Approach to Risk Management
The Brother Group aims to be a company that is trusted by all its stakeholders with the goal of achieving sustainable growth. Given that the creation of customer value is envisioned in "At your side 2030," our Group Vision for the period FY2022 to FY2030, we recognize potential factors that may hinder our efforts toward it as risks and appropriately manage those risks to enhance our ability to realize the Group Vision.
As the Brother Group operates multiple businesses globally, we recognize that we are likely to be affected by a high level of complexity and uncertainty in the business environment due to the global economic situation and geopolitical factors. Therefore, we constantly identify and respond to risks relating to compliance, product safety, import/export control, security trade control, information management, environmental laws, safety and health, disaster prevention, and the supply chain. We also continue to strengthen our business continuity measures in preparation for a crisis and re-examine our structures for sustainable value creation with the aim of being able to identify and respond to risks from an even more strategic perspective that spans a longer term, that is, the medium to long term.
Risk Management Promotion System
To reduce the risks of serious impacts on its management, the Brother Group has established the Risk Management Committee chaired by the Representative Director & President and formulated a comprehensive risk management system based on its Risk Management Regulations. The Group has in place a risk management system where each organization and subsidiary within the Group understands the risks and the probability of their realization and implements measures to avoid such risks or reduce their impacts, thereby appropriately managing them, while the progress of such efforts is regularly reported to the Board of Directors.
The Risk Management Committee meets regularly once every six months. However, we have created an emergency risk management system whereby in the event of a serious risk being realized, the committee chairperson will urgently convene an extraordinary meeting of the Risk Management Committee. Also, in our risk management system, the Risk Management Committee has subordinate committees dedicated to specific kinds of risks, including risks relating to compliance, product safety, import/export control, security trade control, information management, environmental laws, safety and health, disaster prevention, and the supply chain, and these committees or departments in charge work to identify and reduce the respective kinds of risks and respond to any realization of them under the supervisory responsibility of the Representative Director & President (or a designated executive officer). Particularly for product safety, we have established Basic Product Safety Policies and a Voluntary Action Plan for Product Safety to provide safer products to customers.
Clarification of Evaluation and Responses
We have created systems for evaluating and responding to business risks under the leadership of persons in charge of risk management in each department and Group subsidiary. In addition, the Risk Management Committee manages the progress of the evaluation of and response to material risks faced by the Group as a whole. Specifically, the Committee reviews identified risks every fiscal year and instructs each Group organization and facility to prepare risk evaluation sheets. After those sheets are submitted, the Committee aggregates the information provided therein and uses it to assess each risk according to the level of its impact and likelihood and calculates the weight to be added to each risk, thereby identifying critical risks to the Group. The Committee then instructs persons in charge of risk management at each organization and facility to adopt countermeasures against each risk and monitor the situation.
Compliance Committee
The Compliance Committee works to increase workforce awareness of the importance of complying with laws and business ethics and to prevent violations and recurrences of similar cases through compliance-focused education programs and awareness-raising activities.
Committee of Security Trade Control
The Committee of Security Trade Control is responsible for properly managing export transactions and technology transfers in line with applicable laws and regulations. This Committee also works to maintain and improve the management level by convening meetings to discuss important matters whenever there is an amendment to the law, implementing internal audits, and offering guidance and education to Group companies.
Product Liability Committee
The Product Liability Committee meets periodically to promote coordinated efforts to ensure product safety throughout the product lifecycle, starting with R&D, design, and production, through sale, use, repair, and maintenance, and finally disposal.
Information Management Committee
To cope with information risks, including the risks of information leaks, as well as cybersecurity and product-security risks, the Information Management Committee determines a policy for appropriately managing customer information and other information retained by the Group and works to ensure the implementation of the policy throughout the Group.
Safety, Health, and Disaster Prevention Committee
The Safety, Health, and Disaster Prevention Committee discusses annual plans, devises and implements specific measures, and conducts awareness-raising activities to ensure employee safety and health, prevent disasters, and minimize damage from any actual disaster.
Environmental Law Committee
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. The Committee discusses and determines measures to address environmental issues, such as compliance with product-related environmental laws and regulations and pollution at business sites.
Supply Chain Risk Committee
The Supply Chain Risk Committee identifies the impacts of both the current and potential risks in the supply chain, formulates policies on measures to address them, and promotes risk mitigation throughout the Group.
