Introduction

GovernanceManagement

Social Innovation

Environmental

SocialGovernance

Assurance

Hitachi Sustainability Report 2023

149

Risk Management

Corporate GovernanceBusiness Ethics and Compliance

Risk Management
Executive Summary

Basic Concept
We have seen the emergence of social issues such as rapid digitalization and complex global political and economic change, as well as environmental issues such as climate change, resource
depletion, and large-scale disasters. In response, the business environment has become so volatile that it is difficult to predict the future, and the response to these changes has become amajor factor in maintaining business models. Hitachi strives to comprehend and analyzes this business environment quantitatively and qualitatively. Based on social issues, our competitive

Addressing Risks and Opportunities

environment, and management resources, we engage in risk management from the perspective of responding to risks and opportunities for further growth, creating profit-earning opportunities

Business Continuity Initiatives

while controlling risks.

Information Security
Governance Data

Topic

Addressing
Risks and
Opportunities
Business
Continuity
Initiatives

Overview

In April 2022, Hitachi established a new Risk Management Meeting within the Senior Executive Committee to deliberate and determine materialities related to companywide risks. The President serves as chair of the Risk Management Meeting and the chief risk management officer (CRMO) serves as vice-chair. By managing thediverse risks of Hitachi’s global operations centrally, we are building a solid management foundation that is aligned with growth strategies.
We provide the Hitachi Group Guidelines for Developing Business Continuity Plans to Group companies to enhance our preparation for major disasters and otherrisks. In addition to strengthening safety and business continuity measures in the event of natural disasters such as large-scale earthquakes in Japan as Natural
Disaster BCPs, the procurement departments of business units (BUs) and major Group companies in Japan strive to enhance procurement BCPs to minimize theimpact of future incidents.

Introduction

GovernanceCorporate GovernanceManagement

Social Innovation

Environmental

With the rapid advance of digitalization and complex developments in the political and­economic landscape globally, the business environment is changing with each day. In the Risk

Risk Management

Management Meeting, which is chaired by the President with the Chief Risk Management

Addressing Risks and Opportunities
Business Continuity Initiatives

Assurance

Hitachi Sustainability Report 2023

150

Addressing Risks and Opportunities

Business Ethics and Compliance

Executive Summary

GovernanceSocialGroup Governance Efforts
PolicyActivities

Officer (CRMO) acting as vice-chairperson, Hitachi monitors and analyzes this business environ-

We amended our Group Governance Policy in April 2023. The policy aims to clarify how thement quantitatively and qualitatively and manages risks in terms of the response to risks that

Hitachi Group’s governance should function and to explicitly state responsibilities and roles ofHitachi should prepare as well as opportunities for further growth in light of, for example, social

different organizations given Hitachi’s presence as a global enterprise.

issues, competitive advantages and management resources. We will create revenue opportuni-

Achieving sustainable growth through the global expansion of the Social Innovation BusinessInformation Security

ties while controlling risks. We will identify severe risks that could potentially have a significant

requires group-wide optimal management, based on the Group’s common aim, to reflect global

Governance Data

impact on Hitachi’s operations in terms of the nature of risk events, the expected time period,

perspectives and diverse values in our business management and efficiently allocate manage-

the likelihood of their occurrence and their seriousness when they do occur, and we discuss

ment resources. Based on this policy, the Hitachi Group integrates its management to formulate

and implement measures against the risks. By identifying the various risks Hitachi faces whileand execute the Group’s strategies in pursuit of synergies within the Group, strengthen its man-operating around the world, we are working to achieve a solid management foundation that isagement foundation through common discipline and rules, and streamline business manage-

linked to our growth strategy.

ment through the standardization of our global operations. In this way, we will accelerate our
global growth by ensuring the transparency and fairness of our business management, protecting the Hitachi brand’s value and promoting our Social Innovation Business.

