Risk Management and Internal Control


Approach to Risk Management

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. Furthermore, due to the acceleration of changes in the business environment arising from the global spread of COVID-19, there is a greater need than ever to appropriately recognize and respond to the risks surrounding the group. We constantly recognize and respond to risks relating to compliance, product safety, export control, information management, the environment, safety and health, and disaster prevention. 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.

Risk Management Promotion System

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 control, product liability, information management, safety, health, and disaster prevention, and the environment 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 and will respond when risks occur. In particular, for product safety, we have established Basic Product Liability Policies and voluntary product safety action plans to provide safer products to customers.

Clarification of Evaluation and Responses

We have created systems for evaluating and responding to business risks focused on persons in charge of risk management in each department and 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.

Compliance Committee

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.

Committee of Security Trade Control

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.

Product Liability Committee

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.

Information Management Committee

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.

Safety, Health, and Disaster Prevention Committee

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.

Environmental Committee

The Environmental 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 regularly discusses and determines measures for environmental issues (Climate change, Compliance with Environmental Laws and Regulations on Products and pollution, etc.) that must be dealt with by the whole Brother Group.

Material Risks and Their Countermeasures

Item Main Risks Countermeasures
Risks related to international affairs
  • US and China trade friction
  • Brexit
  • Review pricing strategies in cooperation with US subsidiaries and minimize impact of additional duties by close examination of country of origin of consumables and other measures
  • Respond appropriately to trade and legal regulation aspects according to the situation in the UK and EU
Contraction of printing market
  • Contraction of the printing market due to reduced printing on paper
  • Respond to changed market needs, and promote acquisition of high print volume customers by expanding sales of high-end equipment
  • Ensure stable profit and strengthen connections with customers through swift conversion to contract-type and other new business models
  • Expand sales in the special printing and solutions areas
Competition among companies
  • Increasing competition in the market due to the rise of new manufacturers in China and other countries in Asia
  • Implement initiatives for providing products and services that realize customer value in each market
  • Build a speedy and cost competitive business management base
Changed global economic situation
  • Adverse impact on performance due to business fluctuations in each region caused by changes in the situation of the global economy
  • Enhance development, production, sales and marketing, and after-sales service and maintenance
Security trade control
  • Adverse impact on sales of machine tools due to strengthening of legal regulations related to security trade control
  • Maintain systems for proper compliance with laws and regulations
  • Strengthen the security trade control system for the whole Brother Group
  • Restructure the security trade control system for greater effectiveness
Risks related to parts and materials
  • Difficulty procuring parts and materials
  • Parts and materials price hikes
  • Examine suppliers and consider substitute products according to changes in product design
  • Reflect price hike risks in management plans
Supply chain
Supply chain interruption
  • Supply chain interruption due to difficulty procuring parts and materials and logistics disruption arising from increase in infectious disease, large-scale disasters, geopolitical risks, etc.
  • Respond by production in multiple facilities, especially of consumables
  • Have backup production facilities and hold parts inventories
  • Strategically examine parts suppliers and their upstream suppliers
  • Review inventory levels in sales facilities to prevent product shortages
  • Implement fire prevention and disaster prevention measures in each production facility
CSR procurement
  • Violation of human rights of workers in the supply chain
  • Loss of trust due to use of conflict minerals products
  • Formulate CSR procurement policies and conduct briefings for business partners
  • Enhance systems for risk evaluation and correction in the supply chain by joining the Responsible Business Alliance (RBA)
  • Formulate a Conflict Minerals Response Policy and request compliance by business partners
M&A (impairment risk)
  • Expected investment effects not obtained
  • Delays in business integration (post-merger integration)
  • Impairment of Domino goodwill and fixed assets
  • Enhance development and sales abilities of the Domino business as a key strategy in the current medium-term business strategy CS B2021
  • Check the asset value of goodwill and record an appropriate estimated value at least once a year
Currency exchange risks
  • Sales reduction and cost increase due to currency rate fluctuations
  • Increase the rate of linking of receipts and payments in foreign currency denominated transactions
  • Implement forward exchange contract transactions
Social demands related to the environment
  • Climate change
  • Establish medium-term targets for FY2030 in relation to reduction of greenhouse gas emissions and implement emissions reduction initiatives
  • Based on the TCFD recommendations, analyze the financial impacts of climate change, and implement appropriate countermeasures and information disclosure
Environmental regulation, environmental pollution
  • Environmental regulation, environmental pollution
  • Comply with laws and regulations on prohibited chemical substances and controlled chemical substances in accordance with the establishment of the Brother Group Green Procurement Standards
  • Gather information on environmental laws and regulations in each country and region of the world and take measures in cooperation with product design-related departments to reflect them in products
Information systems
Information security
  • External attacks on information systems, product information security
  • Develop information security operating rules in accordance with the Information Management Regulation, enhance management systems, and conduct internal education and training
  • Develop a basic policy on product information security and implement activities for improving product security in the whole Brother Group
Information networks
  • Leakage of confidential information and personal information
  • Implement security countermeasures based on multi-layered defense against unexpected intrusion or attacks from outside
  • Conduct organizational training on prepared responses to occurrence of internal incidents
Human resources
Occupational injuries, casualties
  • Occupational injuries
  • Casualties among employees due to disasters
  • Horizontal development of information on causes of accidents that have occurred and measures for preventing recurrence
  • Conduct safety and disaster prevention activities in each facility and check their status of implementation through factory inspections
Securing human resources
  • Intensified competition for human resources, inability to secure necessary human resources, loss of key personnel
  • Promote evolution of personnel systems and make continual improvements to the workplace environment
  • Develop succession plans for key personnel
  • Implement activities for maintaining and improving brand image through enhancing employee awareness and corporate public relations in accordance with the Global Charter
Laws and regulations
Compliance in general
  • Accounting fraud, misappropriation
  • Unfair trade practices (competition law violation)
  • Harassment
  • Quality irregularity
  • Establish employee conduct standards through the Codes of Practice in the Global Charter and carry out dissemination activities
  • Establish Compliance Committee and consultation centers
Tax systems
  • Increase in tax burden due to additional tax and international double taxation
  • Respond through cooperation with external experts
  • Communicate with tax authorities
  • Use advance pricing agreements (APA)
Quality, product liability
  • Market quality problems
  • PL problems
  • Manufacture products under strict quality control standards
  • Take countermeasures for controlling expansion of damage when incidents occur
Intellectual property
  • License-related disputes
  • Infringement by third parties, production and sale of counterfeit products
  • Employee invention disputes
  • Use patent licenses held in business activities
  • Take defense and settlement countermeasures in infringement lawsuits by third parties
  • Exercise intellectual property rights against infringement by third parties
  • Implement appropriate incentives for inventors based on invention incentive rules
  • Suspension of economic activities due to expansion of COVID-19
  • Continue business activities through implementation of thorough infection prevention measures

