Risk Management

Basic Concepts and Promotion System

ROHM considers all phenomena that may hinder the work and business performance if they occur to be "risks." In addition to working to minimize such occurrences, we also implement measures to ensure that it will be possible to either continue or restore the business smoothly even if disasters or similar events do occur.
In specific terms, a "Risk Management and BCM Committee" has been formed under the "CSR Committee" that is chaired by the President. This committee identifies, analyzes and supervises the major risks that may occur in the execution of the duties of ROHM Group. Furthermore, in addition to evaluating the activities of the departments responsible for each risk, it also promotes the formulation of a Business Continuity Plan (BCP) and works for its thorough implementation throughout the company so that efforts are made to implement all possible preparations and countermeasures in advance.
A Risk Management Office has been established in the Department of General Affairs as an internal organization for the elimination of antisocial forces. It coordinates and exchanges information with external specialist organizations such as the police department and expands and implements specific activities to eliminate antisocial forces.

Business Risks

The following are risks that may have a significant impact on the financial status and operating results of ROHM Group. References to future events are based on judgments made by ROHM Group at the end of current fiscal year.

(1) Risks Associated with Business Strategy and Market Changes

ROHM Group focuses upon the automotive market, the industrial equipment market and overseas markets, and places importance on markets expected to achieve more growth such as the key product areas of power, analog and standard products, in addition to markets and technologies where ROHM Group can exhibit its strengths. Global competition may intensify in these key areas, and it is possible that ROHM will be engulfed by fierce development competition or pricing competition that exceeds the limits of cost cutting. Furthermore, there is also a possibility of market growth slowing or market contraction due to various changes in social needs. There is a risk that such market trends and changes in the competitive environment will have an adverse effect on the financial condition, management performance and cash flow of ROHM Group.

(2) Exchange Risks

ROHM Group has expanded its stronghold in global development, production, and sales. Therefore, the financial statements prepared in each local currency are converted into Japanese yen in order to prepare consolidated financial statements. Accordingly, even if the values in local currencies remain the same, the profits and losses on the consolidated financial statements may be affected by the exchange rates at the time of conversion. While conducting production activities in Japan, Asian countries, the US, and European countries, ROHM Group sells its products on the global market. This means different currencies are used between production and sales bases, and consequently exchange rate fluctuations exert a continual influence on ROHM Group. Generally, a strong Japanese yen conversion adversely affects our business performance, while a weak yen conversion has a favorable impact.

(3) Risks of Product Defects

As stated in the Company Mission, ROHM Group places top priority on quality, and develops products subject to stringent quality control standards. However, this does not guarantee that defective products will never be produced or that claims arising from product defects will never be sought by buyers in the future. If a buyer should make a claim for defects regarding ROHM products, company performance may be adversely affected.

(4) Risks Associated with Production Activities

ROHM Group employs a vertically integrated business model, but a variety of materials including rare metals are required for the manufacture of electronic components. For this reason, the occurrence of restrictions on procurement from a particular supplier may have an adverse effect on production activities or cost structure.

(5) Legal Risks

In order to manufacture products distinguishable from those of other companies, ROHM Group develops various new technologies, cultivates expertise, and manufactures and sells products worldwide based on these proprietary technologies. ROHM Group has a division that specializes in the strict supervision of in-house activities in order to ensure that the technologies and proprietary knowledge used by the Group do not infringe on the intellectual property rights of other companies such as patent rights. In addition , in all business fields in which ROHM Group is involved, the Group complies with all relevant laws and regulations with respect to the utilization and handling of exhaust air, drainage, harmful materials , waste treatment, surveys on soil/underground water pollution, and the protection of the environment, health, and safety. However , the Group may incur legal responsibilities in this respect due to unexpected events, which may possibly have an adverse influence on financial results.

