To respond appropriately to various risks surrounding the Group and to operate its business stably by minimizing damages, the Group strives to improve risk sensitivity. In the fiscal year ended March 2024, the Group built a more highly effective and reliable risk management system on the basis of ISO 31000 and is conducting risk reduction activities at all Group business sites globally.

The Group’s risk management activities are mitigation activities to prevent risks from occurring and aim to “Improve corporate value by minimizing damage when risks emerge.” To ensure that these goals are achieved, we are conducting activities under the following three basic policies:

While critical risks inherent to each field of business are identified by individual business divisions and critical risks inherent to each site are identified by individual sites compulsively, each corporate department identifies and evaluates serious, high priority risks which share a high degree of commonality across the Group and which are expected to have a severe impact on the Group’s business management. The Strategic Management Committee reviews risks every year to select critical risks. All of the Executive Officers participate in this process. The plan for addressing these critical risks is reported to the Sustainability Deliberative Council, which deliberates the matter, and information about the actions to be taken to address these risks is shared at meetings, including Sustainability Review meetings.
Managing Executive Officer Nogawa is responsible for risk management activities in general, and these activities are run independently of the Audit Committee. 
With regard to training, we are striving to boost our quality of activities by providing training programs that feature an outline of risk management and guidance on how to proceed with the activities in detail and by holding risk sensitivity seminars taught by external instructors.

The Group divides risks into the following categories and implements comprehensive risk management:
 

• Risks with high commonality and high priority for the entire Group (corporate departments)
• Inherent risks in each business field (business divisions)
• Business site-specific risks (business site)

Each CR is evaluated on a 5-level scale of impact/Likelihood based on quantitative/qualitative evaluation criteria standardized within the Group.
Furthermore, according to the risk level (A, B, C, D), the priority of Risk Treatment is determined.

The table below shows the main risks the management of the Group has recognized, based on this system, as having the potential to significantly impact the Group’s business results and financial situation.

The following are excerpts from the “Business and other risks” section.

As the world's population and economy grow, environmental issues such as an increase in resource and energy consumption, a rise in the amount of waste, and global warming are becoming increasingly serious. Going forward, the linear economic model of mass production, mass consumption, and mass disposal may no longer be viable, and the risks associated with raw material procurement, including resource depletion, and the difficulties of waste disposal may increase.
Accordingly, there is a need to shift from a society that continues to consume limited resources to one that reduces waste generation and recycles resources for effective use. If we do not promote resource recycling in each of our businesses, it could lead to a loss of growth opportunities and a risk of exclusion from the industry.
In light of this situation, pursuant to the Medium-term Management Strategy for the period from the fiscal year ended March 2024 to the fiscal year ending March 2031, the Group aims to build a recycling system for metal resources based on our strengths and realize growth throughout the value chain by expanding the scope, regions and scale of our operations. We will promote resource recycling through our advanced recycling technologies for E-Scrap, home appliances, carbide tools, etc., which is one of our strengths, and develop and provide recyclable products to enhance resource circulation, thereby strengthening our competitiveness over the medium- to long-term.