Risks and Their Countermeasures
| Item | Particulars, likelihood, timing and degree of impact of risk | Countermeasures | |
|---|---|---|---|
| Trade and geopolitical risks |
The Group conducts business activities globally, has manufacturing facilities located primarily in China and other parts of Asia, and has sales companies in multiple regions throughout the world. As a result, U.S.-China relations, the Russia-Ukraine situation, the situation in the Middle East, and other changes in international circumstances could have major impacts on the Group's business operations, performance, and financial standing. In particular, trade policies, tariff systems, and import/export regulations against the backdrop of U.S.-China relations may be subject to future review and revision, and depending on the particulars and scope of application, there is a risk that procurement costs for raw materials, components, and so on could increase or that supply chain disruptions could occur. In addition, if the Russia-Ukraine situation becomes prolonged or the situation in the Middle East becomes further destabilized, resulting in economic sanctions, trade restrictions, or changes in energy policies by various countries, the Group's production and sales activities could be constrained. Furthermore, changes in the international logistics environment against the backdrop of the situation in the Middle East and other factors could lead to transportation delays and higher transport costs on major shipping routes, and there is a risk that such developments could have an impact on the supply of products or profitability. It is difficult to predict the timing of occurrence or degree of impact of these risks with certainty, and depending on the circumstances, there could be a significant impact on the Group's business operations or performance. |
Taking into account the possibility that U.S.-China relations, the Russia-Ukraine situation, the situation in the Middle East, or other changes in international circumstances could have an impact on business activities, the Group continuously gathers and analyzes information globally. The Group monitors developments concerning trade policies, tariff systems, import/export regulations, and related matters in coordination with local subsidiaries and sites in each region while conducting risk management in collaboration with relevant departments. To address the risk of increased costs resulting from changes in U.S. tariff systems or trade policies, the Group continuously monitors tariff trends and regulatory changes, and if additional tariffs or new regulations are introduced, will promptly analyze the impacts. To address increased costs as a result of tariffs and the like, the Group will strive to mitigate the impact on earnings by appropriately reflecting the additional cost in product prices and implementing cost reduction measures. Also, in light of changes in the business environment over the medium to long term, the Group will continuously examine optimization of production and procurement sites. Considering the possibility that economic sanctions and trade restrictions imposed by various countries will be maintained or strengthened in relation to the Russia-Ukraine situation and the situation in the Middle East, the Group will ensure strict compliance with relevant laws, regulations, and restrictions and make careful determinations regarding whether business activities and trade are possible. Furthermore, to address transportation risks arising from changes in the international logistics environment due to the situation in the Middle East and other factors, the Group will strive to increase supply chain stability at each manufacturing facility by developing multiple routes and ports for use and by reviewing logistics systems. Through these initiatives, the Group will strive to minimize the impacts on the Group's business operations from changes in the international situation and trade environment. |
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| Risks associated with changes in the business environment | Structural changes in the printing market | Printing volumes in the office and home printing markets continue to decline as a result of the progression of digitalization and diversification of working styles, and it is expected that the market overall will continue to contract at a moderate pace. The Printing & Solutions Business is positioned as an important business for the Group's revenue and profit, and consequently, if the Group is unable to respond adequately to changes in the market environment, there may be an impact on the Group's business performance or profit foundation. |
In addition to reinforcing the earnings capacity of existing businesses, the Group is reviewing the structure of the business as a whole in stages by focusing on growth areas. In the office and home printing markets, in addition to hardware sales, the Group is expanding "connected businesses" including contract services and subscription models and is working to strengthen ongoing relationships with customers and enhance lifetime value (LTV). In the labeling field including commercial & industrial applications, the Group is reinforcing the provision of optimal solutions tailored to the application and focusing efforts on expanding business. Also, the Industrial Printing Business including Domino and Printing & Automation continues to grow against the backdrop of the transition from analog to digital and rising needs for automation. By utilizing existing technologies, the Group will seek further growth and improved profitability in the industrial printing market and strengthen a sustainable business structure. |
| Intensifying competition among companies | The Group is facing competition from companies that operate globally, emerging manufacturers, and others in each business area including the Printing & Solutions Business. If the market environment changes substantially as a result of intensifying price competition from competitors, the introduction of new products or technologies, the progression of industry consolidation, or other factors, this could impact the Group's business performance and profitability through declining sales prices, or changes in market share. |
The Group is working to enhance competitiveness across all businesses by maintaining and reinforcing competitiveness in existing businesses and expanding into areas where growth is expected. The Group is providing products and services that emphasize customer value in each market while reinforcing proposal development capabilities using the Group's global sales and service networks. In conjunction with these initiatives, the Group is building business foundations that can respond flexibly to changes in the competitive environment by promoting higher business efficiency, reducing development and manufacturing costs, and improving quality and reliability. |
