Creating a Resilient Business

At CCBJH Group, identifying and mitigating risks across our business is a key management foundation that supports the achievement of our strategic business plan, Vision 2030. We also continue to strengthen our business resilience to ensure business continuity and maintain services to our customers in the event of crises or disruptions.
Our risk management program consists primarily of Enterprise Risk Management (ERM), Incident Management and Crisis Resolution (IMCR), Business Continuity Management (BCM), fraud management, and insurance.

To enhance our crisis response capabilities, we provide training for the Executive Leadership Team (ELT^*) and IMCR core members. We also provide employees with training on the fundamentals of risk management, early incident reporting, and responding to natural disasters and cyberattacks. These initiatives help strengthen resilience across the organization.

* The management body of the CCBJI Group. It is chaired by the Representative Director & President and consists of the heads of each business division

Risk Management System and Governance

Risk governance is a critical foundation supporting our business resilience. The Chief Financial Officer (CFO), Chief Sustainability Officer (CSO), and Chief Risk Officer (CRO) are each accountable for risk management within their respective areas of responsibility. The CRO regularly reviews the status of enterprise risk management, reporting quarterly to the Audit and Supervisory Committee (ASC) and semiannually to the Board of Directors. Both bodies provide oversight of our risk management activities.

Integrating Smart Risk into our business

Three Lines Model

CCBJH Group adopts the Three Lines Model as part of its internal control framework. By clearly defining the roles and responsibilities of each line and ensuring effective collaboration among them, we help ensure the effectiveness of risk management and internal controls.

1st Line: Business Functions: Business functions are responsible for identifying and assessing risks associated with their activities, developing and implementing appropriate mitigation measures, and continuously monitoring the effectiveness of those measures. Risk assessments and mitigation measures are reviewed as necessary to reflect changes in the business environment and risk landscape, supporting the continuous improvement of risk management.
2nd Line: Legal and Risk Management Division: The Legal and Risk Management Division collaborates with relevant functions responsible for ethics and compliance, corporate governance, and related areas to establish and enhance risk management and internal control frameworks. The division also supports business functions in managing risks effectively.
3rd Line: Internal Audit and External Auditors: Internal Audit and external auditors operate independently of both the first and second lines. They conduct annual audits and assessments and provide recommendations for improvement where appropriate.

Risk Management Framework and Process

CCBJH Group manages enterprise risks through its ERM framework, which is aligned with ISO 31000.
As part of our annual risk identification process, we conduct interviews with General Manager-level leaders to identify risks from a business function perspective, and with the ELT to identify risks from a management perspective. Identified risks are compiled in our Risk Register, which serves as the management record for key risks.
Business functions monitor the risks assigned to them as risk owners and share changes in the business environment, emerging risks, and mitigation measures through the quarterly Risk Management Forum (RMF). The information shared at the RMF is analyzed and evaluated, incorporated into the Risk Register, and reported to the ELT, ASC, and Board of Directors.

Enterprise Risk Management Process Aligned with ISO 31000

ERM Process diagram showing the flow: 1. Identify Risk -> 2. Evaluate likelihood & 3. Evaluate impact -> 4. Determine Inherent Risk -> 5. Evaluate Mitigation -> 6. Determine Residual Risk -> 7. Determine Tolerance (Yes goes to 8. Monitor KPI's; No loops back to 5. Evaluate Mitigation), accompanied by explanatory text.

Key Reportable Risks

Our key reportable risks are identified through analysis of internal and external data. Although these do not represent every risk that could affect our business, they include risks currently assessed as having low materiality that could affect our operations or financial performance in the future.

As part of our sustainability initiatives, we identify risks and opportunities arising from environmental and social issues that may affect our business. We also promote the cross-functional management of climate- and nature-related risks and continue to conduct disclosure and analysis in line with the recommendations of the TCFD and TNFD.