If the Group pursues only earnings (E), disregards safety & health (S) at manufacturing sites, neglects compliance and environmental management (C), and supplies products that do not meet required quality standards (Q), it may lead to a decline in corporate value not only due to legal sanctions but also a decrease in social credibility.
To reinforce responses to SCQ issues, the Group has established the SCQ Promotion Office headed by the CEO and subcommittees consisting of the general managers of related departments, etc., to focus on the core aspects of corporate activities, such as "safety and health," "compliance," and "quality."
Concerning S, Safety & Health (safety and health first), we analyze the occurrence of occupational accidents within the Group, identify issues to be intensively addressed, and formulate specific measures. We also regularly share information on the progress of each measure and discuss solutions. In addition, we regularly hold meetings of safety managers and meetings of safety supervisors and safety instructors to exchange information on various accidents and safety and health activities within the Group, which spans a wide range of industries, thereby improving the level of safety and health. Furthermore, we position employee health management as an important management issue and have established the Health and Productivity Management Panel under the SCQ Promotion Office to implement a variety of measures for maintaining and promoting health throughout the Group.
As for C, Compliance & Environment (Compliance, Fair & Equitable Activities, Environmental Management), we consider compliance to be a broad concept that includes not only legal compliance but also corporate ethics and social norms, and we believe that we must faithfully meet the expectations of our stakeholders. With a view to strengthening the compliance system of the entire Group, we are continuing our efforts to raise the compliance awareness of every employee within the Group through various measures, including training in Japan and overseas. Further, by accurately and promptly collecting and sharing information on compliance violations that occur within the Group, we take appropriate measures against violations and reflect such information in risk management activities, education, and training to prevent recurrence. For the environment, in accordance with relevant laws and regulations, we strive to prevent air, water, and soil pollution. We conduct business activities in compliance with various environment-related laws and regulations concerning climate change, air pollution, water pollution, harmful substances, waste recycling, and soil and groundwater pollution. As environmental laws and regulations become stricter in Japan and overseas, to respond to revisions to laws and regulations and changes in environmental standards, we promote measures such as sharing information on revisions to applicable laws and regulations, providing thorough training and education, and promoting measures to avoid, reduce, and transfer risks, including strengthening facilities, throughout the Group.
Regarding Q, Quality (quality of products, services, etc. provided to "customers"), in order to thoroughly prevent the recurrence of a series of quality issues that occurred from November 2017, we continue to implement recurrence prevention measures, have established a Day for Reflecting on Quality to prevent memories of quality issues from fading into the past, and engage in "proactive quality management," thereby creating a system to prevent the production of non-conforming products.

The Group has production and sales sites, and others in 32 countries and regions overseas, and positions its overseas business as an important foundation for the growth of the Group's business.
In the event that geopolitical risks such as political instability, conflicts between nations, unilateral invasions, or political upheavals materialize in the countries and regions in which our Group operates, our business activities may be hindered.
Besides the above risks, other risks associated with global business development include changes in economic conditions in various countries and regions, unforeseen policies and regulations, and changes in our business partners' business strategies and product development.
To address these risks, the Group constantly monitors the situation and reviews business strategies and overseas investments. In addition, we respond appropriately to these changes by sharing information from local sites and cooperating with each business. Furthermore, we strive to collect information on individual country risks, such as legal regulations overseas, and share and disseminate such information within the Group. On top of this, we formulate conventional risk mitigation measures and BCPs, which are periodically reviewed.
Particularly in the Metals business, there is a risk of being affected by events beyond the control of the Group, such as intervention in resource projects by national and local governments in copper-producing countries, fluctuations in the global supply-demand balance of copper concentrates, and declining copper concentrate grades. To mitigate these risks, we promote the diversification of countries and regions where we purchase copper concentrates as well as more effective investment in superior mining projects as part of our efforts to form a sustainable raw material procurement portfolio. At the same time, we actively use recycled raw materials like E-Scrap (waste circuit boards from various electronic devices) to ensure stable supplies of raw materials.
Click here to read about our "Business and Other Risks".

We are striving to strengthen our crisis management systems to facilitate prompt, accurate responsiveness to emergency situations, including natural disasters, accidents, terrorist attacks and pandemic events. Besides operating crisis management related rules that apply to the entire Group, we have formulated business continuity plans at all our consolidated subsidiaries in Japan and overseas. These plans are regularly updated to ensure their relevancy. In the event of a large-scale earthquake or pandemic, we have incorporated the identification of essential human and material resources to ensure the rapid recovery of critical operations. This includes stockpiling provisions, outlining plans for alternative supply of crucial products, and scheduling maintenance and repairs for vital facilities. The scenario assumptions are as follows:

