Risk Management

Approach to Risk Management

Reflecting changes in society and the business environment, the risks facing businesses are growing increasingly complex and diverse.
Tokyo Electron considers understanding and appropriately addressing the risks that it may face in its businesses, as well as their impacts, to be essential to its sustainable growth.

Risk Management System and Initiatives

In order to promote more effective risk management, we carry out enterprise risk management*¹ through a body established within the General Affairs Department at our headquarters. This body works with the respective departments responsible for each operation to identify a wide range of risks arising in business activities, such as compliance risk, human resource and labor risk, and business continuity risk. It then classifies risks with high impact and probability as our key risks. The body also formulates and executes measures to minimize these key risks, monitors the effect of said measures, as well as works to understand the status of risk control, and implements the PDCA cycle for risk management. In fiscal year 2021 we introduced CSA*² and started a risk management committee. We will continue these activities going forward. By continuing to strengthen and progress risk management activities throughout our Group, we will implement risk management that is more effective than ever before.

*1 Enterprise risk management: Group-wide systems and processes related to risk management activities
*2 CSA: Control Self-Assessment. Internal risks and controls are evaluated and monitored by those who are actually performing the duties with the goal of building and maintaining an autonomous risk management system

Auditing by the Internal Audit Department

The Global Audit Center serves as the internal audit department for the entire Group and implements audits based on the audit plan. Based on the results of these audits, it provides instructions for making improvements as needed, confirms the progress of these improvements, and provides any necessary support. The Group’s internal control over financial reporting in fiscal year 2021 was also evaluated as effective by the independent auditors.

Risk Management Initiatives

We conduct Group-wide reviews to identify the current status of risk management as well as any potential and actual risks surrounding the company in the future. Based on the results of the reviews, we have identified the following 13 risks as having potential to cause significant issues to our financial condition, operating results and cash flows, and are working to address them.

Item Main Potential Risks Main Risk Management Initiatives
1.Market Fluctuations Rapid contraction of the semiconductor market could lead to overproduction or an increase in dead inventory. In addition, a rapid increase in demand could lead to an inability to supply customers with products in a timely manner resulting in lost opportunities ・Periodically review market conditions and orders received at Board of Directors and other important meetings, and appropriately adjust capital investments, personnel/ inventory planning and other aspects of business
・Account Sales Division and Global Sales Division to strengthen the sales framework and customer base by grasping investment trends of customers and responding to a wide range of customer needs
2.Geopolitics Initiatives made by an individual country or region from such perspectives as industrial policy, national security or environmental policy in shifting to domestic production of semiconductor-related businesses, strengthening policies prioritizing domestically manufactured products or tightening of export controls and environmental laws and regulations could lead to restrictions on business activities ・Carefully watch policy and diplomatic trends to understand moves to introduce regulations
・Communicate opinions to policy-making authorities such as through public comment, and anticipate the impact of different countries introducing polices and regulations, and consider countermeasures
3.Research and Development Delays in the launch of new products or the mismatch of such products with customer needs could lead to a decline in the competitiveness of products ・Establish the Corporate Innovation Division, and build a Group-wide development framework that integrates innovative technological development with the technologies of each development division
・Provide highly competitive next-generation products ahead of competitors through collaborating with research institutions and sharing a technology roadmap spanning multiple generations with leading-edge customers
4.Procurement, Production and Supply Interruptions in production due to a natural disaster or delays in component procurement due to deterioration in the business conditions of a supplier or an increase in demand that exceeds the supplier’s supply capacity could lead to delays in the supply of products to customers ・Formulate business continuity plan, establish alternate production capabilities, develop multiple sources of important parts, seismically reinforce plants, etc.
・Build a system for the stable supply of products by sharing forecasts based on demand projections with suppliers to ensure the early procurement of parts and production leveling
5.Safety Safety-related problems with the company’s products could lead to damages suffered by customers, liability for damages and a decline in credibility ・Based on the “Safety First”*¹ approach, thoroughly implement safety design at the product development stage, promote safety training and establish a reporting system in the event of an accident
6.Quality The occurrence of a product defect could lead to liability for damages, costs for countermeasures and a decline in credibility ・Establish a quality assurance system and a world-class service system
・Resolve technical issues from the product development and design stage
・Investigate the cause of any defects and implement measures to prevent the same or similar defects from occurring
・Monitor the quality status of suppliers, conduct audits and provide support for improvement
7.Laws and Regulations Violations of the laws and regulations of the countries and regions where the company does business could lead to diminished public confidence in the company, fines, liability for damages or restrictions on business activities ・Monitor compliance activities at key sites in and outside Japan under the direction of the Chief Compliance Officer
・Have assessments conducted by external experts and report identified issues to the CEO, Board of Directors and Audit & Supervisory Board for swift and effective action
8.Intellectual Property Rights The inability to obtain exclusive rights to proprietary technologies could lead to reduced product competitiveness. Furthermore, infringement of the intellectual property rights of third parties could lead to liability for damages ・Advance the R&D strategy, business strategy and intellectual property strategy in an integrated manner to build an appropriate intellectual property portfolio
9.Information Security Breaches of information or the suspension of services due to unauthorized access by cyberattack, natural disasters or other factors could lead to diminished public confidence in the company or liability for damages ・Establish an information security system that conforms to global standards by launching a dedicated security organization and having security assessments conducted by external experts
・Establish globally standardized rules and regulations for information management
10.Human Resources The inability to recruit and retain necessary human resources on an ongoing basis or the inability to create an environment where people with diverse values and expertise can play an active role could lead to diminished product development capability or customer support quality ・Make ongoing improvements to work environments and promote health and productivity management, including having top management share direction through regular employee meetings, establishing training plans for the next generation of human resources, visualizing career paths for employees and offering attractive remuneration and benefits
11.Environmental Issues The inability to respond appropriately to each country’s climate change policies, environmental laws and regulations, and customer needs could lead to additional related costs such as for developing new products or changing specifications, as well as to reduced product competitiveness and diminished public confidence in the company ・Set industry-leading medium- to long-term environmental goals*²
・Reduce greenhouse gas emissions from product use. Reduce overall energy consumption and increase the ratio of renewable energy used at plants and offices
・Provide technologies that help reduce the power consumption of semiconductors
12.The Novel Coronavirus (COVID-19) The spread of COVID-19 could slow the company’s business activities or lead to the deterioration of global economic conditions ・Establish an Emergency Task Force headed by the CEO
・Restrict travel to high infection-risk countries and regions, maintain supply chains and thoroughly implement infection prevention measures at plants and offices
13.Other Risks Business could be influenced by global and regional political conditions, economic conditions, financial and stock markets, foreign exchange fluctuations and other factors ・Take necessary measures to counter such risks

*1 Safety First: Sustainability Report Refer to p.28
*2 Medium- to long-term environmental goals: Sustainability Report Refer to p.50