(6) Natural Disasters and Geopolitical Risks

ROHM Group performs development, manufacturing, and sales activities not only in Japan but also worldwide. To distribute the associated risks, the Group locates production lines at multiple bases worldwide. However, these production and sales bases may be damaged due to earthquake, typhoon, flooding, other natural disasters, the spread of infectious diseases, or man-made disasters such as political uncertainty or international conflicts. These risks could simultaneously occur in multiple regions, and this may have a significant impact not only on ROHM Group but also the entire supply chain including customers and suppliers.

(7) Mergers and Acquisitions Risks

ROHM Group, taking into account future business prospects , considers it necessary to investigate and implement mergers and acquisitions worldwide with a focus on entering new fields that are relevant to our existing business, and to always make the utmost efforts to improve corporate value and expand the size of our business. In conducting mergers and acquisitions, we thoroughly study, review, and deliberate matters before any acquisitions are made. Nonetheless, due to unexpected circumstances or significant changes in market forces after an acquisition, an acquired business may not progress as expected and we may suffer losses in some cases as a result.

(8) Research and Development Risks

At present, new technologies and products are being developed and diffused in different electronics fields. ROHM Group, as a part of electronics related industry, continually faces stiff competition in technology and product development and therefore must exert ourselves day and night in the research and development of materials and products in order to produce new products and technologies. Consequently, our research and development expenditures in the year ended March 31, 2020 were approximately 9 percent of our consolidated sales.
In these research and development activities, plans may be considerably delayed, and the opportunity to introduce them into the market missed, for example, due to a lack of technical capabilities or the ability to develop new products. And, there is also the possibility that the new products we develop may not receive favorable acceptance by the market as anticipated. If this occurs, it may affect our business performance.

(9) Other Risks and Our Corporate Risk Management System

In addition to the above-mentioned risks, there are various other factors that may influence our financial situation and business performance,such as risks related to logistics, material and energy procurement,security leaks, information systems, and human resources. In response, ROHM Group has been making company-wide efforts to enhance its risk management system in order to avert these risks and, in their event, minimize their impact. To identify, analyze,control, and manage significant risks that may arise in the course of executing business within the Group, ROHM organized the "Risk Management and BCM Committee" under the CSR Committee with the President serving as the chairman. Along with overseeing the activities of the main departments that control risks, the committee crafts and enforces across the company Business Continuity Plans (BCP) so that ROHM is proactive and prepared for possible risks.

(10) Novel Coronavirus (COVID-19)

ROHM Group’s corporate activities have been restricted due the temporary stoppage of production and decreased operation rates as a result of restrictions on production and sales locations in regions worldwide such as China, the Philippines and Malaysia in response to COVID-19 that began to spread at the start of 2020. Operation has currently returned to normal, but any future spread of the disease may have an additional impact on the business activities of ROHM Group.
In addition to such direct effects on business activities, it is believed that the effect of the disease to the global economy will have a significant indirect impact on trends in the electronics market and ROHM’s orders received and net sales.
Under such conditions, ROHM Group puts the safety of employees, customers and business partners first, and is implementing a variety of measures to continually reduce the risk of infection, such as lowering the attendance rate, ensuring social distancing in the workplace, enforcing the wearing of masks, flexible work styles such as working from home and staggered working hours, and the introduction and promotion of utilization of IT tools for enabling these. The steps we have taken to maintain supply to customers are transferring some models to other ROHM Group locations and OSAT^* in response to contraction or temporary suspension of operations, and also taking steps from a long-term perspective to mitigate potential risks, such as the development of flexible production lines and labor-saving production lines. In addition, considering the impact of COVID-19 continuing in the long term, we have also taken steps to ensure financial stability such as the establishment of a commitment line.

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  OSAT (Outsourced Semiconductor Assembly and Test)
  Contracted manufacturers who perform assembly and testing in the back end of the semiconductor fabrication process.

Business Continuity Management

We have stated that part of our company mission is "to contribute to the advancement and progress of culture through a consistent supply, under all circumstances, of high quality products in large volumes to both the domestic and global markets." As ROHM Group is conducting development, manufacturing and sales activities in various locations around the world, we believe that one key issue for the management of the company is to establish Business Continuity Management (BCM). We have therefore formulated ROHM Group fire and disaster prevention policy for the implementation of activities. A part of this is the implementation of various measures to prepare for emergencies at our production sites in both Japan and overseas. For example, we identify the risks such as disasters and form countermeasure committees to handle them. We also propose Business Continuity Plans (BCP) and conduct training based on them.