• All buildings usable, minor equipment damage
• Power and networks (critical systems, internet, phone, etc.) unavailable (for 3 days)
• Suspension of water supply and sewage (insufficient supply of drinking water and toilets)
• Numerous absences due to halted transportation services

• Implementation of a state of emergency and voluntary restraint of commuting due to numerous infections (approximately 1 month)
   

Through these measures, even in the event of a crisis, we strive to swiftly recover and continue our operations to minimize the impact on our customers. 
Furthermore, at major business sites, we are instituting Business Continuity Plans based on management resources as all-hazards plans that enable the business sites to address any crisis.
Further, we continuously obtain up-to-date crisis management information from around the world. Our employees traveling abroad or stationed in various locations are equipped to make informed decisions in times of crisis and have access to safety assurance and medical services on-site. Additionally, we have established a framework that clearly outlines response structures, roles, responsibilities, and organized chronological response measures for various crisis situations, ensuring a robust capability to respond to crises effectively

The Group implemented a crisis management system both in Japan and abroad in order to help quickly assess the safety of employees and the scope of damage at business sites in the event of a disaster or other crisis, and to share this throughout the Group. We provide all employees with training on reporting their safety so that they can promptly report their safety in the event of a crisis.  
This has made it possible to initiate a swift and appropriate initial response and has also allowed us to leverage the Group’s network to provide support, etc. from sites near disaster-afflicted areas.

The Mitsubishi Materials Group maintains production sites, sales offices and other locations in 32 countries and regions around the world, and positions its overseas operations as an important foundation for the business growth of us. When geopolitical risks such as political instability, inter-state conflicts, unilateral invasions or regime changes materialize in the countries or regions where our Group operates, they can impede our business activities.
Additionally, risks associated with our global business expansion include economic conditions in each country and region, unexpected government policies and regulations, changes to business strategies and product roll-outs on the part of business partners, as well as individual country risks such as legal restrictions.
We will continue to closely monitor conditions, share information provided by local sites and gather information through coordination between each business to gain an appropriate understanding of geopolitical and geoeconomic risks. And we regularly review business and overseas investment strategies.
In particular, in the Metals business, there is a risk of being affected by events beyond the control of us, such as intervention in resource projects by national and local governments in copper-producing countries, fluctuations in the global supply-demand balance of copper concentrates, and declining copper concentrate grades. As part of our efforts to form a sustainable raw material procurement portfolio, we strive to secure stable supplies of raw materials by diversifying the countries and regions where we purchase copper concentrates, effectively investing in high-quality mining projects, and proactively using recycled raw materials.

Mitsubishi Materials Group does its utmost to strengthen crisis management systems (documentation and the establishment of rules) to ensure that it can swiftly and accurately respond to natural disasters, accidents, and crises such as terrorism and pandemics that occur overseas.

1. Group Company Crisis Management Regulations
   Based on the Mitsubishi Materials Group Crisis Management Regulations, each Group company formulates Group Company Crisis Management Regulations laying out preparations for crises, how to respond in the event a crisis situation develops and other matters, in an effort to ensure the safety of employees, preserve and prevent extended damage to company assets, and quickly restore and continue business operations.
    
2. Overseas Crisis Management Manual
   An Overseas Crisis Management Manual has been formulated for employees traveling or stationed overseas, setting forth how they should act and respond under normal circumstances and during an emergency. When employees travel overseas, the action to take and persons that need to provide approval is determined according to travel advisories based on the overseas travel standards. Similarly, we instruct employees stationed overseas to gather information, establish emergency contact systems and stockpile supplies, and instruct them to develop response guidelines based on criteria for determining the crisis level in the event of an emergency.
   To respond to unexpected events occurring overseas in the future, we will consider the introduction of more rapid and detailed safety confirmation proxy services and will pursue further revisions to our crisis management system.
    