Hitachi’s Risk Management Structure
GRI 2-12/2-13/2-24/3-3/403-2

Structure

We established five working groups (WGs) according to types of risk under the Risk
Management Meeting. The WGs utilize related group corporate functions and manage respective risks appropriately.
Risk Management Structure

Board of Directors
Senior Executive Committee
Risk Management Meeting
CRMO
Risk categories / Working Groups
Investment risks

Business risks

Crisismanagement

ComplianceGroupgovernanceコンプライアンス
本部

安全衛生マネジメント
推進本部

営業統括本部

投融資審査統括本部

推進組織
投融資戦略委員会室Introduction

GovernanceManagement

Social Innovation

Environmental

Crisis Management Initiatives

Risk Management

example is quick action taken in the event

Executive Summary

Addressing Risks and Opportunities
Business Continuity Initiatives

that a crisis occurs. Even in ordinary
times, we are ready to take action against

sale of assets, orders for projects) to facilitate our response to risks and secure growth opportuni-

Occurrenceof crisisties. Hitachi has a framework for delegation of authority within a three-layer deliberation structure—the Board of Directors, the Senior Executive Committee and the business units—in
accordance with the size and details of the project to ensure appropriate and flexible decision

Potential risks

each of the serious risk categories toenhance our preparedness for contingen-

Information Security

cies and ensure appropriate action. In

Governance Data

fiscal 2022, our corporate measures in theareas of large-scale natural disasters inJapan, as well as cybersecurity and otherrelated issues, were strengthened andreviewed. Our aim was, for example, tomaking when carrying out an investment or other activity. For important projects, the Investment

infrastructure. In fiscal 2023, the expansion of our measures for business units

Various risks

Management of serious risks

Response whena crisis occurs• Establishment of a task force• Consolidation and centralization of
information• Initial response, implementation ofabatement measures

Strategy Committee, an advisory body consisting of members of our corporate divisions, examines risks in a multifaceted manner to submit a report (including recommendations of approval or

Crisis Management WG
Responding to
non-serious risks• Ongoing monitoring• Consideration of categorizing a
non-serious risk into serious risks

disapproval) to the Senior Executive Committee whose members include the President. After aninvestment is executed, we periodically monitor the status of the project. If the project fails toproceed as planned, we have a framework in place to decide whether to continue with the investment, which might lead to a decision to withdraw. The aim is to enhance our capital efficiency.
In response to changes in the economy finance, geopolitics, customers and other compo-

Preparations under normal conditions

nents of the management environment (risks and opportunities), the criteria for providing invest-• Preparation of response and operational steps based oncrisis scenarios• Conducting drills, revising procedures, responding to issues• Reconfirming business continuity plans

ment and post-implementation monitoring (including PMI) are continuously strengthened in an

facilitate the migration of major systems to
the cloud and duplicate our information151

Hitachi has a proper framework of decision making in different phases of investment (e.g., M&A,
Severity

achieve more sophisticated resilience. An

Hitachi Sustainability Report 2023

Structure

For crisis management, Hitachi strives toBusiness Ethics and Compliance

Assurance

Efforts Against Investment Risks

Activities

Corporate Governance

GovernanceSocialand the Hitachi Group companies as well as Diagrammatic drill, among other initiatives, will bestrengthened to enhance the Group’s resilience globally.

Framework of Decision Making
After an investment
is executed

When an investment
is executedCompliance Initiatives
Activities

effort to achieve the Mid-term Management Plan and capital allocation plans.

GRI 201-2

Resolution by the
Board of Directors(particularly importantmatters)

Board ofDirectors

As a cross-sectoral compliance initiative, four related departments worked together and shared

Chairperson: CRMO

information with one another in fiscal 2022 regarding the measures implemented by each department under regular conditions (e.g., development of regulations, training, monitoring, audits) andhow to handle contingencies in the event that they arise (e.g., communication with internal andexternal stakeholders including senior management when a major risk manifests) to handle major

Approval by the
President(important matters)

compliance-related risks that concern corporate ethics and laws, the environment, quality, andSenior Executive
Committee
Risk Management
Meeting

health and safety. These departments work to strengthen their cooperation in terms of management
methods in different categories of risks. In this way, we have sought to raise the level of our risk
management in the different categories and reduce risks. In fiscal 2023, we will seek to establish anorganizational climate for encouraging employees to speak up and preventing violation of laws andinternal rules with the aim to reduce the Hitachi Group’s compliance-related risks.

