Business and Other Risks

Integrated risk management to support global business activities
The OMRON Group has been working on integrated risk management under a common group framework. Become more attuned to risk and identify risks at the earliest stages in the face of a faster pace of change in the operating environment and rising levels of uncertainty.
We are working to improve the quality of our activities by implementing the PDCA cycle on a global basis to address issues arising from environmental changes that cannot be handled at workplace.
We also aim for active risk management between management and employees in the front line to solve problems.
We are working to achieve our long-term vision SF2030 to establish a system that enable the field to make risk decisions efficiently, effectively, and promptly, while preserving the company's philosophy and rules.
Integrated Risk Management Structure and System
The integrated risk management framework clarifies the position of risk management in group management. The OMRON Group summarize them in internal rules (OMRON's Integrated Risk Management Rules), which are under the control of the Global Risk Management and Legal Division. To promote global activities between management and employees, risk managers are selected within each headquarters department, each business division, each overseas region, and within each Group company (approximately 160 people).
We have established a Corporate Ethics and Risk Management Committee (in principle, the committee meets four times a year), which is composed of risk managers. In addition, we implement the following measures through the Emergency Response Headquarters, which is set up in the event of a crisis. We regularly reported to the Executive Council and the Board of Directors.

The three main activities are as follows:

  • Timely identification of environmental changes and impact assessment, sharing of information among relevant parties
  • Conduct global risk analysis to identify important risks and establish appropriate responses
  • Establish crisis response measures when a risk is identified

Activity Cycle for Integrated Risk Management




Risks Surrounding Management and Businesses, and Risk Analysis
In our long-term vision SF2030,the OMRON Group aims to solve social issues that arise in the transition to a new social and economic system. To this end, we are committed to transformation of business and transformation of corporate management and organizational capability based on the factors that influence social issues. We consider the key factors that must be addressed in the execution of these efforts to be risks.
For major risks, we regularly (at least once a year) conduct comprehensive analyses of expected actual risk cases that have occurred, and rank these risks accordingly. In operating our group, we have identified the following two significant Group risks. S Rank: Risks of utmost importance to the operation of the Group, which may jeopardize its survival or bring severe social liability, A Rank: Risks that impede the achievement of important Group goals. We monitor the implementation of measures and changes in the risk situation.
At present, the S and A ranks set by the Group are as follows. If the Group does not take appropriate measures for the significant Group risks, it will incur serious social responsibility. It could also lead to the failure of business strategy, resulting in the loss of the corporate value.
S Rank A Rank
Stable supply of products *
Business Continuity (COVID-19 and Natural Disasters)
Geopolitics *
Sustainability Issues (Climate Change)
Sustainability Issues (Human Rights)
IT Systems and Information Security
Quality
Global Compliance
Accounting and Tax
Human Resources and Labor
M&A and Investment
Intellectual Property
Business Development in Emerging Countries