Risk category	Description and potential impacts	Key mitigations
Cyber Security and Systems	Business activities being impacted and/or confidential information leaking caused by system failures or cyber incidents. Losing trust from consumers and customers Deterioration of financial conditions Regulatory prosecution, fines, and reputational damage	Prepare countermeasures to mitigate any damage caused by system failures Improving and strengthening system security by proactive threat identification and conducting simulation tests of cyberattacks Complying with laws and regulations on information and data privacy management Establishing internal regulations related to information security supported by related employee training programs
People Talent (Attraction and Retention)	Not being able to secure, retain and develop sufficient human resources and build constructive relationships with labor unions due to business performance, aging population, and a competitive employment environment. Slowdown or suspension of business activities Slowdown or suspension of supply chain operations Inability to achieve growth plans	Implement strategic people development plans and managing payment structure Recruit diverse talent base and commitment to people development Implement unmanned operations, online transactions, and outsourcing of shipping operations Enhance the workplace environment to improve employee satisfaction Strengthen communication between top management and employees
Health and Safety	Lack of compliance with safety systems, ownership or accountability and awareness, mental health issues, and the use of aging equipment cause serious workrelated health and safety incidents. Death or serious injury Reputation damage Prosecution and/or fines	Continue ISO45001 certification/Internal Audit strategies Continue implementing mental health survey Varieties of safety measures in place Education & training to raise awareness Remodeling of program to leverage Coca-Cola system best practices
Growth Strategies	Failure to implement measures to improve our competitive advantage and grow the business through transformation (such as business integration, joint ventures, capital investments, project management etc.) due to people capabilities. Deterioration of financial conditions caused by loss due to impairment Losing trust from shareholders	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 Talent development strategies ensuring right skill sets are available to manage projects and deliver technological transformation Supervision by Board of Directors and Executive Officers
Changing Consumer Mindset	Changes in consumer preferences caused by concerns over sugar consumption and increased health awareness, or pricing. Acquisition or loss of consumer base Winning or losing trust from consumer Discriminatory taxation	Focus on product innovation and portfolio expansion Strengthen range of low and no calorie beverages Diversification in pack sizes Promote active lifestyles through consumer engagement program
Evolving Commercial and Competitor Landscapes	Inability to respond to changes in the retail and competitive environment effectively, efficiently and with agility. Acquisition or loss of consumer base Winning or losing trust from consumers Reduced sales profit Reduced portfolio availability	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 online channels to respond to the surge in Internet mail orders People development strategies to leverage advantages in technology
Manufacturing, Logistics & Infrastructure	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	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
Natural Disasters	Death and injury of employees, damage to business facilities for production, logistics and sales operations caused by events, 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 capabilities, tested annually, enabling structured and streamlined responses. Enhance regional response capability through 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. Insurance coverage and specialized programs for earthquake.
Sustainability	Failing to respond to changes in stakeholders' awareness of sustainability including climate change risks and/or inadequately reporting on sustainability and ESG topics in line with stakeholder and regulatory requirements. Reputation damage with a reduction in stakeholder trust Increase in investor activism in field of climate change Financial impacts - loss of sales if customer expectations on climate change are not met and they shift to competitors	Sustainability Committee reviews and aligns the sustainability plans and objectives Achieving CSV goals contributing to the development of a sustainable society. Coca-Cola system initiatives include increasing the use rate of recycled PET resin, developing more light-weighted packages, and collecting used PET bottles more effectively. Proactive response in line with ESG, TCFD and TNFD reporting requirements.
Climate change	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 Discriminatory taxation	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 level of raw materials that are difficult to procure, and shift to other raw materials when necessary
Quality and Food Safety	Product related quality and food safety incidents Losing trust with customers and consumers Decline in earnings due to product recall or mass disposal of defective products Loss of opportunities due to penalties	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 deal with quality/food safety issues quickly and efficiently.
Regulatory Compliance and Ethics	Violations of laws, internal regulations, and our code of ethical conducts. Loss of customer and consumer trust Damage to brand and corporate reputation Regulatory penalties Economic loss through fraud	Strong Tone from the Top and continued internal communication on corporate behaviors. Ethics & Compliance Committee meetings held regularly. Minimizing employee fraud opportunities by rebuilding the business processes, organizational structure, and IT systems.
Franchise relationships	Risk related to our high dependency on, or changes to our relationship with TCCC and CCJC 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 TM rights and/or decline in product development capabilities and brand power. Increased COGS due to concentrate price. Increased sales promotion expenses in event of a decrease in sales support	Maintaining and continually strengthening cooperative relationships with The Coca-Cola Company and Coca-Cola (Japan) Company
Commodity Pricing	Significant increase in procurement costs due to fluctuations in foreign exchange rates, raw material shortages, and commodity price increases. Increased cost base impacting profitability Reduced product supply Limitations to product portfolio	Mitigate the impact of exchange rate and product price fluctuations through the uses of derivative transactions and hedging Procure raw materials at lower costs through collective multi system company purchases leveraging Coca-Cola system.

Specific climate change-related risks and approaches to TCFD and nature-related risks and TNFD is located at:

TCFD TNFD

Emerging Risks

Through external environmental monitoring and ongoing internal dialogue regarding risk, CCBJH Group continually monitors changes in the current and future risk landscape. We gather information and conduct analysis on risks that may affect our business in the future.

Risk category	Description and potential impacts	Key mitigations
PFAS	PFAS contamination represents a direct threat to beverage water sources and product quality Heightened regulatory scrutiny and tightening standards globally Reputational exposure from consumer sensitivity to contamination Potential liability from litigation and supply chain exposure	Enhanced proactive monitoring of PFAS in all water sources Supplier engagement and compliance requirements Investment in advanced water treatment technologies Alignment with leading global regulatory standards Transparent disclosure of testing and mitigation efforts Integration of PFAS scenarios into crisis and risk management plans
Dual nature of AI	Rapid advances in AI that outpace effective adoption in our business could result in competitive disadvantage, inefficiencies, regulatory breaches, or reputational harm and decline Strategic: Loss of market share to AI-enabled competitors Operational: Reduced efficiency in forecasting, production, and quality control Regulatory/Reputation: Non-compliance with emerging AI regulations; negative stakeholder perception of misuse	Ongoing monitoring of AI developments and sector applications Integration of risk, compliance, and sustainability criteria into AI adoption and clear oversight for usage Capability building to ensure effective and responsible deployment
Geopolitical tensions and conflict	While the probability of large-scale conflict remains uncertain, the likelihood of periodic disruption is rising Key vulnerabilities include disruption to the sea line of communication such as Bashi Channel Shipping delays, higher freight and insurance costs, and constrained access to packaging materials and ingredients, energy and commodity price spikes Increased working capital tied up in buffer stocks Knock-on effects for market access and brand perception Heightened risk of cyber incidents that could disrupt IT systems and compromise data integrity	Diversifying suppliers Establishing inventory buffers and strategic spares for critical materials Enhancing cyber defenses, including backup and third-party security reviews Implementing commodity and FX hedging strategies Maintaining contingency playbooks for major disruption scenarios

Risk Management

SDG-related Initiatives

CSV Goals (Creating Shared Value)

Managing Risk and Leveraging Opportunities