Fire and Disaster Prevention Policy

"The policy shall be to prevent and be prepared for disasters by promoting the fire and disaster prevention based on the respect for the international norm, etc., and observance of laws and regulations."
ROHM Group shall provide the safe and secure work environment and be prepared for emergencies, such as a fire, and also seek to prevent any disasters that possibly affect the business continuity through the continuous approach to the fire and disaster prevention.

Main Activity Topics

Action for Earthquake Risks

(1) ROHM Headquarters: Training in Anticipation of Earthquake

In October 2019, BCM Countermeasures Headquarters drills were conducted at ROHM head office for members of the line teams, which are subordinate organizations of the BCM Countermeasures Headquarters. The scenario was an earthquake (intensity 6 upper) on the Hanaore Fault, and each team identified the conditions, activities and issues anticipated from the day of the earthquake until 14 days later and prioritized actions in a desktop exercise from the perspective of clarifying the priority issues to resolve and make improvements upon as a company for the continuation and restoration of core business.
We were able to raise awareness of BCM/BCP and improve the overall level of responses by clarifying issues associated with the roles and activities of each team and reaffirming the order of activities.

(2) LAPIS Semiconductor Training Based on the Lessons Learned from the Great East Japan Earthquake

As the date of the Great East Japan Earthquake, Miyagi production site has set March 11th as the Comprehensive Disaster Prevention Training Day to implement company-wide training including all the outsourced companies that are permanently stationed on the site.
The BCM Countermeasures Headquarters serves as the central role implementing this training. It conducted company-wide evacuation drills and established the Disaster Rehabilitation Headquarters to simulate the entire recovery process of the actual experience from the Great East Japan Earthquake, which allows employees to learn from real-life scenarios and know how to implement countermeasures against the risks of earthquakes in the future.

(3) ROHM Hamamatsu: Maintaining Functionality of the Disaster Prevention Headquarters and Strengthening of Information Management

The BCM Rehabilitation Countermeasures Headquarters was relocated to a seismic base isolation system in FY2019, enabling headquarters functions to be maintained by connecting to an emergency generator in the event of a power outage.
A “Building Safety Determination Support System” is used to analyze the oscillation of a building immediately after an earthquake to determine the safety of the building structure in three levels, enabling information to be quickly provided to employees. Furthermore, the completion of a seawall along the coast of Hamamatsu City in March 2020 is also expected to have the effect of mitigating of tsunamis.

(4) ROHM Headquarters : Installation of a Seismic Base Isolation System in the Headquarters Server Room

At ROHM headquarters, in order to mitigate the risk from seismic activities, a mirror site of the central system was developed and is operated so that in case of emergency at the headquarters, a system to switch operation over to the mirror site will become possible. In addition, installation of a seismic base isolator in the server room was completed in January 2017. ROHM will continue to be involved in implementing BCP measures.

(5) ROHM Electronics Philippines,Inc. : Construction of an Earthquake-proofed Production Wing

A new wing of the Philippines plant was completed in December 2018, and improvements were made in production capacity for the increased production of resistors and transistors. The new wing was designed on the basis of the latest NSCP 2015 (the National Structural Code of the Philippines; comparable to Japanese seismic design standards), and a production system that is prepared for the occurrence of earthquakes has been built.