3. Crisis Situation Communication Flow
   In the event a crisis situation develops, the site where the crisis has occurred follows the reporting criteria in the Crisis Situation Communication Flow to report the designated items to the Crisis Management Administrative Office via their in-house Company, and the administrative office shares information with the officer in charge as needed.
    
4. Overseas Local Information Contact Site
   When a crisis situation extends over a large area, a site serving as the point of contact for information in the area where the crisis has occurred is set up as the Overseas Local Information Contact Site, to collect information (on the status of human and property damage, the status of infrastructure recovery, etc.), and to coordinate the selection of relief suppliers and determine the necessary quantities and sites.

With regard to geopolitical and geoeconomic risk reduction in our sustainability agenda, the Metals company has identified the periodic review of overseas operations and the formation of a raw materials procurement portfolio as key themes.
As one of the initiatives for periodic review of overseas operations, PT. Smelting (PTS), which was our consolidated subsidiary in Indonesia, was transferred to an equity method affiliate as of June 30, 2024. In Indonesia, the new mining law enacted in 2009 requires mining companies to add value to minerals, and PTS is becoming more and more like a smelter attached to the Grasberg mine operated by PT Freeport Indonesia (PTFI), in which we have a joint venture. PTS is becoming more and more like a smelter attached to the Grasberg mine operated by PTFI. In light of this situation, as part of efforts to add value to minerals, PTFI financed the expansion of PTS and, on the condition that the expansion work is completed, converted the entire loan amount into new shares of PTS (capital increase) using the book value net asset method.
In January 2023, PTS changed its smelting process from purchasing copper concentrates from PTFI to contract smelting, whereby PTS receives copper concentrates from PTFI and returns the products to PTFI.
After PTS becomes an equity-method affiliate of MMC, MMC will continue to be deeply involved in PTS's business operations by taking advantage of its more than 20 years of experience in PTS's operations, taking charge of PTS's operations through its Indonesian subsidiary, and being involved in the sales activities of copper cathode returned to PTFI through contract smelting. PTFI will continue to be deeply involved in PTS's business operations.

The Business Continuity Plan (BCP) of the Advanced Products company has been formulated and operated for specific events such as earthquakes, windstorms, floods, and pandemics (so-called "causal event-type BCP").
However, in recent years, the difficulty of predicting the future has become an issue. For this reason, it has become mainstream to review BCPs to an all-hazard type that can respond to various management resource losses, such as difficulty in coming to work, power outages, and shortages in parts procurement due to damage to suppliers.
As the business environment surrounding our company is becoming increasingly diverse, we have decided that it is necessary for the Advanced Products company to switch to an "all-hazards BCP." In times of crisis, securing the safety of employees and their families is our top priority, and we aim to strengthen relationships of trust with our stakeholders by swiftly restarting and continuing our businesses and fulfilling our social responsibilities. In the fiscal year ending March 2025, we completed the BCP review for the Copper & Copper Alloy business. In the fiscal year ending March 2026, we will work to enhance our company's corporate value by reviewing the BCP for the Electronic Materials & Components business.

In order to ensure a stable supply of cemented carbide products and tungsten products, it is important to duplicate and maintain a stable global supply chain. As part of this effort, we acquired H.C. Starck Holdings (Germany) GmbH (hereinafter referred to as H.C. Starck), a world-leading manufacturer of tungsten products, as a subsidiary in the fiscal year ended March 2025. We plan to further strengthen our structure, including investment, mainly in Europe, the U.S., and Asia. In response to risk, we hold a certain amount of inventory in Japan and overseas to prepare for unexpected situations, and we have completed the preparation of BCP inventory, which includes disaster mitigation and early restoration of our supply system in the event of a disaster. Furthermore, we are currently building an S&OP system to achieve optimal inventory management. This will enable us to maintain an efficient shipping process even during emergencies and establish a system that ensures continuous product delivery to our customers.
Through these efforts, we will further strengthen our foundation for a stable supply of cemented carbide tools and tungsten products.