*...Themes that have increased in importance compared to last year


Addressing Important Group Risks

Risk Stable supply of products (S Rank)
External Environment and Risk Scenario In recent years, consumption and investment have continued to expand globally with the spread of DX equipment, diversifying production sites, and the increasing decentralization of production locations for global environmental protection, and growing social demands.
Meanwhile, supply chain disruptions are prolonged due to shortages of materials such as semiconductors, container shortages and customs delays, etc. There are also concerns about the deteriorating situation in Russia and Ukraine and the impact of the urban blockade caused by Zero Corona policy in China. Product supply capacity may be reduced if product logistics lead times are significantly lengthened or procurement volume does not reach the required volume due to increase the range of missing components.
The OMRON Group's Business and Measures The Group will achieve strong growth through the following, semiconductor manufacturing, electric vehicles, plastic-free, expanding demand for capital investment in renewable energy, and strong demand for blood pressure monitors and other health-related devices due to the aging of the population and rising health consciousness
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
In FY2021, despite the shortage of parts and materials, we strived to reduce the impact through flexible design changes, procurement of alternative parts and materials, and expansion of airfreight to fulfill our responsibility to supply customers.
The long-term vision SF2030 promotes the following. Continuing to expand procurement sources for semiconductors and other components, engaging in design changes to shift to components with less procurement risk; formulate supply chain strategies to increase resilience from a medium- to long-term perspective.
Risk Business Continuity (COVID-19 and Natural Disasters) (S Rank)
External Environment and Risk Scenario As business continuity risks, the following will also have a significant impact on business activities: outbreaks of mass infection due to the spread of infectious diseases such as COVID-19 over a long period of time and strict quarantine policies against infectious diseases in various countries, such as city blockades. The long-term supply of products to customers may become stagnant. Specifically, discontinuation of production at our plants and delay in early recognition of information regarding the suspension of parts supply from key suppliers, etc.
In addition, in the event of unforeseen disasters, such as large-scale natural disasters caused by recent climate change, huge earthquakes, or large-scale fires at our business partners, there is a possibility of partial suspension or reduction of business activities due to large-scale suspension of social infrastructure and economic activities, or long-term suspension of parts supply from important suppliers, etc.
The OMRON Group's Business and Measures The OMRON Group operates production sites in China, Asia, and other regions around the world. We deliver products to our clients globally through sales sites in these countries and regions. The supply chain for parts and other items used by the Group is also diversified in processes globally, from materials procurement to the production assembly process.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
For more information on COVID-19, the Pandemic Response Headquarters, led by our CEO from fiscal 2019, addresses the pandemic with top priority to ensuring health and safety of our employees and the prevention of the spread of infection in regions where we operate. In addition, based on our COVID-19 Business Continuity Plan, we are continuing to take infection control measures in consideration of various national government/regional laws, regulations, and guidance. Based on the premise of With Corona living with COVID-19, the Group has shifted to a working style that optimally and flexibly combines office work and remote work. We also promote the practice of the most effective and efficient work style according to the business.
The OMRON Group has devised a business continuity plan for not only production, but also purchasing and procurement, logistics, and IT, We develop and strengthen our measures to provide for necessary safety measures, business continuity, and rapid recovery in preparation for natural disasters. We also conduct simulations and training drills for emergency situations, operate an employee safety confirmation system in preparation for disasters, and stockpile emergency food and drinking water to improve the effectiveness of our continuity plans. Furthermore, in preparation for an emergency in the supply chain, we are taking measures such as building a mechanism to ascertain parts supply risk immediately after a disaster and securing strategic parts inventory according to degree of importance. Major Initiatives
  • Implementation of measures based on the COVID-19 Business Continuity Plan
  • Monitoring of the COVID-19 outbreak status, work attendance rates, etc.
  • Formulating and updating business continuity plans / Conducting simulations and training drills
  • Centralized management of supplier production area information and establishment of evaluation systems for alternative production sites
  • Understanding and analyzing market/material information using third-party information
  • Securing parts inventories according to degree of importance
  • Establishing escalation routes for emergencies
Risk Geopolitical Risks (S Rank)
External Environment and Risk Scenario As for geopolitical risks, international relations are changing more and more, including bilateral relations between the U.S. and China and multilateral relations over the situation in Russia and Ukraine.
Under such circumstances, the economic security policies of each country may be strengthened, and import/export transactions and fund settlements with companies subject to laws, sanctions, and regulations to prevent the outflow of cutting-edge technology outside the country may be suspended. In addition, protectionist tariff policies in various countries may reduce price competitiveness.
In the event of war or conflict, there is a risk of long-term business suspension or withdrawal from business in the relevant region, or other unforeseen changes in policies, laws, or regulations that may affect our corporate activities.
Failure to respond appropriately to these changes in circumstances and policies can lead to legal disputes, administrative penalties, and even loss of public trust in the brand.