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| Changes in global economic circumstances | The Group engages in business globally, and therefore, fluctuations in the global economy can have effects on demand trends in regional markets. If capital investment or consumption by customers is curtailed due to economic recession or other such developments, demand for the Company's products and services could decline, which could have an impact on the Group's performance. It is difficult to predict the timing of occurrence or degree of impact of such changes in the economic environment, and depending on the circumstances, there could be an impact on the Group's business operations or profit over the medium to long term. |
The Group seeks to build a stable earnings base that is not easily impacted by short-term economic fluctuations, and in addition to providing high-value-added products and services, the Group is consistently working to reinforce functions from development to after-sales service. In the Printing & Solutions Business, the Group will focus efforts on products for the office and home printing market, mainly A4 machines, as well as commercial labeling, a growth field. The Group is working to secure continuous profit and reinforce earnings capacity by expanding "connected businesses," including contract services and subscription models that provide stress-free printing experiences, automatic delivery of consumables, and more. In the Industrial Printing Business, in addition to introducing new products, the Group is reinforcing the services and solutions business and working to optimize business foundations. By providing high-added-value services including automation and data analysis, the Group will contribute to improved customer productivity and stronger market competitiveness. In the Machinery Business, the Group is rolling out high-productivity and energy-saving products and reinforcing global sales and service structures to contribute to enhancing customers' competitiveness and reducing their CO2 emissions. The Group is also building profit structures that are resilient against economic fluctuations by reducing fixed costs and raw material expenses. Also, the Group has a balanced sales structure in Japan, Asia, the Americas, and Europe, which relatively controls the impact of economic fluctuations in any particular region. Going forward, the Group will continue to utilize its global networks and develop business in each region. |
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| Supply chain risks | Supply chain disruption |
The Group operates manufacturing and sales facilities globally. The main manufacturing facilities are located in Vietnam, Philippines, China, and other countries, and sales facilities are located in countries around the world. If geopolitical confrontations, rising tensions, or political and economic instability occur in various regions of the world, including East Asia or the Middle East, or if disasters such as large-scale fires, storms, or major earthquakes occur, or if the continuous procurement of components becomes difficult due to reviews of business portfolios by suppliers (such as deteriorating business profitability or aging equipment), there is a risk of disruptions, such as soaring costs and supply shortages in the procurement of components and production. In addition, if global logistics are disrupted and there is a shortage of space on ships, stagnation of shipping containers occurs, or there are restrictions on navigation, there is a risk that imports of parts and product shipments will be delayed and shipping costs will increase. As a result, business results may be affected by a loss of sales opportunities and a loss of customers due to product shortages in the market. |
To address supply chain disruptions, the Group has established structures for gathering information globally and making timely management decisions. In production systems, the Group produces key consumables at multiple sites and implements risk countermeasures such as maintaining spare production equipment. The Group obtains parts from multiple suppliers, maintains strategic inventories of critical parts and materials, and takes action to reduce reliance on specific countries or suppliers. At sales sites, the Group will continue to optimize inventory levels to prevent product shortages. As for logistics, the Group is securing inventory storage space for products, parts and materials, by utilizing internal and external warehouses in the regions where its manufacturing facilities are located, and the Group is promoting the use of multiple routes and ports. In addition, at various facilities, the Group has also implemented fire prevention measures and certain disaster prevention and mitigation measures against earthquakes, typhoons and other natural disasters. In Japan, the location of its Headquarters, the Group has established disaster preparedness and crisis management systems in anticipation of a Nankai Trough earthquake. |
| Product and service quality risks | The Group recognizes that there are product and service quality risks inherent in all stages of the product lifecycle. There is no guarantee that no defects will occur in any products or services or that product safety or quality issues will not occur in the future. If major quality problems occur, there could be an adverse impact on the Group's performance and so on as a result of incurring massive costs as well as a decline in customer purchasing intent due to harm to the Group's brand image and reputation. | In order to provide high-quality and appealing products and services, the Group has established strict quality control processes for the supply of such products and services to markets. The Group also confirms and verifies that quality levels are appropriate with regard to products that are supplied by manufacturing contractors. Furthermore, if an accident caused by a product or service were to occur, the Group would place the highest priority on responding to the injured party while disclosing information, reporting to governmental agencies, and taking measures to prevent any further damage. | |
| Human resource risks |
