Risk Management System
Economic and political conditions, such social factors as environmental regulations and safety and security systems, natural disasters, and technological innovation in countries around the world have the potential to affect the Group's operations and financial results. Based on its risk management policy and risk management regulations, the Group comprehensively aggregates and controls business risk from a Groupwide perspective and has established a system for responding appropriately to risk.
Enterprise risk management (ERM)
Departments are in charge of risk management for business risks. Management departments and internal committees for each risk category monitor the status of risk management across the organization to perform a risk evaluation for the entire company. An inspection of the Internal Audit Chamber is also performed in order to manage risks more appropriately.
Meetings of the Risk Management Committee are held twice a year to enable chief executives of each department to report on the status of managing critical risks that can affect our company management to all corporate officers including outside directors and evaluate the status of management. The committee also investigates improvement related to company-wide risk management methods and new countermeasures. In fiscal 2017, we implemented a new approach for the top-down addition of company-wide risks to the Group business environment in addition to the risks identified by each department.
Important risks that can significantly affect company-wide business management include operational risks such as major accidents involving vessels or aircraft; country risk; natural disasters and other external factors; and compliance risk such as antitrust law violations.
Information Security Measures
The NYK Group is seeking to enhance its cyber resilience by strengthening its multilayer defense measures and installing an Endpoint Detection and Response system for additional protection in the event of a security breach to minimize any damage and enable prompt recovery. The Company’s preventive measures for cyberattacks include regular training drills and verification of its global systems. The Company also plans to construct a fully integrated worldwide system for centralized real-time response to a cyberattack.
In addition, in fiscal 2015 the Group began installing highly secure cloud-based groupware for all group companies in Japan and overseas to support secure information sharing, improve operating efficiency, and strengthen security.
Climate Change Risk
The Company uses the World Energy Outlook of the International Energy Agency (IEA) as reference points for future energy-related trends. The IEA publishes a main New Policies Scenario (NPS) and a Sustainable Development Scenario (SDS), which assumes that the Sustainable Development Goals (SDGs) of the United Nations are fulfilled. The IEA projects that global energy demand in 2040 under NPS will increase from 2017 by 27% and under SDS will decrease by 2%. The New Policies Scenario assumes current policies will continue and new measures and technological innovations will be implemented. However, NPS projections for global energy consumption and CO2 emissions have been reduced each year on growing expectations for worldwide conversion to renewable energies and an acceleration in technological developments. Therefore, projections for energy trends must be based on a careful analysis of both the NPS and SDS and factor in the influence from increasing implementation of climate change measures.
The Company uses the IEA’s World Energy Outlook as a reference point for an annual analysis of the potential impact on demand for the Group’s freight transport services. Because the Group operates its large seagoing cargo vessels for 15 to 20 years, framing an accurate long-term projection for the freight transport trend is critical for investment and other business planning. While we base our projections primarily on the IEA’s main scenario, we also must take a long-term view on our business operations, which requires considering the potential impact on Group business from changes in overarching trends or freight volume and in the event that stepped-up climate change measures were to cause a shift in freight demand.
Task Force on Climate-related Financial Disclosure
NYK announced its support of the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in December 2018 and is currently examining the content of its information disclosure and its disclosure measures to ensure they meet the TCFD’s stringent expectations.
We intend to deepen our analysis of freight conditions based on the IEA main scenarios and gauge the degree of potential impact on Group business through analysis of both risk and opportunity within key parameters (such as foreign exchange, fuel prices, and carbon tax) while improving information disclosure of our governance, strategy, risk management and metrics and targets.
The Group’s core shipping operations are closely involved with industries ranging from energy and food to manufacturing, and through these industries climate change is already starting to impact our business operations. We fully recognize that the risks and the opportunities from this impact will increase in terms of both the certainty that they will occur and degree to which they will affect our operations.
We consider this to be an issue of an unprecedented scale for the Group and are accordingly examining the viability of creating a response preparedness taskforce which consists of each group members, such as Environment Group, Corporate Planning Group, Governance Group, Research Group, Finance Group, and Investor Relations Group.
A wide variety of economic, political, and social factors in countries throughout the world have the potential to impact negatively the NYK Group’s mainstay shipping and integrated logistics operations as well as the Group’s cruise and other businesses. Please click on the link below.
NYK has prepared business continuity plans (BCPs) for all the major operations in NYK headquarters, so if disasters, accidents, or other events disrupt operations, the Group will be able to maintain its important functions uninterrupted wherever possible, or to quickly restore them if interrupted.
In 2016, NYK included preparations for working from home in its revised BCPs, transferred to a more earthquake resistant data center, and introduced an IT platform that uses cloud computing to enable the sharing of information globally. We have also established an IT tool for information sharing in the event of a natural disaster and conducted a disaster drill using the IT tool.