Governance

Message from the CRO
We aim for sustainable growth anddevelopment through initiatives tocontrol risk and the challenge toturn risk into opportunity.

Hiromasa Zaitsu
Risks Surrounding Toyoda Gosei
There are a diverse range of risks that could shakethe foundations of management, and they are making
the situation unclear and uncertain. They include thestrategic business risks of the automotive industry
in the midst of a period of major change, as wellas natural disasters, infectious diseases, trade
restrictions and sanctions, human rights violations,and information security.
In order to continue sustainable growth anddevelopment as a company, it has become importantto understand and accurately address these risks.

Controlling Risks
The Internal Controls Committee, chaired by thepresident, has been established to implement
specific measures through three subcommittees:
the Risk Management Subcommittee for selecting
and mitigating important risks, the Compliance
Subcommittee for ensuring thorough compliancewith corporate ethics and laws, and the Internal Audit
Subcommittee to implement internal auditing in asystematic manner.
In particular, as a response to key risks, we have been
focusing on the following measures; preparations fora Nankai Trough earthquake since we are locatedin the Tokai region in Japan, prompt sharing of
information and strengthening of cooperation at theglobal level to continue production operations undersuch circumstances as the COVID-19 pandemic andthe impact of the conflict in Ukraine, visualization andsystematic improvement of cybersecurity measures,and so on.

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Corporate Officer

CRO

Future Initiatives
In June 2023, we created the new role of CRO.
We have been implementing preventative measures tomitigate risks and prompt and appropriate responses
to incidents when they occur. Going forward, as CRO,I will work to raise the overall level and respond more
flexibly by providing horizontal coordination to relevant
departments within the company and to affiliates inJapan and overseas. We will address issues related tothe organizational structure in a cross-organizationalmanner from the standpoint of the CRO, such asdifferent departments being responsible for different
types of risks and the difficulty of identifying theresponsible department due to the involvement ofmultiple departments depending on the type of risk.
In addition, several issues have emerged, which
require responses in cooperation with entities ineach region on a global basis such as the revisionof laws and regulations on trade controls in various
countries. We will work to develop internal response
systems and specific measures to deal with suchcomplex and multifaceted risks. Although there are
an increasing number of risks for which it is difficult toknow the correct response, we will prepare for themby assessing the current situation and developing
response scenarios based on a variety of situations.
We are committed to risk management with the belief
that enhancing our ability to respond to contingencies
will be a proactive approach to turning risks into
opportunities for the Company.

About Toyoda Gosei

Value Creation Story

Value Creation Strategy

Foundation of Value Creation

Data

Risk Management
Basic Philosophy
We are working to prevent risks that could have graveconsequences for management and to minimize
damage in adverse events. For these purposes, weidentify risks in each function and make decisions on
how to respond in meetings of the Board of Directors,
Internal Controls Committee, and various generalcouncils.
An Internal Controls Committee headed by thecompany president identifies key risks, determines
measures to counter them, and checks on theprogress in executing these measures. In this way,
Organization of Internal Controls Committee

these measures are made more effective.
In addition, initiatives to deal with key risks orunexpected risks due to political instability or otherexternal factors are discussed regularly by the Boardof Directors, and continuous improvements are made.
Moreover, Risk Management and Response Guidelines
have been established. These guidelines show theactions taken to prevent potential risks and to respondto problems appropriately and quickly.

Internal Controls Committee

Chairperson: President Saito

Deliberation of policies and measures related to internal controls

Risk Management Subcommittee

Compliance Subcommittee

Identifies major risks, decides measures
to avoid or mitigate them, confirms
implementation status

Reports and deliberates on corporate ethics
and status of compliance with laws, etc.

Internal Audit Subcommittee
Status reports on internal audits

Principal risk management activities
Specify key risks for the next fiscal year
● Confirm plans to counter key risks●Final report on the progress status ofactivities for the current fiscal year
● Improve and review risk management
policies, activities, standards, etc.