The OMRON Group's Business and Measures The OMRON Group operates production sites in China, Asia, and other regions around the world. We deliver products to our clients globally through sales sites in these countries and regions.
We will further accelerate our global expansion, including strengthening our presence in the Chinese and Indian markets in our long-term vision SF2030.
We are also creating new businesses based on cutting-edge technologies such as AI, IoT, and robotics, and promoting projects related to social infrastructure such as public transportation and traffic safety in our social systems business.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
For geopolitical risks, we regularly monitor global political and economic conditions and trends in laws and regulations, ascertaining changing business environments in each area and their impact on our performance. We are also exploring systems for rapidly analyzing and generating insights on the state of optimal production, research and development, and intellectual property management, as well as on the impact of changes in laws and regulations on our various businesses. Export regulations in various countries have wielded greater influence in recent years. Our Global Risk Management and Legal HQ manages a company-wide export control committee, conducting proper security trading management.
We conducted a survey of policy trends and laws and regulations by outside experts, responded to the situation in Russia and Ukraine, and discussed and debated key issues in regular discussions and reports to the Executive Committee and at Board of Directors meetings in FY2021.
Under our long-term vision SF2030, we will promote initiatives such as strengthening our analysis of the situation in each country in order to respond to uncertain geopolitical risks ahead of time. Major Initiatives
  • Analyzing and evaluating policies such as tariff increases in major countries, export restrictions, and emerging technology trading restrictions based on security export controls
  • Re-evaluating transaction formats and our supply chain
  • Building a system to manufacture products in parallel at multiple locations
Risk Sustainability Issues (Climate Change) (S Rank)
External Environment and Risk Scenario Climate change has become a social issue on a global level in response to natural disasters and loss of species that are becoming more and more severe every year. Companies are also expected to reduce greenhouse gas emissions in their value chains toward a decarbonized society, and to make their products and services more environmentally friendly.
At the same time, laws and regulations regarding climate change and environmental policies and the disclosure of efforts to address these issues are being strengthened in Europe, the U.S., and elsewhere, and society as a whole, including customers and suppliers, is accelerating its demand for decarbonization initiatives.
Due to the rise in energy prices as a result of tightening regulations in various nations, additional capital investment to address energy savings and renewable energies, and impact from the introduction of carbon taxes, there are risks of increasing business costs. Furthermore, in the event that the Company and suppliers were to fail to appropriately address these, the resulting suspension of customer transactions, administrative penalties, or harm the Group's business opportunities. Furthermore, inadequate systems to deal with climate-related information disclosure may lead to a loss of public trust in the brand due to failure to meet the required standards demanded by stakeholders.
The OMRON Group's Business and Measures The OMRON Group has business locations around the world, and does business with suppliers across a number of countries. Under our long-term vision SF2030, we will work to reduce greenhouse gas emissions in order to decarbonize and reduce our environmental footprint, aiming to achieve a carbon-neutral society. To solve the problems of resource depletion and environmental destruction, we will shift to a circular economy by extending product life and expanding collection and recycling. We are also committed to coexistence with nature through appropriate management of chemical substances and preservation of biodiversity in order to protect opportunities for healthy and cultural activities for future generations and mankind.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
In response to the risk of climate change, we have revised the OMRON Environmental Policy, which clearly states the key environmental issues and action guidelines that OMRON should address in fiscal 2021. The general manager of the Global Human Resources and General Affairs Division, the General Manager of the Global Purchasing, Quality & Logistics Division, and the General Managers of each business unit, each of whom has been delegated authority by the President, are responsible for promoting environmental initiatives. Important environmental matters are decided by the board of directors. The President reports to the board of directors on the status of execution of decisions made, which is monitored and supervised by the board of directors.
The OMRON Group has declared OMRON Carbon Zero in fiscal 2019. We aim for the company to emit zero greenhouse gas emissions in 2050, and are steadily reducing emissions each year to achieve this goal. In our long-term vision SF2030, we will set numerical targets for each of Scope 1, 2, and 3 (Note 1) and accelerate the movement to reduce greenhouse gas emissions. Specifically, OMRON will work to reduce Scope 1 and 2 greenhouse gas emissions from its business activities by expanding energy conservation and energy creation and achieving carbon zero at all domestic business sites. Under Scope 3 Category 11 (Note 2), which covers greenhouse gas emissions from customers' use of OMRON products, each business unit will review product design for decarbonization and work to make new products more energy efficient.
The Group has indicated its endorsement of the TCFD (Note 3) in 2019. We have conducted a scenario analysis for each of our businesses in FY2021 and disclosed the Group's initiatives in line with the four categories of Governance, Strategy, Risk Management, and Indicators and Targets (see (5) Disclosure in Line with TCFD Proposals for more information on TCFD initiatives). Major Initiatives
  • Revision of OMRON Environmental Policy
  • Achieve decarbonization and reducing environmental impact
    - OMRON Carbon Zero declaration
    - Reducing greenhouse gas emissions by scope 1, 2, and 3
  • Support for TCFD, disclosing information in accordance with this framework, and implementing scenario analyses