In recent years, competition for recruiting talented human resources has intensified due to changes in working styles and the employment environment as well as the rapid advancement of generative AI, and there is a risk that the Group will not be able to recruit the human resources needed to accelerate business portfolio transformation. In particular, if the Group is unable to recruit and develop personnel with the skill sets and experience necessary for business growth in industrial fields, talent capable of driving business expansion, leaders who can advance business transformation, and talent who can continuously tackle challenges, there could be an impact on the Group's management strategies. In addition, if the Group allows a highly homogeneous workplace environment in which diverse values and experiences are not respected or utilized, or if discrimination or harassment occurs, it could become difficult to recruit and retain talent, leading not only to a decline in organizational capabilities and employees' psychological safety, but also a substantial impact on the Group's social credibility. |
To realize the Group's management strategies, the Group is working to strengthen the talent portfolio in priority areas by increasing hiring of experienced and managerial personnel from outside while also actively investing in talent development and updating and enhancing educational programs to develop the next generation of leaders. For key talent, the Group is formulating succession plans. Also, in accordance with the code of conduct specified in the Global Charter, the Group is working to instill the highest ethical standards while developing the environment and raising employee awareness so that each employee can maximize their individual strengths and abilities and thrive. In addition, the Group sees respect for diversity as a driver of growth and innovation, and has formulated the Brother Group Human Resources Management Policy and is promoting measures to further advance talent management at all Group companies. |
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| Environmental and social risks | Social demands relating to the environment |
For the Group, which conducts business activities globally, the following risks are currently and will remain into the future extremely important issues and may have a significant impact on business management. In addition to physical risks that can significantly impact production and sales activities, such as human injury and death, suspension of business operations, disruption of supply chains, and so on caused by disasters, climate change also entails transition risks such as tighter laws and regulations associated with the rapid shift to a decarbonized society, increased response costs and loss of sales opportunities due to delays in responses. As for advancement of the circular economy, policies aimed at economic development while controlling resource consumption are being promoted mainly in European countries, and entail transition risks such as tighter laws and regulations, increased response costs and loss of sales opportunities due to delays in responses. |
In response to climate change, in order to reduce the emissions of greenhouse gases that cause it, the Group has set medium-term targets for 2030 that have been validated by the Science Based Targets (SBT) initiative for the 1.5°C target. In order to achieve these targets, for Scopes 1 and 2, the Group is focusing its efforts on energy conservation and the active use of renewable energy at business sites, and for Scope 3, the Group is focusing its efforts on resource conservation and recycling of procured parts and materials, enhancing the energy efficiency and recyclability of products, and other measures so that the Group can reduce emissions in the parts and materials procurement, use, and disposal stages of products, which account for more than 80% of total product greenhouse gas emissions. Furthermore, the Group has collaborated with parts suppliers since FY2023 to introduce renewable energy for the electric power used when manufacturing parts used in laser printer products and inkjet printer products, thereby reducing CO2 emissions from the manufacture of parts. Also, in the Machinery Business, demand for EV parts is increasing in place of internal combustion engine parts. As an EV parts processing solution, the Group develops "SPEEDIO" series products that can meet various processing needs, including machining of large aluminum parts for EVs, and thereby respond to the risk of a transition to EVs in the automobile industry. In response to advancement of the circular economy, the Company sets a medium-term target for 2030 (reduce virgin materials used in products in the Printing & Solutions Business, which uses particularly high amounts of resources, by 25%) to improve the Group's resource efficiency. To achieve this target, the Group has positioned expanding collection and recycling of printer consumable cartridges, promoting product reuse, and expanding business that maintains connections with customers such as subscription services as important initiatives, and the Group is promoting effective use and circulation of resources, contributing to CO2 reductions. Also, in February 2020, the Company declared its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board and its support for the recommendations of the Task Force on Nature-related Financial Disclosures (TNFD) in March 2025. As a response to the TCFD, the Group analyzed the financial impact of climate change on all of the Group's businesses and posted the results on the Web and other media. As a response to the TNFD, the Group made some disclosures in accordance with the TNFD recommendations. The Group will work to enhance information disclosures even further in the future. |
| Environmental regulations and environmental pollution | The Group, which conducts business globally, is subject to the application of various environmental laws and regulations in each country and region around the world. In particular, regulations on chemical substances in products, such as the EU RoHS Directive, are being established and are continuously amended in various countries and regions. If a violation of these regulations occurs, product recalls, suspension of production and sales, imposition of fines or criminal penalties, decline in social trust, and other repercussions could have a significant impact on the Group's business or performance. | The Group has identified chemical substances that should be prohibited, restricted or managed in the Brother Group Green Procurement Standards, and by notifying suppliers about the Standards, requires their compliance with the Standards. The Group strives to comply with laws and regulations by obtaining compliance guarantees concerning parts and materials from suppliers, providing composition information, conducting supplier audits, and conducting sampling testing of delivered goods. | |