Topics: Risk Management Initiatives


Regarding COVID-19, which emerged in January 2020, the company established a COVID-19 countermeasures headquarters in early February 2020 and, in cooperation with industrial physicians, took infection prevention measures with top priority given to the health and safety of customers, business partners, and all employees. For business continuity, we took thorough infection prevention measures at production facilities and endeavored to continue production with the cooperation of our parts supplier business partners. In our sales facilities, offices and other locations, we made flexible use of working from home and staggered working hours under each country's regulations.

Supply Chain Interruptions

As the Brother Group has expanded its production and sales facilities globally, its supply chain is likely to be significantly impacted by the occurrence of infectious diseases, wars, terrorist attacks, large-scale disasters, natural disasters, and other such events.
To minimize the risk of supply chain interruptions during emergencies, with regard to production systems, we respond to risks through production in multiple locations, especially of consumables. At the same time, we also take other risk countermeasures such as having backup production facilities and parts inventories. In addition, we take action to reduce risks by strategic consideration of parts supplier business partners and upstream suppliers. In our sales facilities, we review inventory levels to prevent shortages of products, and we take fire prevention measures and certain measures against natural disasters, such as earthquakes and typhoons, as disaster prevention measures. Also, in Japan, where our headquarters functions are located, we have established a disaster prevention crisis control system in anticipation of a Nankai Trough earthquake.

Internal Control

To Maintain and Improve the Transparency and Reliability of Financial Reporting

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 many stakeholders.

Aiming to maintain and improve internal control continuously, the Brother Group companies every year conduct self-inspections using a check list or other tools to examine whether their internal control systems are functioning effectively, and also carry out audits by their internal audit departments from an independent viewpoint.
When merging or acquiring other businesses, the Brother Group provides them with support in accordance with their scale and situations, which includes organizing a corporate structure capable of practicing regular self-assessment of internal control status and making improvements as necessary. In addition, the Brother Group is flexible to changes. For example, when the Group adopted International Financial Reporting Standards (IFRS) in FY2016, it revised its checking methods to meet the new standards.
For its employees, the Brother Group utilizes its intranet to share the purposes and significance of internal control as well as activities conducted within the Group, and also provides training and other opportunities for them to deepen their understanding of internal control.

Internal Control Framework

Internal Control Framework

Internal Audits

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 Representative Director & President and the 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 respective departments self-sustaining; and
  3. Increasing audit efficiency through collaboration and information sharing between the auditing departments in the group and IT utilization.

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