(Note 1) Scope 1 and 2: Greenhouse gases emitted directly or indirectly from the company's own operations.
Scope 3: Greenhouse gas emissions from the company own value chain
(Note 2) Scope 3 Category 11: Emissions from the use of products, services, etc., manufactured and sold under Scope 3.
(Note 3) TCFD:Task-force on Climate-Related Financial Disclosures

Risk Sustainability Issues (Human Rights) (S Rank)
External Environment and Risk Scenario Consumers are increasingly choosing and purchasing products and services that are fully respectful of human rights through growing interest in the SDGs. Activities that take human rights into consideration, such as life safety and health, also lead to improved performance by workers.
Meanwhile, the enactment of human rights related laws and regulations is accelerating in many countries through our value chains for problems such as forced labor in developing countries, child labor, low or unpaid wages, long working hours, and working environments with inadequate safety and hygiene.. Ethical issues related to emerging technologies are becoming a social issue as emerging technologies such as AI become increasingly popular.
Actions for human rights issues are a business license for companies that solve social issues on a global scale.
Failure to take appropriate action on human rights issues along the value chain can lead to suspension of business with customers, administrative penalties, and loss of public trust in the brand. In addition, development themes may be suspended and reputational risks may occur. Due to insufficient compliance with laws and regulations in utilizing emerging technologies such as AI, etc.
The OMRON Group's Business and Measures The OMRON Group has business locations around the world, and does business with suppliers across a number of countries. In addition, under our long-term vision SF2030, we will actively engage in businesses that utilize cutting-edge technologies such as AI, IoT, and robotics, and this may lead to AI ethics and other human rights issues.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
In response to human rights risks, in fiscal 2021, we established the Omron Human Rights Policy in line with the United Nations Guiding Principles on Business and Human Rights (UNGP). The general manager of the Global Human Resources and General Affairs Division, the General Manager of the Global Purchasing, Quality & Logistics Division, and the General Managers of each business unit, each of whom has been delegated authority by the President, are responsible for promoting human rights initiatives. Matters that are important in fulfilling our commitment to respect for human rights will be decided by the Board of Directors. The President reports to the Board of Directors on the status of execution of matters decided, and the Board of Directors monitors and supervises the execution of such matters.
In response to human rights-related laws and regulations, the OMRON Group has expressed Statement on the UK Modern Slavery Act and publicly announced our human rights initiatives.
We have been addressing human rights risks by conducting RBA risk assessments of our own production sites and key suppliers, and by requiring our suppliers to manage human rights appropriately based on our sustainable procurement guidelines. Under our long-term vision SF2030, we will form a company-wide project led by the Sustainability Promotion Office to establish a global human rights governance system.
We will expand the scope to include the entire value chain, and work toward the implementation of human rights due diligence and the establishment of a global value chain human rights redress mechanism. (For details of the initiatives, please refer to 2. Business Conditions, 1. Management Policy, Management Environment, and Issues to be Addressed (4) SF 1st Stage Medium-Term Management Plan (iii) Strengthening Sustainability Initiatives.)
We also set ethical use of technology as an important human rights issue, and will promote the appropriate use of technology by understanding the impact of AI, robotics, IoT, and other technologies on human rights. Major Initiatives
  • Formulation of OMRON Human Rights Policy
  • Declaring compliance with the UK Modern Slavery Act
  • Operating whistle-blower hotlines worldwide
  • Risk assessment using the RBA Assessment Tool
  • Presenting sustainable procurement guidelines to suppliers and confirming compliance status
Risk IT Systems and Information Security (S Rank)
External Environment and Risk Scenario As society becomes increasingly digitalized, companies are expected to improve productivity and solve social issues through DX and data utilization.
On the other hand, the threat of cyber-attacks is rapidly increasing. If countermeasures against such attacks are weak, company may result in the leakage of personal and confidential information or business shutdowns due to server downtime, etc.
Personal information and data protection laws and regulations are being revised and strengthened on a global basis due to the demand for privacy protection and the policies of various countries. Violations in business operations could result in a loss of public trust, inability to conduct business, or the imposition of large fines.
If information management is inadequate in technological development through co-creation, etc., business competitiveness may be lost due to unauthorized removal or leakage.
The OMRON Group's Business and Measures The Group has established and operates various systems on a global basis. Currently, we are promoting the Corporate System Project ("CSPJ")as one of the most important projects for OMRON. We aim to establish a management system that will enable the evolution to data-driven corporate management. CSPJ is an initiative not only to renew IT infrastructure, but also to standardize business processes and utilize data in the future.
The OMRON Group possesses essential business information, as well as personal or confidential information obtained from business partners during the course of business. In our long-term vision SF2030, for example, we will promote the construction of a data platform as we evolve a business model that combines goods and services. This business model including the use of data in the development of global telemedicine services in the healthcare business.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
For IT system and information security risks, we have a Cyber Security Integration Meeting with the CFO as the supervising officer to assess the security level and address issues based on a global standard cyber security framework. For IT system and information security risks, we hold an integrated cybersecurity meeting with the CFO as the supervising officer. This meeting is based on a global standard cyber security framework to assess security levels and address issues.
We made progress in shifting to a Zero-Trust Model (Note 1) in FY2021 by strengthening measures to monitor suspicious behavior of PCs. We have reviewed our privacy policy, rules and various procedures, and conducted training for all employees in response to the revised Personal Information Protection Law that went into effect on April 1, 2022.
We will continue to strengthen our crisis management system against cyber attacks and rebuild our global system to promptly respond to changes in personal information and data protection regulations in various countries. Major Initiatives
  • Evaluation of measures based on NIST-CSF (Note 2) and transition to a Zero-Trust Model (Strengthening of internal application authentication, detection of anomalies, start of analysis operations, strengthening of restrictions on internet communications)
  • Thorough handling of information based on information security rules (e.g. usage, storage, disposal, measures to take in the event of an incident)
  • Understanding personal information and data protection laws and regulations and implement measures to protect the rights of individuals including the revision of information security rules
  • Employee education for enhanced information literacy
  • Conducting cyberattack drills
  • Website vulnerability checkups