Action for Water Risks

(1) Identification of Water Risks by Using the World Resources Institute's Aqueduct

ROHM Group uses the "WRI Aqueduct" global evaluation tool as a tool to identify water risks.
Semiconductor manufacturing is an industry that uses large volumes of water, and the securing of sufficient water is a lifeline for it. All of our plants for the front-end processes (wafer processes) of semiconductor manufacturing are concentrated in Japan, and we have set the "risk of water shortages" as a priority issue in the country. We have set long-term targets up to FY2020 for the securing of the water intake and reduction of water use and are promoting a water intake plan that is linked to the production plan and environmental objectives.
At overseas plants performing later processes such as assembly and inspection, the "risk of flooding" has been identified as an issue. During the flooding in Thailand in 2011, group plants in the country were forced to stop production. This had a major impact both inside and outside the company due to the economic losses arising from the suspension of production and the loss of facilities and equipment. In addition to also using the "WRI Aqueduct" as a tool to evaluate the risk of flooding at each plant, the Risk Management and BCM Committee have also conducted risk evaluation and analysis. From the BCP perspective, measures have been implemented to disperse the risk of production suspension due to flooding by preparing a system (production plan and management) for the production of the same product at multiple bases in multiple countries and regions.

(2) Flood Training Based on the Experience of Flood at Thai Factory Site

In September 2019, ROHM conducted drills for the BCM countermeasures head quarter as preparation for flooding at our production site in Thailand.
Based on an action plan that was prepared by using the experiences of the flood that occurred in 2011, the implementation items were checked for hypothetical situations assuming "upstream flooding" and "flooding equivalent to that in 2011 with a flood wall in the industrial park being washed away." In addition, the following exercises were also conducted: flood wall assembly drills (prepared in case of flooding), drain pump operation drills, boat-handling training, checking of goods for use in case of flooding, and training on other necessary skills.

(3) Construction of Factories that will Withstand Flooding in Malaysia

In October 2016, ROHM Group's largest factories were completed at the site in Malaysia. Preparations are underway for the increase in diodes production along with the doubling production capacity of the existing factories. Learning from the flooding that occurred in 2014, the first floor height of the new factory was set at the mean sea level plus 5.1 meters. For the electrical power supply, a backup system was implemented by adopting a double power supply, and a system to prevent long-term operational suspension was developed.

Action for Fires and Other Risks

(1) Formation of Self-defense Fire-fighting Teams, and Fire and Disaster Prevention Drill

As a preparation for disaster, ROHM has self-defense fire-fighting team and deploys small engine fire pumps, chemical protective suits, disaster prevention/fire protection clothes, and life-saving equipment, etc. according to each company's situation. ROHM also conducts practical training in firefighting and earthquake scenarios, drills for clean rooms that handle hazardous substances, and earthquake drills so that everyone can respond in times of disaster with quick and appropriate activities. ROHM actively participates in community fire drill contest and comprehensive evacuation drills in each area where the group has business operations, in order to cooperate in regional disaster prevention efforts. In October 2019, a total of 1,914 employees participated in a mass evacuation drill at the Headquarters as preparation for an anticipated earthquake.

(2) Fire and Disaster Prevention Management System and Internal Fire Protection Patrols at ROHM Headquarters

The Fire Prevention Committee and its special committees operate patrols and hold meetings on "general fire prevention," "clean rooms," "hazardous substances," and "earthquake countermeasures." ROHM also strengthens fire prevention management by self inspections that include managers in charge of fire, persons in charge of fire extinguishers, persons in charge of earthquake countermeasures and others in each workplace as a way of reducing fire and disaster risks. People in charge of the Fire Prevention Committee at Headquarters conducted the fire protection patrol at other sites twice in a year.

(3) Production Site in Thailand: Practical Training on Initial Fire-Extinguishing for Local Communities

In May and June 2019, production site in Thailand implemented classroom learning and training on initial fire-extinguishing for 154 people from local schools and temples. The fire prevention committee at the production base took a central role to implement these activities in response to feedback received during stakeholder dialogue with local residents. Through these kinds of activities, we will continue to promote countermeasures for fire prevention, not only by the company, but also by the region as a whole.

Risk Measures in Supply Chain System

ROHM continues to conduct surveys among business partners regarding alternate production methods, increased clarification of methods for procuring critical raw materials, and maintaining safety stock.
Moreover, ROHM Group will continue to promote its approach to supply chain BCP through CSR procurement self-assessment tools, visits to verify the status of CSR procurement, and other initiatives.