumers and customers
Deterioration of financial conditions
|High||Prepare the countermeasures to mitigate the damages caused by system failures (such as, by setting up backup sites overseas)
Improving and strengthening system security by proactive threat identification and conducting simulation tests of cyberattacks
Complying with laws and regulations on information management
Establishing internal regulations related to information security supported by related employee training programs
|Climate Change||Risk of becoming short of raw materials including water and agricultural products due to climate change.||Reduced commodity availability and product supply
Increase of production costs
Limitations to product portfolio
|High||Focus on sustainable procurement.
Engagement with stakeholders
Sourcing alternative suppliers, and strengthening the selection of suppliers and their management by utilizing the performance data
Adjust the amount of raw materials that are difficult to procure, and shift to other raw materials when necessary
|Strategic stakeholder relationships
(The Coca-Cola Company)
|Risk related to our high dependency on, or changes in our relationship with The Coca-Cola Company and its subsidiary, Coca-Cola (Japan) Company as trademark owners in respect to contract/relationship terms and renewals, concentrate pricing, support for product promotions.||Decrease in sales from any suspension in the use of trademark rights and/or decline in The Coca-Cola Company's product development capabilities and brand power.
Increased manufacturing costs due to the price of concentrate and increased sales promotion expenses from any decrease in support for sales promotion activities.
|High||Maintaining and improving cooperative relationships with The Coca-Cola Company and Coca-Cola (Japan) Company
Management focus on effective day-to-day interactions and implementing partnership models for growth
Active engagement in joint projects and business planning with a focus on strategic issues
Participation in regular ‘Top to Top’ senior management forums
|Business Transformation||Risk of failing to take measures to improve competitive advantage (such as, through business integration, capital investment, product development, etc.)||Deterioration of financial conditions caused by loss due to impairment
Losing trust from shareholders
|Medium||Building a robust system that enables the group to respond readily and flexibly to various circumstances
Formulate business integration strategies that take multiple scenarios into consideration
|Quality and Food Safety||The risk of product related quality and food safety incidents||Losing trust from consumers
Decline in earnings due to product recall or mass disposal of defective products
Loss of opportunities due to penalties
|Medium||Supplier quality audits and quality certifications
Employee awareness of quality control in all processes from manufacturing to sales
Enhance the quality control and reporting system so that consumer/customer complaints receive a timely response
Robust identification and response programs that enable us to quickly and efficiently deal with quality/food safety issues
|Regulatory Compliance and Ethics||Risk of violations of laws, internal regulations, and our code of ethical conducts||Loss of customer and consumer trust
Damage to brand and corporate reputation
Economic loss through fraud
|Medium||Strong Tone from the Top and continued internal communication on corporate behaviors
Ethics & Compliance Committee meetings held regularly
Minimizing employee frau opportunities by rebuilding the business processes, organizational structure and IT systems
|Risk of volatile and challenging macro-economic conditions caused by global events including pandemics (the outbreak of COVID-19)||Deterioration of financial conditions
Reduced consumption spending
Modified Olympic activation
|Medium||Enhanced strategic and operational risk identification enabling the group to grasp the changes in macroeconomic landscape more quickly and prepare better for the future by improving the ability to predict the future demand and trends more accurately
Monitoring and responding to changes in status to customers’ business operations
Strong crisis response practices that focus on employee, customer and consumer safety
|Manufacturing, Logistics & Infrastructure||Risk of the stable supply of goods being impeded due to issues in production and logistics operations, or changes in weather and consumer behaviors||Drop in sales volume and revenue
Losing trust from customers
|Medium||Building a flexible supply system to respond to changes in the market environment
CAPEX investment in infrastructure (production lines, etc.) that will enable the group to respond to the increase in demand during the peak seasons more readily
Systems enhancements to enable timely sharing of inventory status
|Commodity Pricing||Risk of procurement costs increasing due to, such as, fluctuations in exchange rates and commodity prices||Increased cost base
Reduced product supply
Limitations to product portfolio
|Medium||Mitigate the impact of exchange rate and product price fluctuations through the uses of derivative transactions
Procure raw materials at lower costs through collective multi system company purchases
In 2020, we conducted risk interviews with all function heads who were executive officers, Including the president and vice president to identify risks and risk mitigation plans from a top-down perspective. This was combined with the conventional bottom-up approach based on risk questionnaires to those in operations. In addition, we have further deepened the involvement of the executive management team in ERM promotion by appointing a number of them as accountable risk owners and by shifting to a system in which they take charge of the second defense line. We will continue make efforts across the organization to prevent, identify, and manage existing and emerging risk and to maximize opportunities that enable business growth.