(Note 1) Zero-Trust Model: A security model based on the concept of never trust, always confirm that does not trust people, networks, or devices.
(Note 2) NIST-CSF: Cyber Security Framework (CSF) published by the National Institute of Standards and Technology (NIST) in 2014. This framework is generic and systematic. Countries around the world are moving toward compliance including the U.S..

Risk Quality (S Rank)
External Environment and Risk Scenario Expectations are growing for companies to provide highly innovative products and services as a means of solving social issues.
At the same time, high standards are required to ensure product safety and accuracy. Product safety-related laws, regulations, and standards, such as those listed below, are becoming stricter globally: Reporting and countermeasures in the event of product defects, regulations on chemical substances contained in products including the RoHS Directive (Note 1) in Europe, TSCA (Note 2) in the U.S., and UL certification (Note 3) in the U.S., etc. In addition, products are increasingly networked and the threat of cyber-attacks is growing. In the event that we provide inadequate product design/inspection, inappropriate customer support, inappropriate reporting, or in the event that we are non-compliant with laws, regulations, and standards, the resulting large-scale recalls or damage to social trust in our brands or suspension of production and distribution of the product.
The OMRON Group's Business and Measures The Group has established and operates various systems on a global basis. Currently, we are promoting the Corporate System Project ("CSPJ")as one of the most important projects for OMRON. We aim to establish a management system that will enable the evolution to data-driven corporate management. CSPJ is an initiative not only to renew IT infrastructure, but also to standardize business processes and utilize data in the future.
The OMRON Group has been engaged in business with Sensing & Control + Think as our core technology.
In our long-term vision SF2030, we will continue to evolve this Sensing & Control + Think concept to achieve new value through the combination of products and services, not just goods. These include i-BELT, a data utilization service for manufacturing sites in the control equipment business, and the development of a global telemedicine service in the healthcare business.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
The OMRON Group has established a basic quality policy based on the principle of quality first for quality risk to maximize customer satisfaction. We have also established a quality management system based on international standard requirements. In addition, in order to further our quality governance, the Global Procurement and Quality & Logistics HQ, which conducts top-level oversight of quality, holds company-wide quality meetings. In addition, we have established and enforce Group rules regarding our quality assurance system, quality assurance activities, and management in the event of a serious quality issue. With respect to quality compliance, we are strengthening our management system by ascertaining trends in globally-changing environmental and safety-related laws, regulations, and standards related to products and other areas. With regard to product security, we have established a response system when we receive external vulnerability information on our products and services.
Under our long-term vision SF2030, in addition to the above, we aim to establish quality technologies to prevent quality risks for lithium-ion batteries, power devices, and other technologies with high quality risks used in each of our businesses, according to the respective risks. With regard to product security, we will work to strengthen our systems throughout the product and service lifecycle, including the supply chain while utilizing outside consulting firms. Furthermore, we will establish a quality management system adapted to the service business, taking into account the shift from goods to goods and services.