| Human rights violations in the value chain |
The Group has numerous overseas manufacturing facilities, with the main manufacturing facilities located in Vietnam, Philippines, China, and other countries, including manufacturing and procurement in Japan. These facilities have trading relationships with parts suppliers, and if human rights problems, such as forced labor or child labor or occupational health and safety concerns, occurred at these suppliers or elsewhere along the supply chain, there would not only be a risk of serious direct harm to the people working there, but the Group could also lose the trust of its customers, which could affect its business relationships with them. Also, if any disruptions occur in imports, exports, or customs clearance in relation to such problems, there is a possibility that the Company would not be able to provide products to markets. If a third-party organization determines that there are any deficiencies, not only in actual human rights violations, but also in risk mitigation efforts or the provision of remedial measures, it is anticipated that the lapse of third-party certifications held by the Group could make it difficult to maintain existing business relationships or establish new business relationships and that exclusion from investment index indicators could have an impact on the Group's stock price and other effects. Furthermore, tracing materials beyond the suppliers leads to raw materials. In the trade of mineral raw materials, if it were found that the trade of certain minerals in conflict areas in Africa and other high-risk regions funds the local armed groups and is involved in conflict or human rights abuses, this could similarly lead to a loss of the trust of customers. |
To clearly demonstrate the Group's commitment to reducing human rights risks and promote initiatives, the Group established the Brother Group Human Rights Global Policy and has requested understanding of this policy and cooperation with the Company's measures by all of the Company's officers and employees as well as all parties involved in the Group's products and services. The Group also joined the Responsible Business Alliance (RBA) and conducts annual self-assessments at Group manufacturing facilities in accordance with the RBA Code of Conduct to confirm that there are no human rights risks that require priority action. At the same time, the Group is taking action to identify and address human rights risks by continuously undergoing on-site audits conducted by third-party organizations at four major manufacturing facilities. The Group requests that suppliers comply with the RBA Code of Conduct to reinforce systems for assessing and remediating risks in the supply chain relating not only to human rights, but also including health, safety, and the global environment. The Group formulated a CSR Procurement Policy and CSR Procurement Standards for suppliers and posted them on its website. The Group also explains the policy to suppliers by conducting supplier briefings and providing written explanations and conducts risk assessments (human rights due diligence) throughout the value chain by requesting major tier 1 suppliers to take action to address human rights, occupational health and safety, and ethics. Implementation methods are regularly reviewed, and most recently, the Group has been enhancing the effectiveness of human rights due diligence by conducting risk-appropriate assessments targeting suppliers for which relatively higher risks are anticipated based on factors such as their products and locations. The Group seeks to reduce human rights violation risks across the entire supply chain by requesting that the Group's tier 1 suppliers require upstream suppliers to also implement human rights initiatives. With regard to responsible procurement of minerals, the Group established a Responsible Minerals Procurement Policy and posted it on the Group's website. In addition, the Group conducts surveys on the use of minerals and conducts procurement in collaboration with the Group's suppliers to ensure transparency in supply chains regarding mineral procurement and avoid the use of conflict minerals. |
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| Occupational accidents, human injury | The Group engages in business activities around the world, and the labor environment, attitudes toward safety and the environment, and applicable laws and regulations vary by country and region. For this reason, there are diverse risks in the labor environment, ranging from minor workplace accidents to serious incidents resulting in fatalities or permanent disability. Also, if a manufacturing facility's operations are suspended due to large-scale natural disasters, which have occurred in recent years, or fire, explosion, and so on caused by machinery or equipment, the Group may be unable to adequately fulfill its social responsibilities including impacts on the supply chain, and this could have a material impact on the Group's business performance and business continuity. | The Group strives to ensure safe and healthy working environments and to raise employee safety awareness by conducting activities in accordance with the Group's Occupational Health & Safety management system. Also, information regarding accidents and incidents that occur at each site is shared across the Group on a monthly basis, and efforts are made to prevent the recurrence of similar accidents. The Group adopted the Regulations on Systems and Control for Disaster Prevention of the Brother Group in 2017 to address the risks of fire and explosion and apply them to manufacturing plants and other sites in Asia. The status of these initiatives and their implementation at each site is verified through periodic group-wide occupational health, safety, and disaster prevention audits and other measures. | |
| Labor disputes and deterioration of management-labor relations | The Group operates sales, development, and manufacturing sites globally, and there is a risk that instability in labor-management relations may arise from differences in labor practices and laws and regulations among various countries and regions, which could cause labor disputes or deterioration in labor-management relations. If these risks materialize, they could lead to the suspension or delay of business activities, a declining operational efficiency, and harm to the Group's reputation. | The Group strives to maintain sound labor-management relations by complying with labor practices and labor laws and regulations in each country and region and through measures such as conducting regular labor-management consultations and employee engagement surveys, improvement activities, and strict compliance with laws and regulations. In addition, the Group established a common global human rights policy and work to prevent and minimize the impact of labor disputes and any deterioration in labor-management relations in order to avoid contributing to human rights violations through the Group's business activities. | |