Approval by the BU
CEO or executive
officer in charge ofthe sector

Business Unit
(BU)

Business withdrawal,
sale or continuation

Investment Strategy
Committee

ReportA committee whose
members are from related
corporate divisions such as
the Finance Group

Clarifies the risk factors fora proposed matter,
identifies important
discussion points, andissues a report (including
recommendations ofapproval or disapproval)

ReportSenior Executive
Committee
Decision by the BU to withdraw
from, divestiture or continue
with the business

Conflicts withspecified conditions

Monitoring byhead office

Monitoring by the BUIntroduction

GovernanceManagement

Social Innovation

Environmental

SocialQuantitative Understanding of Risks
Activities

Corporate Governance

Hitachi calculates expected maximum risks (Value at Risk) by statistical methods according toBusiness Ethics and Compliancethe type of assets held on the group’s consolidated balance sheet. Similarly, the risks of increas-

Risk Management

ing the backlog of long-lead projects have been quantified since fiscal 2022.

Executive Summary

Addressing Risks and Opportunities
Business Continuity Initiatives
Information Security
Governance Data

We avoid missing out on growth opportunities by visualizing the capacity for growth investment, etc., considering consolidated net assets and other factors. We also engage in monitoringand hold discussions through the Risk Management Meeting to ensure that risks are not excessively unbalanced compared to Hitachi’s consolidated financial strength.
We also quantitatively analyze and understand the state of risks and profitability on a regional
and per-sector basis.

Responding to Climate Change Risks and Opportunities
Activities

GRI 201-2

In June 2018, Hitachi announced its endorsement of the recommendations by the Financial
Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD).
P.043 Climate-related Financial Information Disclosure (Based on TCFD Recommendations)

For details of the risk factors, please refer to page 34 of the Annual Securities Report (the154th business term).
Annual Securities Report (the 154th business term) P.34
https://www.hitachi.com/IR-e/library/stock/hit_sr_fy2022_4_en.pdf

Governance

Assurance

Hitachi Sustainability Report 2023

152

Introduction

GovernanceCorporate GovernanceBusiness Ethics and Compliance

Risk Management
Executive Summary
Addressing Risks and Opportunities

Business Continuity Initiatives

Management

Social Innovation

Environmental

SocialGovernance

Assurance

Hitachi Sustainability Report 2023

153

Business Continuity Initiatives
Approach to Business Continuity Plans (BCPs)
Approach

Activities

BCPs Initiatives

ucts. Based on our experience with the various impacts e.g.

Activities

lockdowns caused by COVID-19 and wars, we will accelerate

Given the close relationship of our business to social infra-

Hitachi, Ltd. continues to strengthen measures against natural

structure, we continue to strengthen BCPs to ensure that thedisasters by conducting annual earthquake drills, which simu-

impact of risks do not disrupt our business and thereby

late a major seismic event.

­significantly affect society. We published the Hitachi Group

Information Security

Guidelines for Developing Business Continuity Plans (Overview)

Governance Dataand the Hitachi Group Guidelines for Developing BusinessContinuity Plans (By Department) in Japanese, English, andFY2020• Drills to set up an earthquake task force on aremote-work basis on the assumption that all
work must be conducted remotelyon the assumption that not everyone can assemble at the office on weekdays and that there is a
mix of those who come to the office and those
who work from home

FY2021

Group companies. These guidelines served as a useful tool in
dealing with the COVID-19.
We also appointed personnel with responsibility for risk-­
response policies at our main overseas bases. Major Group
companies outside Japan prepared BCPs to strengthen

FY2022

response to business risks including major disasters, infec-• Conducted training for remote workers, assumingthat headquarters disaster-response staff living inareas subject to JMA Seismic intensity 7 are notable to participate in drills in person; simulated anearthquake occurring directly under the Tokyo
metropolitan area during daylight on a weekday

tious diseases, political instability, social disruption, and acts

Procurement BCPs Initiatives
Hitachi, Ltd. and its Group companies in Japan have formulated

Approach

Activities

BCPs for each business in preparation for major earthquakes,

Hitachi enhances procurement-related business continuity

wind and flood damage, and novel strains of influenza. Eachplans (BCPs) across Group companies worldwide to ensurebusiness division reviews its BCP regularly and makes revisions

significant incidents*1 do not disrupt our business or seriously

as necessary to reflect the latest risk assessment results. In fiscal

impact the society.