We aim to establish a mechanism to accumulate and utilize knowledge (risk management and quality initiatives in the service business) to harmonize quality sensitivity and values. Major Initiatives
  • Acquisition of ISO9001/ISO13485/IATF16949(Note 4)
  • Business Company QMS(Note 5)audit (internal audit) and product design process issue resolution activities
  • Currently working to ascertain trends in environmental and safety-related laws, regulations, and standards related to products and other areas, and to strengthen management systems conducting impact assessments
  • Operation of a product security vulnerability information management system (PSIRT)

(Note 1) RoHS Directive: Directive by the European Union (EU) on the restriction of the use of certain hazardous substances in electronic and electrical equipment.
(Note 2) TSCA: U.S. law regulating the manufacture and import of hazardous substances
(Note 3) UL Certification: Certification for reliability and safety of raw materials and products by Underwriters Laboratories, a third-party safety science organization in the United States.
(Note 4) ISO 9001: International standard for quality management systems
ISO13485: International standard for quality management systems specifically for medical device industry
IATF 16949: International standard for quality management systems specifically for the automotive industry
(Note 5) QMS: Quality management system

Risk Global Compliance (S Rank)
External Environment and Risk Scenario With the growing influence of corporations in society, social demands for fair trade are increasing. Global laws and regulations, such as antitrust laws and anti-bribery laws, will become stricter. At the same time, new laws and regulations and operations are being considered in light of evolving IT, AI, etc., and responses to social issues such as climate change.
If company has been discovered or judged to have violated laws and regulations by a governing agency may be subject to fines or other administrative penalties, criminal punishment, or litigation for damages, which could have a negative impact on company reputation in society.
The OMRON Group's Business and Measures The OMRON Group offers products and services globally, including those licensed by the governments of various countries. Under our long-term vision SF2030, we will promote the development of innovative products and new business models through co-creation with various business partners. We will also actively work to solve global social issues, including those in emerging countries.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
As part of our socially responsible corporate management, we consider corporate ethics and compliance to be one of the most important issues in our activities. We focus our actions on preventing such occurrences. In particular, for anti-competitive activities such as cartels, bribery, and other significant risks. Specifically, we have established the OMRON Group Management Policy as our management policy.