PLAN

●ACTIONPLAN

ACTIONDODO(Execution of annual plan)● Share information on key risks (includingGroup companies in Japan and abroad)● Apply to company departmental policies● Conduct activities based on plan
Review yearly activities (including Group
companies in Japan and abroad)● Share risk analysis● Evaluate and discuss activities withmembers of the Board of Directors●CHECKCHECK

External disclosure of activities (securities report, corporate governance report, integrated report, company website, etc.)

Response to Key Risks
Operating foundation risks (primarily handled by CRO)and business strategy risks (primarily handled by CFO)
based on the business environment are assessedfrom the perspective of impact on operations (financialimpact, etc.) and possibility of occurrence (frequency),and key risks are identified.
Key risks are reflected in company policy as important
action items, and initiatives are made to mitigate or
prevent risks.

Examples of Key Risks
Classification

Main Key RisksLarge Large-scale disasters (earthquakes, stormand flood damage, etc.)
 Risks, opportunities, and responses basedon TCFD DX support
 Recalls due to serious quality issues

 Cyberattacks/scam emails
 Carbon neutrality measures Raw material procurement, energy price hikes, etc.
 BEV conversion measures
 Injuries and operation shutdowns due to serious work accidents

Medium Leakage of confidential information
 Trade friction

 Traffic accidents (causing serious damage/injury)
 Incidents of harassment

Small Antitrust law violations
 Business operations with partnercompanies

 Interruption of business operations due to fire or explosion
accidents

Size of risk
Impact onoperations(financial impact,etc.)
×Possibility ofoccurrence(frequency)

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GovernanceCrisis Management Project in Anticipation of Large-Scale Earthquake Disasters
A crisis management system has been put in place forthe event of a massive disaster, such as the predicted
Nankai Trough earthquake or natural disasters due toclimate change. This system is based on the principlesof human life first, community support, and earlyrecovery. Specifically, in addition to infrastructure andsystem measures based on the Crisis Management
Project, resilience training has been conducted morethan 180 times for directors and members of antidisaster
departments since FY2013. These efforts are basedon the company’s belief that improving the skills ofresponse personnel is essential. Specific proceduresfor the recovery of affected buildings, facilities,and processes have also been established, and foralternative production in a production recovery system.
Recovery training for design drawings and other datais also carried out so that product development can becontinued even after disasters. In addition, workshops
to strengthen crisis management not only in Toyoda
Gosei companies but also at Group companies andsuppliers are conducted regularly. Assessments using
anti-earthquake measure implementation statuscheck sheets, clarification of weak points with graphs,
presentation of responses taken at Toyoda Gosei andother companies, and collaborative preparation ofbusiness continuation plans (BCP) are carried out.

Disaster Response

Initiatives to Date

Disaster outbreak – First response

Recovery

Permanent

Warning & Monitoring TeamEarthquakeoccursEmergency
earthquake alertFirst Response
Task Force
Advance Team(investigative team)

Emergency
Task Force

Life Support
Task ForceDistrict
Task Force

Production
Restoration
Task ForceInstructions
Reports

Classification

Measures

Facilityandequipment
measures Earthquake resistance measures for buildings and facilities
 Establishment of a disaster prevention center to serve as
an operations base for the entire company in the event ofa disaster Equipping all locations with a multi-channel access (MCA)
radio system*1 and satellite phones
 Installation of crisis management servers (earthquakeresistant structure) and emergency power generators
 Operation of a DR*2 system and DCs*3Systemmeasures

 Implementation of site and building safety assessments
 Training in operation of earthquake early warning systems
and employee safety information systems
 Preparation of supply chain information
 Preparation of a business continuity plan (BCP)

Skills Ongoing resilience training (disaster simulation exercises)*1 Radio system used in Japan for various purposes, from daily
operations to emergencies and disasters*2 System for restoring and repairing damaged systems (DisasterRecovery)*3 General term for special facilities equipped with and operating
computers, data communications, and other equipment (DataCenter)

Enhancing Our Global Risk Response
In response to global risks that occur not only inJapan but also in other countries (e.g., parts and raw
material shortages, the Ukraine conflict, etc.), we aretaking necessary actions on a global basis to quickly
assess the situation (weekly BCP reports) both in

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Japan and overseas. Standardization is also underway
so that domestic and international locations can takemeasures on their own initiative, and we are enhancing
our ability to respond to key risks seen in the businessenvironment of each company.