2022, Hitachi, Ltd. and its Group companies in Japan strength-

an effort to enhance procurement BCPs throughout theGroup worldwide.
*1 Events such as natural disasters (including major earthquakes) serious enoughto disrupt business

Achievements in Fiscal 2022
We have introduced the Procurement BCPs
Management System for our procurement partners inJapan to share information (on contingency impact
surveys) efficiently among Hitachi Group companies
during disasters.
In fiscal 2022, we added a new function to identify
the locations damaged by typhoons and other windstorms in a timely manner, which have been increasingof terrorism.

Formulation of BCPs

We share these activities with procurement divisions in
BUs and key Group companies outside Japan as appropri-• Remote drills using a Web conferencing systemenhance preparedness for major disasters and other risks.
Group Guidelines for Pandemic Influenza Preparedness forthe above measures.

ate, making use of this information in reviewing strategies in
Drill Simulating Earthquake Measures

Chinese for distribution to all Hitachi Group companies toRegarding infectious diseases, we released the Hitachi

strategically; and (5) consider and promote substitute prod-

To minimize the impact of disasters that may occur, theened BCPs related to infectious diseases such as COVID-19 inprocurement divisions in BUs and key Group companies:

particular, as well as continuity plans in the event of mega-­(1) standardize and use generic parts to make procurement asearthquakes. Group companies outside Japan have formulated

flexible as possible; (2) cultivate multiple suppliers; (3) distribute

BCPs in light of risks of concern in their respective locations.

production across several locations; (4) budget inventory

Note: Hitachi normally refers to suppliers (including suppliers, vendors or providers) as procurement partners who build business together on an equal footing.

in recent years.
In the future, we promote systematization of incident identification and survey for overseas procurement
partners in China and other countries.
P.108 Responsible Procurement

Introduction

GovernanceCorporate GovernanceManagement

Social Innovation

Improving Safety for Employees Sent toDangerous Regions

Environmental

SocialGovernance

GlobalLogic Business Continuity Plans
GlobalLogic continues to execute Business Continuity

Activities

Plans (BCPs) in all business locations. Maintaining theBusiness Ethics and Compliance

Hitachi takes all possible measures to ensure safety whensafety of employees as the highest priority, the com-

Risk Management

sending employees to countries and areas at high risk of con-pany continues to operate in Ukraine through BCPs.

Executive Summary
Addressing Risks and Opportunities

Business Continuity Initiatives

flicts, terrorism, and other threats. On-site surveys are also

A diverse distribution of the workforce is a key

conducted by in-house and outside experts beforehand.

factor in the ability of GlobalLogic to operate safely and

In addition, Hitachi, Ltd. participates in the Council for

maintain productivity. A total of 15% of Ukraine team-

Public-Private Cooperation for Overseas Safety organized bymates live and work outside Ukraine, with another one-

Information Security

Japan’s Ministry of Foreign Affairs to enhance collaboration

third located in the relative safety of western Ukraine. In

Governance Databetween the private and public sectors in this area, by which

addition, the company conducts a program to incentiv-

contributes to safety measures at other Japanese corpora-ize temporary or permanent employee relocation totions operating outside Japan.

safer locations inside and outside of Ukraine.
In fiscal 2022, the company improved safety mea-

Achievements in Fiscal 2022

sures and business continuity to prepare for the future,including the opening of 11 satellite offices acrossIn fiscal 2022, Hitachi, Ltd. undertook measures for the

Ukraine. All offices have been equipped with redundanttimely provision of information to ensure the safety of

power and communications infrastructure, including

our employees around the globe. These measuresmultiple satellite internet connections and mobile powerincluded posting information from contracted consul-

banks. The company also maintains a sufficient inven-tants and news agencies on the company’s intranet. In

tory of emergency provisions in its offices.

addition, the company employs an outside specialist to

In addition to the preceding, GlobalLogic imple-

provide medical assistance to Hitachi Group employees

mented a long-range Ukraine de-risk plan beginning in

outside Japan.

fiscal 2023.

Assurance

Hitachi Sustainability Report 2023

154