| Information risks |
Cyberattack methods have grown increasingly sophisticated and complex in recent years, and there is a risk that unauthorized access, malware infection, ransomware attacks, and similar threats could result in the external leak of personal information and confidential information held by the Group as well as system outages and other disruptions, making it difficult to continue business operations. The Group strives to maintain safe information security levels for the websites and related systems the Group provides to customers and stakeholders, but there is a possibility that cyberattacks, such as targeted attacks, could result in damage including data destruction or falsification or service outages. There is also a risk of information leaks occurring due to internal misconduct by employees, contractors, or others. If such an information security incident should occur, it could result in the loss of customer trust, damage to the Group's brand image, and other consequences, which could have a material impact on the Group's business activities and performance. Furthermore, if the accuracy of various types of business data including accounting information is impaired due to corruption of key business data or information system failures, or if disruptions in the operation of internal controls occur, there could be an impact on the reliability of financial reporting. In addition, the threat of cyberattacks targeting IoT products has been increasing in recent years, and if customer personal information or confidential information were leaked from Brother products, the Group's brand value could be harmed and market competitiveness could decline. Also, if the Group is unable to respond to the tightening of information protection related laws and regulations in various countries and regions, restrictions on the Group's business activities could be imposed. |
The Group formulated the Information Security Basic Policy, established the Information Management Committee, and created information security operational rules. The Group strives to prevent leaks of personal information and confidential information and strengthen globally uniform multi-layered defense measures against cyberattacks by implementing security measures and conducting internal education based on these operational rules and regulations. As countermeasures against external intrusions and cyberattacks, the Group conducts 24-hour, 365-day security monitoring to rapidly detect suspicious activity on PCs and servers and eliminate threats and respond to increasingly sophisticated cyberattacks. For critical systems that impact the Group's supply chain, the Group uses external data centers and cloud services and is advancing server redundancy to establish a system configuration that can recover rapidly even in the event of a system failure. Furthermore, the Group implements access controls and access log management for personal and confidential information and monitors employee PC operation logs to prevent unauthorized handling of such information. In addition to implementing the best possible measures as described above, the Group continuously enhances the skills of personnel involved in operating and using systems through ongoing education in order to keep pace with constantly evolving IT technologies. To prepare for the occurrence of an incident, the Group conducts drills in internal response organizations during normal operations and strives to minimize damage by achieving rapid response and recovery. As measures concerning internal control systems, the Group maintains quality enhancement activities in the development, maintenance, and operation of information systems from the perspective of overall IT control and the Group works to achieve appropriate IT operations. In addition, the Group established the Product Information Security Basic Policy and is working to enhance product security throughout the Group so that customers can use the Group's products with reassurance. The Group takes measures to minimize risks by establishing internal rules on reporting lines for cases where vulnerability risks relating to products occur and the response system for product information security incidents and establishing structures. |
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| Intellectual property | Intellectual property |
Infringement of the Group's intellectual property by third parties such as sale of counterfeit goods by third parties could occur. The possible results of this include deterioration of the Group's business results and a decline in the Group's reputation. Also, there is a possibility of the institution of litigation by a third party against the Group in relation to intellectual property rights of the third party. If the third party's claims were upheld, the Group may be enjoined from selling the Group's products and may be required to pay compensatory damages. |
The Group enforces intellectual property rights against infringing conduct by third parties while giving consideration to the degree of impact on business results and reputation. Also, the Group conducts business activities while respecting third-party intellectual property rights, but in the event that a third-party institutes litigation on the grounds of infringement, after carefully investigating the details, the Group takes countermeasures such as defending against the litigation or reaching a settlement. |
| License agreements | The Group conducts its business activities while entering into license agreements relating to intellectual property rights with other companies, as necessary. However, there could be an impact on business activities depending on the terms and conditions of such license agreements. | The Group acquires numerous intellectual property rights as the result of research and development. The Group takes countermeasures, such as licensing some of the intellectual property rights that it holds to other parties, while entering into agreements to minimize the impacts on business activities. | |