We also have established the OMRON Group Ethical Conduct Rules as specific guidelines for the conduct of our directors and employees. We have appointed a person responsible for promoting corporate ethics and compliance and established a Corporate Ethics and Risk Management Committee to promote corporate ethics and compliance. The president himself regularly issues instructions regarding the thoroughness of corporate ethics and compliance and provides opportunities for thorough awareness. In addition, the company conducts periodic training for directors and employees on corporate ethics and compliance, including anti-competitive behavior such as cartels and bribery.
In addition, we have established an internal and external whistleblower hotline. We accept reports of any conduct that violates or may violate the OMRON Group Rules of Ethical Conduct, employment regulations, or laws and ordinances. In accordance with laws, regulations, and internal rules, the content of reports will be kept confidential, and whistleblowers will not be treated unfairly. Major Initiatives
  • Establishing OMRON Group Rules for Ethical Conduct
  • Regular compliance education every year in October and training to employees.
  • Operating whistle-blower hotlines worldwide
Risk Accounting and Tax (A Rank)
External Environment and Risk Scenario In recent years, stakeholders continue to demand that companies ensure tax transparency and accurately represent economic reality in their financial statements. The provision of new goods and services and transactions are becoming borderless with digitization as a means of solving social issues and globalization of corporate economic activities
Under such circumstances, if we fail to respond appropriately to amendments to tax laws, transfer pricing taxation systems, customs laws, and other related regulations of various countries, or to trends in enforcement by the authorities, we may be required to pay substantial additional penalties or settlements from the authorities. In addition, when conducting unprecedented services or businesses, etc., failure to properly account for them may lead to administrative penalties and loss of public trust in the brand.
The OMRON Group's Business and Measures The OMRON Group conducts business with clients globally. We also have 119 domestic and overseas subsidiaries (as of March 31, 2022), which trade with each other within the OMRON Group. Under our long-term vision SF2030, one of our growth strategies is to achieve new value not only products but also a combination of products and services, we will develop a variety of services such as consulting, after-sales service, and operation service.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
The Global Finance and Accounting HQ plays a central role in addressing accounting and tax risks in cooperation with the regional headquarters. In addition, we have established and operate a global system to ensure the appropriateness of accounting and taxation, including an internal control system to ensure the reliability of financial reporting, and the OMRON Group Rules.
Regarding taxation, the OMRON Group Sustainable Conduct Policies and OMRON Group Rules for Ethical Conduct stipulate that we comply with tax laws and other laws and regulations and pay appropriate taxes. In FY2021, the Board of Directors approved and implemented a Tax Policy embodying the following systems: Basic Policy, Appropriate Tax Payment, Transfer Pricing Compliance, Anti-Tax Haven Taxation, Tax Compliance Initiatives, and Relationship with Tax Authorities. Major Initiatives
  • Work with local subsidiaries to respond to changes in taxation systems and enforcement by authorities in each country and region.
  • Review policies related to international taxation in light of various OECD reports and the development of new international taxation rules.
  • Strengthen customs compliance system and monitoring
  • Regularly gather information on accounting standards using outside experts, etc., and investigate and respond to their impact, etc.
Risk Human Resources and Labor (A Rank)
External Environment and Risk Scenario Companies are expected to create innovations that will lead to sustainable enhancement of corporate value, through the activities of diverse human resources to solve social issues.
On the other hand, there is expected to be a shortage in the supply of professional human resources due to the aging of the working population and intensifying competition among companies for human resources. Furthermore, the mobility of human resources will accelerate as individuals' values regarding their careers and working styles become more diversified.
If the design and operation of human resources policies and systems are inadequate, it will be difficult for company to secure the necessary human resources in the right places at the right time. This can lead to a decline in employee engagement and the risk of labor disputes.
The OMRON Group's Business and Measures The OMRON Group acquires and develops leaders who can lead change, as well as the highly specialized human resources needed in each field to accelerate global business development and create innovation in new businesses and technologies. Under our long-term vision SF2030, we will formulate a human resources strategy and promote the enhancement of human creativity. We will also strengthen our efforts to acquire excellent human resources by acquiring specialized human resources in priority fields such as DX and new business creation.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
To address human resources and labor risks, we listen to our employees, understand and identify organizational issues, and take action to resolve these issues. The Global Human Resources & General Affairs Division will take the lead in conducting a Group-wide engagement survey through the VOICE (Note). We have worked to promote the localization of key positions overseas. In addition, we have been promoting the localization of key positions overseas. Furthermore, the Group has established and operates an internal reporting system as one of the mechanisms to monitor the penetration of corporate ethics.
Under our long-term vision SF2030, we will promote the introduction of medium-term performance-linked equity compensation to all global managers and other measures to achieve market-competitive and fair compensation in order to realize our business strategy. We will also introduce human resource portfolio management to ensure that the right number of people with the right abilities are placed in the right positions, and actively invest in human resources with a strong desire to grow. Major Initiatives
  • Conduct and improve group-wide engagement surveys through VOICE
  • Placement of the right people in the right places at the global level
  • Localize key positions overseas
  • Operation of Whistle-Blower Hotline
Risk M&A and Investment (A Rank)
External Environment and Risk Scenario Companies are expected to advance technologies such as IoT, Big Data, robotics, and AI as a means to solve social issues. Companies are expected to accelerate innovation through alliances, M&A, and investments with startups and other companies with technological capabilities.
On the other hand, companies may not do enough due diligence, or the anticipated synergies or capital/business alliance initiatives may not proceed as planned. In addition, large amounts of goodwill and investment impairments may occur if post merger integration (PMI) and governance are not properly implemented. M&A and investment execution may be protracted and plans may need to be revised significantly with the tightening of investment restrictions due to economic security policies and the operation of antitrust laws in the IT sector.
The OMRON Group's Business and Measures The OMRON Group considers M&A and alliances to be necessary strategies for future growth. In accordance with this, we work to improve the corporate value of the Group with alliances, and divestment of business based on portfolio management*.
In order to create new businesses under our long-term vision SF2030, we will continue to emphasize and actively implement co-creation with partners who share and resonate with the social issues that OMRON perceives.
In FY2021, we invested in Techman Robot, a cooperative robot manufacturer, to create manufacturing sites where humans and machines cooperate and to solve labor shortages at manufacturing sites.
We have entered into a capital and business alliance agreement with JMDC, a company that owns medical data such as receipts and medical checkups, with its core health data platform for the social implementation of health promotion and serious illness prevention solutions, including Event Zero.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
When executing M&A and investment risk, we form project teams comprised of members from business divisions, headquarters units, and outside experts. These teams issue investment determinations in consideration of risks and synergistic effects from collaboration with the Group based on confirmation of financial and contract details with the company in question and a detailed preliminary examination through conversations with management, among other actions. Even after the acquisition, business divisions and HQ units work together to formulate and execute a plan given the business strategy and risks. In addition, the performance of the company in question, the progress of the relevant business strategy, and the assessment of its business value are regularly reviewed by the board of directors. Major Initiatives
  • Exploring and assessing M&A and investment candidates based on business strategy
  • Formulating due diligence and business plans according to M&A and investment projects
  • Review of specific target progress for post-acquisition economic impact by the board of directors (At least once a year)

