Risk Management and Compliance

ValuesRisk Management and Compliance
Risk management structure

1. Statement of Compliance
We aim to be a company that is aware of its societal responsibilities, that observes all laws, ordinances, rules and societal norms
and ethics, and that is trusted by society.

2. Charter of Corporate Behavior

Medium-Term Management Plan

Risk management conditions and decisions regarding
major risks are reported annually to the Board of Directors fordiscussion and supervision. After Board of Director
deliberations, the Internal Control Committee continuously
monitors the risk management structure and implementationof countermeasures.
Principal risks identified as having the potential tomaterially affect DCM Holdings’ financial position, results ofoperations, and cash flows are as follows. The Internal
Control Committee assessment of risks in fiscal 2022
confirms there are no problems with risk responses and thevariability of the risks themselves.

as the foundation, employees work as members ofa company that is trusted by society. To put our compliancepolicy into practice, we established a compliance program tolay out substantive codes of conduct and standards, andperiodically and continually implement compliance education.

Message from the President

The Internal Control Committee comprehensively manages
Group-wide risks based on risk management regulations,and engages in awareness, guidance, education, and otherefforts aimed at preventing and minimizing risks and damage.
Every year, risk managers in each division identify andevaluate risks in terms of degree of impact and frequency ofoccurrence, summarizes them in a risk assessment chart thatincludes countermeasures, and submits it to the Internal
Control Committee. The Internal Control Committee
comprehensively assesses the status of Group-wide risks
based on risk assessments and countermeasures submitted
by each division risk manager.

With regard to compliance management, we laid out theDCM Holdings Compliance Policy. Each and every employee
is aware of the company’s societal responsibility and weensure that we observe all laws, ordinances and societal
norms and ethics, and that corruption is prevented. With thisBusiness Model

Compliance Policy

The DCM Group always acts with the customer in mind
• We offer products with peace of mind
• We keep our promises and operate with integrity

Risk ItemsRisk Details

Responses

Risks Associatedwith StoreOpenings• There is a possibility that plans for new store openings may beaffected by changes in economic conditions may require moretime to secure sites for new store openings, and that various
circumstances, such as the opening of new stores bycompetitors, may affect plans for new store openings.
• There is a possibility that plans for new store openings may beaffected by legal restrictions that delay store openings.

• DCM opens new stores in coordination with local residents and local authorities, withconsideration for the local environment, and in compliance with laws and regulations.
• Information pertaining to the progress of store openings is shared at Management Council andother meetings as needed, and when it is determined that the Company will be affected, we
promptly coordinate with relevant departments to take countermeasures.

• There is a possibility that our product supply system and overallbusiness may be adversely impacted by an increase in extreme
weather events associated with climate change.
• There is a possibility that our business performance may beaffected in the event sales of seasonal products fall short ofsales promotion plans due to flagging demand caused byunseasonable weather such as cool summers or warm winters.

• DCM makes efforts to procure products from multiple suppliers in order to maintain stableprocurement.
• We regard climate change as an important management issue, endorse the recommendationsof the Task Force on Climate-related Financial Disclosures (TCFD), and have establishedtargets for the reduction of greenhouse gas emissions by 2050.
• Going forward, the Sustainability Committee, chaired by the President and COO, will continue
to discuss specific countermeasures• We offer opportunities and an environment where all of our employees can grow their natural gifts and abilities

Risks Associatedwith SalesFluctuations• There is a possibility that our business results may be affectedby competitors opening new stores or changes in customer
purchasing behavior in line with revisions to related laws andregulations.

• Based on our Company Philosophy “Do Create Mystyle” under the long-term business concept“transforming into an integrated business that comprehensively makes people’s lives more
comfortable,” we aim to become a company that offers comprehensive solutions that enrichpeople’s lives and is indispensable to society.

• We respect clients who can share our principles

Risks Associatedwith NaturalDisasters andOtherEmergencies• There is a possibility that our business results may be affectedby the collapse of buildings and other structures in the event ofa major earthquake.

• We have established guidelines and an emergency response manual, maintain an emergency
contact network, introduced a safety confirmation system, and implement other measures suchas periodic drills and the stockpiling of necessary supplies.
• In the event of a disaster or other emergency, we create a task force to ensure business
continuity through Group-wide coordination.

Risks Associatedwith Infectious
Disease• There is a possibility that product supplies will be delayed,
employees will become ill, and stores will be forced to shorten
business hours or temporarily close due to infectious disease.
• There is a possibility that our business performance may beaffected in the event an infectious disease epidemic becomesprolonged, economic activity stagnates, and consumer
sentiment cools.

• To prevent infection, we take measures that include checking employee temperatures before
they come to work, handwashing, and wearing masks, and at stores, we ensure that customers
keep a safe distance, thoroughly disinfect and clean surfaces, and take other measures toprevent the spread of infection among customers and employees.