| Employee inventions | An inventor could institute litigation regarding rewards for an invention. | The Group has established rules on rewards for inventions and provides appropriate rewards to inventors. | |
| Financial and accounting risks | M&A (impairment) |
The Group has established a policy of accelerating investment in growth including M&A with the aims of further expanding its industrial areas and creating and developing new business. When implementing M&A and so on, there is a risk that investment effects will not be achieved as intended as a result of business integration burdens that are greater than initially anticipated or the inability of the investment target to develop business as anticipated at the time of investment. The Group has recorded goodwill of 60,578 million yen (5.9% of total assets) in its consolidated financial statements as of March 31, 2026, of which goodwill relating to Domino acquired in 2015 accounts for 57,950 million yen. If the above risks occur and estimates of future cash flows change or if interest rates or long-term market growth rates and so on change in the future, impairment losses of this goodwill, tangible non-current assets, or intangible assets may occur, resulting in an impact on the Group's business results. |
CS B2027, the Group's Medium-Term Business Strategy, sets a policy of significantly strengthening organizational capabilities and structures for implementing M&A with the objectives of both dynamic investment execution and reinforced governance while ensuring active participation in and support of post-merger integration (PMI) by the head office. CS B2027 also positions the Industrial Printing Business including Domino as a growth business that will function as a growth engine for the Brother Group, and the Group is working to expand new products and business areas, reinforce service and solutions businesses, and strengthen business foundations as priority measures. In addition, the Group compares estimates of future cash flows with book value in relation to goodwill at least once annually, regardless of whether there are indications of impairment, to confirm the value of goodwill assets and record appropriate valuation amounts. |
| Foreign exchange fluctuation |
Overseas business accounts for large proportions of the Group's manufacturing and sales, and foreign exchange fluctuation risks relating to transactions denominated in foreign currencies occur on a regular basis. Based on results for the fiscal year ended March 31, 2026, each one-yen increase in the value of the yen against the euro results in a decrease in annual profit of approximately 800 million yen. Also, each one-yen decrease in value against the dollar results in a decrease in annual profit of approximately 300 million yen. In addition, if currencies in the regions where the Group's main manufacturing facilities are located including China and southeast Asia increase in value, this could be a factor pushing up manufacturing and procurement costs, and thus, medium- to long-term fluctuations in foreign exchange rates are expected to have a certain degree of impact on business results. Assets held by overseas subsidiaries in local currencies (net amount after deducting liabilities) will decrease in value after conversion to yen if these local currencies decrease in value against the yen. This will not immediately have an impact on consolidated profit and loss, but other comprehensive income will decrease and this will become a factor pushing down net asset value. |
To mitigate these risks, the Group is taking measures to increase the rate of linkage between receipts and payments in foreign currency transactions. Furthermore, the Group efficiently manages and avoid short-term risks by conducting foreign exchange forwards and through other means. | |
| Taxation |
The Group engages in business activities around the world and is subject to the tax systems of each country and region where it has business sites. If the tax systems or tax rates in these countries and regions change, there could be a negative impact on the Group's business results. To address issues of tax base erosion and profit shifting (BEPS), tax authorities in many countries and regions are stepping up their efforts, and if legal systems are changed or tax enforcement becomes stricter in the future, there is a risk that the Group will be subject to additional taxation or international double taxation. |
Serious tax-related issues are reported to regional headquarters and information is shared with the BIL tax department. Support is obtained from tax accountants and other external professionals, and the Group consults with tax authorities, as necessary. In addition, with respect to transactions between group companies, the Group appropriately manages transfer pricing with each country and region to ensure that arm's-length prices are maintained, and in the case of transactions that entail high transfer price taxation risks, the Group uses an advance pricing agreement (APA) system to mitigate tax-related risks. | |
| Improper accounting | Regarding improper accounting, there is a risk that accounting procedures contrary to national and regional laws and regulations or the Group's accounting rules will lead to correction of financial results or loss of the trust of stakeholders. | The Group analyzes the financial statements of group companies to determine if there are any signs of improper conduct and, when necessary, conducts individual investigations. | |
| Business conduct risks |
The Group is subject to various laws and regulations in the countries and regions where it conducts business. The enactment and amendment of such laws and regulations could severely restrict the Group's business activities, and the Group may incur large expenditures responding to laws and regulations. Also, in the event of an unintended violation of laws and regulations, there could be an adverse impact on the Group's business results or business activities. Based on this understanding, the Group has identified four key business conduct risks: security export control; embezzlement, improper kickbacks, conflicts of interest, and improper benefits; unfair trade practices (violations of anti-monopoly laws); and bribery (violations of anti-bribery laws). |
At the Group, legal compliance is regarded as an essential part of management for avoiding various risks. To ensure thorough compliance throughout the Group, the Group has established conduct standards for employees based on "ethics and morality," one of the Codes of Practice of the Brother Group Global Charter (hereafter referred to as the "Global Charter"), and the Brother Group Principles of Social Responsibility, which clearly define the Group's responsibilities as a business enterprise and promote appropriate actions. The status of the Group's responses regarding major business conduct risks is described below. |
