Risk Management and Internal Control

The Brother Group aims for sustainable growth and strives to be a company that is trusted by all its stakeholders. We have now formulated a new Group Vision "At Your Side 2030." Through recognizing that risks may hinder the creation of customer value and conducting appropriate risk management, we aim to enhance the ability to realize the Group Vision.
As the group develops multiple businesses globally, we recognize that there is a high level of complexity and uncertainty in the global environment due to global economic effects and geopolitical factors. In addition, we constantly recognize and respond to risks relating to compliance, product safety, export control, information management, environmental laws, safety and health, disaster prevention, and the supply chain. Together with strengthening business continuity in times of crisis and re-examining structures for lasting value creation, we will aim to recognize and respond to risks with an even more medium- to long-term strategic perspective than before.

The Brother Group has established the Risk Management Committee chaired by the Representative Director & President. We have also formulated a comprehensive risk management system based on the Brother Group's Risk Management Regulations with the aim of reducing risks that are likely to have a serious impact on the group's management. Each organization and subsidiary within the group understands the risks and their probability of occurrence and makes efforts to manage risks by implementing measures for avoiding or reducing the impact of risks. Systems are in place for regularly reporting the status of such implementation to the Board of Directors.

The Risk Management Committee meets regularly once every six months. However, we have created an emergency risk management system for responding swiftly to occurrence of a serious risk event in which the chairman will urgently convene an extraordinary meeting of the Risk Management Committee. When COVID-19 arose, the Committee responded in the early stage of occurrence overseas by urging caution in the whole Brother Group and promptly establishing a countermeasures headquarters.
In addition, we have established dedicated committees with respect to individual risks, including compliance, security trade, product liability, information management, safety, health, disaster prevention, environmental laws and regulations, and supply chain, as subcommittees under the Risk Management Committee. With the Representative Director & President (or a designated executive officer) in charge, they make up a risk management system that understands and diminishes risks as well as responds when risks are apparent. In particular, for product safety, we have established Basic Product Liability Policies and voluntary product safety action plans to provide safer products to customers.

We have created systems for evaluating and responding to business risks focused on persons in charge of risk management in each department as well as group subsidiary. In addition, the Risk Management Committee manages evaluation and the status of response to material risks concerning the group as a whole. Specifically, the Committee conducts reviews of risk matters in each fiscal year and gives instructions for preparing risk evaluation sheets to each group organization and facility. By aggregating the results of the risk evaluation sheets, evaluating the risks according to the level of impact and likelihood of occurrence, and calculating the weight of each risk, the Committee identifies the group's critical risks. It then gives instructions to each person in charge of risks for responding to and monitoring each of the risks.

The Compliance Committee makes the workforce aware of the importance of complying with laws and business ethics and prevents violations and their recurrence through education programs and activities.

The Committee of Security Trade Control ensures the proper management of export transactions and technological offerings based on laws and regulations. This Committee is also working to maintain and improve the management level by staging meetings to discuss important matters every time laws are amended, implementing internal audits, and offering guidance and education to group companies.

The Product Liability Committee is held periodically to ensure product safety in R&D, design and production, sale and use, repair and service, and disposal through coordinated efforts.

To cope with risks associated with information leaks, the Information Management Committee determines a suitable policy for managing information on customers and other aspects of the business retained by the company, and deploys it throughout the group.

The Safety, Health, and Disaster Prevention Committee discusses annual plans, devises and implements measures, and conducts awareness activities for the purpose of ensuring employee safety and health, preventing disasters, and minimizing the damage from such disasters.

The Environmental Law Committee is chaired by the environmental officer and includes executive officers and above who are in charge of development, technology, production, and general affairs fields. The committee discusses and determines measures for environmental issues such as compliance with environmental laws and regulations on products, pollution at business sites, etc.

In addition to ongoing supply chain risk events, the committee identifies potential future supply chain risk impacts, formulates policies to address them, and implements risk mitigation within the group.

Society requires businesses to be transparent and reliable in their financial reporting. The Brother Group accommodates this request by maintaining and improving internal control, one of the significant infrastructures that support corporate management, and strives to continuously gain high trust from all stakeholders. Aiming to maintain and improve internal control continuously, the Brother Group companies every year examine whether their internal control systems are functioning effectively, and also carry out audits by their internal audit departments from an independent viewpoint.

Internal Control Framework

The Internal Auditing Department, under instructions from the Representative Director & President, verifies the status of risk management in each of the company's departments and subsidiaries and reports to the Board of Directors, the Representative Director & President and the Board of Corporate Auditors.

We conduct internal audits in the Brother Group companies in Japan and overseas to ensure the PDCA cycle of internal control, to further enhance the transparency and efficiency of business activities, and to reinforce our ability to control risks.
In addition, we aim to further strengthen the internal auditing function of the Brother Group through information sharing among the audit departments of Brother Industries, Ltd. and the regional representative companies for the Americas, Europe and Asia and collaboration with statutory and accounting auditors.
To maintain and improve the internal control function of the whole Brother Group, we promote:

1. Establishing internal control systems more suitable to the group;
2. Making the PDCA cycle of internal control at each facility self-sustaining; and
3. Increasing efficiency of and advance audit through collaboration and information sharing between the auditing departments in the group and IT utilization.