About Toyoda Gosei

Value Creation Story

Value Creation Strategy

Foundation of Value Creation

Data

Basic Policy for Cybersecurity Measures
To strengthen the control of confidential information,
annual checks of the compliance status of each division
based on company confidentiality management
regulations are conducted together with onsite audits.
Self-inspections are also done at Group companies inJapan and overseas, as well as at major suppliers.
Confidentiality officers are assigned in all departments,
and confidentiality education activities are conductedbased on information system security operating

standards and a confidential information management
manual. At domestic and international Group
companies and major suppliers, specific measures
are stratified and executed based on the size ofthe impact on Toyoda Gosei and inspection results
for cybersecurity risk measures at each company.
Regular reports and discussions are conducted in allcompany-wide councils, and cybersecurity measures
are implemented together globally.

Main Cybersecurity Measures
Classification

Prevent
leakage due tonegligence

Prevent leakage
and damage
due to malicious
intentMeasures (domestic and international Group companies and suppliers respond in accordance with the size of the impact)

Facility andequipment
measures Data encryption on personal computers

Systemmeasures Security measures when sending emails out of the company (mandatory cc to superior’s email address,
encryption of attached files)

Facility andequipment
measures Installation of computer anti-virus software Constant monitoring of unauthorizedcommunications
 Prevention of unauthorized connections tothe network

 Firewalls to control communication with outside parties Detecting and preventing tampering with systems open to thepublic outside the companySystemmeasures Confidentiality pledge
 Stricter standards for allowing items to betaken from premises

 Restricted access to file servers

Educational activities(morale measures) USB device connection controls

 Security training for employees Training in responding to targeted email attacks
 Company-wide confidentiality controls inspections and on-site audits using check sheets

Compliance
Basic Philosophy
Toyoda Gosei’s management philosophy states, “We
promote business operations with integrity throughthe establishment of a system founded on thoroughcompliance and corporate ethics.” Together withhighly ethical and fair business practices, we strivefor thorough compliance in all areas based on thisphilosophy. The Toyoda Gosei Group Charter for
Business Ethics sets forth shared values and acode of conduct for the entire Toyoda Gosei Group.
Group companies in Japan and other countries thenformulate and implement their own code of conduct
based on the Charter. Toyoda Gosei Co., Ltd. has alsoestablished the Toyoda Gosei Guidelines for Business
Ethics, which it expects every employee to follow, andhas worked to familiarize all employees with theseguidelines.

Compliance Implementation SystemToyoda Gosei Compliance Implementation System

Toyoda Gosei has established the Internal Controls
Committee with the Company’s president serving aschairman and all company officers as members, whose
activities include reporting on and discussing thestatus of compliance with business ethics, laws, andregulations. The items reported and discussed in theCommittee are shared with the compliance advocates
selected by each department in the Company-wide
Compliance Implementation Council so that they will
be incorporated into the activities of each workplace.
The Committee works for thorough compliance witha unified approach between management and theworkplace.

Corporate activities

Domestic
affiliates

Support for thecompliance system

ManagementPhilosophy

Support for thecompliance system

Toyoda Gosei
Group Charterfor Business Ethics

Overseas
affiliates

Toyoda Gosei Guidelines
for Business Ethics
All company executives

Compliance advocates from each divisionInternal Controls
Committee

Company-wide Compliance
Implementation Council

Ensuring compliance
Legal affairs/compliance training

Compliance consultation office(internal/external)
Labor consultation office(internal)

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