Risks Associatedwith Private
Brand Products• There is a possibility that our business performance may beaffected in the event that private brand (DCM brand) products,
some of which are supplied by overseas vendors, experiencedelivery disruptions, supply instabilities, or if we fail to develop
products that meet consumer needs.

• To ensure stable procurement, we will review the country of origin for each product, diversify
production areas, and establish a system that enables procurement from multiple suppliers.
• When developing new products, we established a system that enables us to proactively
incorporate the opinions and ideas of employees and focus on product development from thecustomers’ perspective. We strive to reduce risks through trial sales of small lots ofmanufactured products before commercialization.

Risks Associatedwith Fixed AssetImpairment• There is a possibility that our business performance andfinancial position may be affected in the event we were to record
an impairment loss on an asset for which a new impairment loss
must be recognized.

• We check for signs of impairment, and if there are any concerns regarding impairment, we takesteps to improve profitability and reduce risk.

Risks Associatedwith Exchange
Rate Fluctuations• There is a possibility that our business performance may beaffected in the event exchange rate fluctuations are greater thanexpected.

• DCM strives to reduce risks by entering into forward exchange contracts.

Risks Associatedwith Interest Rate
Fluctuations• There is a possibility that our business performance andfinancial position may be affected in the event of a rapid andsignificant rise in interest rates leading to increased interest rate
payments and other factors.

• When procuring funds, we make every effort to limit the impact of market interest rate
fluctuations using a combination of fixed and floating interest rates, depending on theprocurement environment.

Risks Associatedwith the Leak of
PersonalInformation• There is a possibility that our trustworthiness in the eyes ofsociety and business performance may be affected in the event
personal information is leaked due to unforeseen criminal acts,accidents, and other factors.

• In addition to formulating rules associated with information security and the handling of
personal information, creating an IT environment conforming to those rules, and regularly
providing employees with educational opportunities, we make efforts to strengthen information
security countermeasures using targeted email attack drills and other training.

Risks Associatedwith CompanyAcquisitions andBusinessTransfers• There is a possibility that unanticipated contingent orunrecognized liabilities may arise when conducting M&Aactivities.
• There is a possibility that our business performance andfinancial position may be affected in the event the synergies
initially envisioned are not realized.

• When engaging in M&A activities, we conduct detailed due diligence on the target company’sbusiness plan, financial position, real estate, employment contract relationships, and otherfactors. The Board of Directors and other relevant bodies review risks identified through due
diligence, the synergistic effects expected from M&A activity, and the appropriateness of theacquisition price, among other efforts aimed at minimizing risk.

The DCM Group values its employees• We respect the human rights and individuality of each and every one of our employees• We evaluate the roles, duties and results of all employees fairly
The DCM Group aims to build even stronger partnerships with our clients• We will clarify the conditions of the dealing, and our reciprocal responsibilities• We maintain fair and equitable partnerships and respect laws, ordinances and rules• We do not accept the donation of undue money or gifts, nor entertainment
The DCM Group will not betray the trust of stockholders

Risk Management and Compliance• We actively work to return profits to stockholders• We actively engage in dialogues and aim to find solutions to business challenges• We aim for healthy growth with innovative management• We disclose information in a timely manner and fulfill our accountability
The DCM Group grows together with local communities and society• We aim to create community-based stores• We work to protect the global environment with things such as developing environmentally-friendly products• We do not involve ourselves with antisocial forces or individuals

Financial Highlights

DCM Holdings Co., Ltd. Integrated Report 2023

• We promote management that puts the customer-first, and give it our all to ensure it stays that way

Corporate Governance50• We provide products and services that come with a greeting and a smile

Sustainability

Risks Associatedwith Climate
Change• We offer products and services with good value

Our Compliance SystemWe have established an Internal Control Committee. Thiscommittee fulfills compliance-related functions and is
responsible for compliance activities within the DCM Group.
In the event that a major compliance issue arises in the DCM
Group, this committee is expected to take the lead in
addressing the issue and formulating countermeasures.
As for specific activities related to compliance, the Groupis working to create a compliance program, create
educational tools, and conduct education and training.
In addition, because we are a retail business group,
we consider the issue of compliance is particularly importantfor merchandisers, who select products to be purchased fromsuppliers, and distributors, who determine the quantity anddelivery method of the selected products. Thus, not only
have we created a code of conduct regarding theAntimonopoly Act, Subcontract Act, and other laws andregulations related to fair trade, but we also conduct training.
We also educate our employees about the Labor
Standards Act, the Act on Securing, Etc. of Equal Opportunity
and Treatment between Men and Women in Employment,
and other issues that are familiar to them through internal
newsletters and posters. In addition, we have establisheda whistleblower system (commonly known as the helpline)
in accordance with the Whistleblower Protection Act, and areworking to ensure that compliance management functions
effectively.

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