*Portfolio management: Efforts to evaluate businesses based on assessments of economic value and market value for the approximately 60 business units OMRON controls at present

Risk Intellectual Property (A Rank)
External Environment and Risk Scenario As a means to solve social issues, companies are expected to become carbon neutral and realize a digital society. Companies are expected to promote open innovation and utilize intellectual property and intangible assets as a source of international competitiveness.
On the other hand, as we pursue research in highly competitive development fields such as AI, IoT, and robotics, we may incur settlement payments for settlements and royalty payments for the use of intellectual property rights. We may also receive claims for infringement of intellectual property rights from third parties, which may result in suspension of business.
Furthermore, if we are unable to prevent unauthorized use or infringement of our intellectual property rights by third parties, including alliance partners, or leakage of the expertise, we may lose our competitive edge.
Third parties may make unauthorized use of OMRON Group brand names or may manufacture and sell products resembling OMRON Group products, damaging our organization.

The OMRON Group's Business and Measures In order to create social needs starting with near-future design, the Group has established an IP policy and is implementing an IP strategy. In our long-term vision SF2030, we aim to create new businesses such as preventive medical support for chronic diseases, automation of primary and tertiary industries, energy solutions that realize carbon neutrality, and advancement of manufacturing sites. In this context, we will strategically patent technologies that differentiate us from our competitors.
In addition, as the scope of inventors is expanding due to the business shift from a product perspective to a service perspective, we are also promoting the creation of inventions for service businesses that solve customer and social issues, not only for engineers, but also for planning departments and product managers.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
To address intellectual property risks, the Intellectual Property Center plays a central role in providing intellectual property education to all in-house engineers and investigating third-party intellectual property rights in R&D and design. For existing products, we also analyze and evaluate the relationship between the Group's products and intellectual property rights held by third parties, as well as the relationship between third-party products and intellectual property rights held by the Group.
Meanwhile, to counter the increasing use of our brand name by third parties overseas in recent years, we regularly conduct activities to detect counterfeit products in the market and on e-commerce sites. In addition, we also take action to prevent the acquisition of trademarks similar to the OMRON Group brand names with malicious intent. Major Initiatives
  • Investigation of infringement of intellectual property rights held by third parties
  • Analysis and evaluation of infringement of intellectual property rights by third parties on the OMRON Group products
  • Monitoring of counterfeit products
  • Preventing the acquisition of similar trademarks
Risk Business Development in Emerging Countries (A Risk)
External Environment and Risk Scenario In emerging markets such as India, consumption is expected to expand due to population growth, and while various industries are growing, social issues are also emerging.
On the other hand, in some emerging countries and regions, corruption and other forms of corruption may become social problems due to weak legal governance and unstable political conditions. In business operations in these countries and regions, there is a possibility of legal and regulatory non-compliance, illegal activities, and accounting irregularities due to poor governance and internal management.

The OMRON Group's Business and Measures The OMRON Group operates globally, we have group companies in various countries and regions. Under our long-term vision SF2030, for example, we will promote the expansion of businesses closely tied to regions with high demand, such as strengthening sales capabilities in India, which has high growth potential in the healthcare business.
If appropriate and sufficient measures are not taken against risk scenarios, this could impact the Group's operating results, financial condition, or SF2030.
The OMRON Group establishes and operates a governance system at the Group companies based on rules for corporate operations, accounting, IT controls, and other matters common to the OMRON Group (OMRON Group Rules). In addition, we are striving to improve effectiveness through global checks and monitoring in each functional lead department and improvement guidance in internal audits. In addition, risk management at each regional management company addresses key risks according to the characteristics of each area.

We believe that the topics of current focus for the OMRON Group where there is notable change in the management/business environment, may have a material impact on investor decisions. However, this is not an exhaustive list of all risks; the Group may be affected in the future by risks that are not currently foreseeable or considered significant.
Matters discussed here that are not historical fact reflect the judgment of OMRON Group management as of the date of submission of this annual securities report (June 24, 2022).

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