In December 2024, our company acquired all shares of H.C. Starck, a world-leading tungsten products manufacturer with over 100 years of history. By making H.C. Starck, which has manufacturing bases in Europe, North America, and China and possesses one of the world's largest tungsten recycling capacities, a subsidiary, our Group now has tungsten business bases in the four major markets of Japan, Europe, North America, and China. Our supply capacity has reached a world-leading level of approximately 15,000 tons per year. Aiming to become the global leader in tungsten products, we will consolidate the Group's strengths to enable end-to-end handling of global tungsten recycling, further strengthening resource circulation. 

While the majority of copper concentrate, the main raw material in copper products, is imported from South America such as Chile and Peru, there are potential supply risks due to the decline of promising mines and other factors. Mitsubishi Materials Corporation will secure supplies of copper concentrate through strategies including the participation in new medium-sized copper mines, while also increasing its procurement of scrap materials and phasing in capital expenditures at the Naoshima Smelter & Refinery and Onahama Smelter & Refinery to handle the increase in scrap volume. In addition, to bolster the collection of scrap materials, we will maintain and strengthen ties with recyclers, investigate and explore possibilities such as setting up of relay yards and sampling sites, and strive to build a resource recycling loop utilizing home appliance recycling plants.

The Procurement & Logistics Department is working to enhance supply chain management to mitigate procurement risks such as supply disruptions due to natural disasters, operational incidents at suppliers, pandemics, geopolitical risks and other incidents. The specific initiatives we are pursuing are summarized below.
We will identify key components and materials that could have a significant impact on our operations and strengthen the management of related supply chain information. By managing information on a new procurement system to be introduced from the second half of the fiscal year ending March 2025, we will achieve the centralized management and visualization of information, and also enable the two-way management of information with suppliers.
Additionally, in the event of an emergency involving the materialization of risks such as natural disasters, the system is designed to automatically alert supplier representatives. As this will enable us to confirm whether there are supply disruptions in the supply chain and gather information faster than before, it will enable us to implement swift and effective measures from the early stages of a crisis.
In conjunction with these efforts, we will conduct risk assessments of key components and materials and clarify response policies based on risk ranks. By securing alternative supply sources and implementing appropriate management to secure safe inventory levels based on these rankings, we will take efforts to ensure stable operation and maintain the steady supply of products to a higher level.

MMC has introduced and begun the operation of a cash pooling system to centrally manage surplus funds at Group companies, maintain appropriate levels of external loans from financial institutions, etc., and achieve optimal cash management for the Group overall.
Currently, surplus funds over Group companies located in Japan are centrally managed by the cash pooling system and used to finance Group companies with funding needs. This helps the Group maintain optimal levels of external loans overall.
Going forward, we will introduce a cash pooling system for Group companies located in Europe and implement other activities to manage surplus funds and make loans to Group companies. In particular, to reduce the impact from the trend of persistently high interest rates affecting overseas subsidiaries, we will strive to develop an optimal cash management system.

Fluctuations in the market value of securities, land and other assets held by the Mitsubishi Materials Group could impact the Group's business results and financial status.
For this reason, we regularly monitor securities in terms of market prices and the financial status of issuers, and continuously reevaluate the status of our holding in light of our relationship with the issuer. Regarding the impairment of fixed assets, we also pursue the sale of unused land, and check for signs of impairment regarding business assets, such as by obtaining real estate appraisals as needed.

The Company has a policy of not acquiring or holding shares (Strategic Share Holdings) other than purely for investment purposes, except when it is required for the business strategy.
With regard to Shares in the Form of Strategic Share Holdings, the appropriateness of such holdings shall be specifically reviewed and examined at a meeting of the Board of Directors on an annual basis. As a result of such reviews and examinations, the Company will reduce any Shares in the Form of Strategic Share Holdings if it is not deemed to be necessary to hold such shares.
For details, please refer to "Corporate Governance - Status of Strategic Share Holdings."