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| Security export control | The Group conducts business globally, and as geopolitical risks including U.S.-China trade friction, the Russia-Ukraine situation, and the situation in the Middle East are increasing, export controls and security-related laws and regulations in individual countries are being tightened. In particular, some of the Company's machine tools are subject to such laws and regulations, and if regulations become even stricter in the future, restrictions on business activities and the burden of expenditures associated with compliance will increase. If a legal violation were to occur, there is a risk that the Group's business and operations would be subject to significant impact, including legal sanctions, suspension of export of all products for a certain period, and loss of social credibility. | The Group identifies and analyzes regulatory trends in each country and region and rapidly updates internal rules and management systems as needed. The Group also strives to continuously improve export control systems by conducting training for officers and employees and regular audits, thereby ensuring the appropriateness of business operations in preventing legal violations. | |
| Embezzlement, improper kickbacks, conflicts of interest, and improper benefits | There is a risk that embezzlement or improper kickbacks by officers and employees could damage the Company's assets and lead to accounting treatment in violation of the Group's accounting standards, resulting in restatement of financial results as well as a loss of trust from stakeholders. | The Group strives to prevent self-authorization and ensure appropriate business operations by implementing multi-person checks in business processes and through other means. The Group has also created systems for the early detection of signs of misconduct, including the establishment of an internal whistleblowing hotline, and conducts regular compliance training for officers and employees. | |
| Unfair trade practices (violation of anti-monopoly laws) | Business activities that violate the anti-monopoly laws and anti-bribery laws of individual countries and regions may expose the Group to risks such as fines imposed by competition authorities and restrictions on the Group's business activities as well as the imposition of significant costs associated with compliance with laws and regulations. | In Japan, the Group announced a Partnership Building Declaration that expressly states the Group's commitment to collaboration and mutual benefit with suppliers in our supply chains and businesses that seek to create value, and the Group established structures for complying with the Act on Preventing Delay in Payment to Small and Medium-Sized Entrusted Business Operators in Relation to Manufacturing Consignment. In particular, with respect to price negotiations based on increases in labor costs by small and medium-sized contractors, if such a contractor makes a request for discussions, the Group will engage in sufficient discussion to ensure that a fair profit for the contractor is included in the price, taking into account the impact of higher labor costs. Also, the Group regularly conducts training of officers and employees of group companies (in Europe, the Americas, and Asia) to raise awareness concerning risks relating to competition law. | |
| Bribery (violation of anti-bribery laws) | Companies located in countries or regions with a high risk of bribery (mainly in Asia) have established anti-bribery policies and take measures such as conducting screening relating to the prevention of corrupt conduct by suppliers. In addition, the Group conducts anti-bribery training to raise the anti-bribery awareness of officers and employees. | ||
Annual Securities Report [PDF/4.3MB] (Last update: Aug 24, 2026)
Internal Control
The Brother Group has continued to work to maintain and improve its Group-wide Internal Control System with the aim of ensuring the reliability of reports, the effectiveness and efficiency of operations, compliance with laws and regulations, and asset protection in accordance with the Brother Group Global Charter and the Brother Group Principles of Social Responsibility.
Internal Audits
Under the direction of the Representative Director & President, global internal audits are conducted in collaboration with internal auditors of subsidiaries both within and outside Japan. Our internal audit activities are aimed at contributing to attaining the management targets by assessing the effectiveness of the Group's risk management, Internal Control System, and governance process and encouraging any necessary improvements.
The respective departments of Brother Industries, Ltd. and all its subsidiaries undergo internal audits that cover overall management. The effectiveness of the Internal Control System on financial reporting is evaluated from a standpoint that is independent of the business execution departments.
Advisory functions may be performed regarding such matters as the development of and improvements to the Internal Control System at the request of committees and departments. The Brother Group is also committed to detecting signs of improper conduct with computer-assisted audit techniques (CAATs) to increase the efficiency of audits and prevent improper conduct within the Group.
An annual audit plan is formulated for themes and subsidiaries selected based on the results of risk assessments conducted by the General Manager of the Internal Audit Dept. The plan must be approved by the Representative Director & President before being implemented. The audit results are reported to the Representative Director & President.
To ensure the effectiveness of internal audits, the General Manager of the Internal Audit Dept. reports the annual audit plan and audit results directly to the Board of Directors. The General Manager also attends meetings of the Audit & Supervisory Committee to periodically report the progress and results of audits. In addition, the General Manager has periodic opportunities for information and opinion exchange with full-time members of the Audit & Supervisory Committee, as well as with Audit & Supervisory Committee members and the Independent Auditor at three-party auditing* meetings.
- A collective name for three types of audits (audits by the Audit & Supervisory Committee, audits by the Independent Auditor, and internal audits)
