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Governance

Risk Management

As the environment surrounding the company becomes more complex and diversified, the Ricoh Group positions risk management as an essential initiative in appropriately controlling the various internal and external uncertainties that surround the Group's business and in implementing management strategies and achieving business objectives. All Group employees strive to improve risk management, as illustrated in the diagram below.

Risk Management System

image: Risk Management System

Risk Management Committee

The Risk Management Committee is positioned as an advisory committee to the GMC and supports the decision-making of the GMC in the Group's risk management activities. It also promotes risk management activities of the entire Group and creates a highly feasible mechanism in line with the actual conditions by periodically revising the risk management system.

Roles of the Risk Management Committee (Chairperson) in the risk management system
  1. Risks are roughly classified into 1) management issues faced during the execution of strategies amid the diversifying business environment (strategic risks), and 2) risks that may arise during the operation of business (operational risks). After systematically and comprehensively extracting and evaluating risk factors, the committee proposes a list of potential “management priority risks” to the GMC and provides support on its subsequent decisions.
  2. The committee sets up a response division for each “managerial risk” and supports the risk management PDCA activities of the division. The committee also assigns a GMC member respectively to each “managerial risk” to evaluate these activities, and promotes the evaluation and proposal process of each risk management activity, that is pursuing both the management team's involvement in risk management as well as the effectiveness of the countermeasures.
  3. In addition to “managerial risks”, the committee cooperates with the risk management systems of each division and Group company to identify individual risks, share and roll out “managerial risks”, thereby to lead enhanced risk management activities of the entire Group.

The committee chairperson is appointed by the CEO, and comprises representatives from each organization mainly undertaking the headquarters function. With its basic stance of “always be open to risks,” the committee convenes meetings as needed, and makes recommendations to the GMC even if risks are implied by parties outside the committee.

Meeting for Strengthening Groupwide Collaborative Risk Management

Regular meetings will be held to strengthen collaboration among the various divisions and business units throughout the Ricoh Group and to increase the effectiveness of risk management at each division of Ricoh and each Group company.

The chairperson of the risk management committee will set up these regular meetings, and risk management promoters who are appointed by the head of each business unit will attend them. The main objectives of these meetings are as follows.

  1. Sharing information to determine focus managerial risks for the entire Ricoh Group and promoting and developing risk awareness in each business unit.
  2. Gathering information about important risks identified in each business unit (each division of Ricoh and each Group company) and reflecting them in focus managerial risks for the entire Ricoh Group.
  3. Information sharing and implementation of interactive opinion exchanges, regarding the promotion of risk management.

Major focus managerial risks for the fiscal year ending March 31, 2020

Strategic risks
  • Business alliance with other companies and strategic investment
  • Response to technological changes
  • Securing human resources, etc.
Operational risks
  • Information security
  • Product liability
  • Long-term delay and suspension of product supplies
  • Protection of intellectual property rights
  • Response to public regulations (including environmental regulations)
  • Impacts of climate change
  • Impacts of disasters, etc.

Responding to incidents and accidents

Setting down the Ricoh Group “Incident Management Standard” for all affiliate companies in Japan and overseas, the Ricoh Group has created a system to deal with incidents that may have a negative impact on corporate business activities and to prevent reoccurrence based on the president's policies. “serious incidents” are to be reported from the division in which the incident occurred through the management division primarily responsible for each incident, to the Ricoh President, the Internal Control Committee members, the disclosure management division, officers connected to the case, and Audit and Supervisory Board Members.

A summary of serious incidents that have occurred during the most recent six months, together with a description of how they were dealt with and the measures taken to prevent reoccurrence, as well as changes in the numbers of occurrences classified by incident, are reported to the Board of Directors every half fiscal year. The GMC will refer to the content of these serious Incident reports as well as changes and trends in the number of occurrences when reviewing managerial risks for the next fiscal year.

Among the reported incidents, the number of compliance-related serious incidents (corresponding to GRI G4 SO5 (a)) in the past three years were 19 in the fiscal year ended March 31, 2017, and 27 in the fiscal year ended March 31, 2018, and 33 in the fiscal year ended March 31, 2019.

Reports during period (percentages of total)
Total number of incidents in year ended March 31, 2019: 33
The year ended
March 31, 2017 (%)
The year ended
March 31, 2018 (%)
The year ended
March 31, 2019 (%)
Labor law violation 11 13
Professional misconduct 7 36
Embezzlement or theft 63 22 36
Corruption 4
Information issues 4
Fraudulent accounting 5 4 6
Inappropriate reporting 19 3
Unfair trade practices 7 3
Others 32 22 3

Of these compliance-related serious incidents, there was one major incident that required disclosures to external organizations in the fiscal year ended March 31, 2016, which was an accounting violation occurred in India. However, there has been no major incident since the fiscal year ended March 31, 2017. We will leverage our website and other vehicles to promptly share any information that should be disclosed regarding Ricoh India.

Financial irregularities at Ricoh India

An independent auditor that Ricoh India appointed in 2015 raised concerns regarding reporting, and delayed the publication of the results until the matter could be concluded. Ricoh India's audit committee, together with its accountants and lawyers in India, undertook an internal investigation which revealed that some employees had falsified accounts. Ricoh India announced its fiscal 2016 results on November 18, 2016.

Timeline
  • Ricoh India bolstered corporate governance by changing its independent auditor after filing its results for the first quarter ended June 30, 2015.
  • In the second quarter of that year, the new independent auditor raised concerns toward Ricoh India's management and audit committee regarding financial irregularities on the part of some employees.
  • Ricoh India's audit committee appointed external experts and under¬took an internal investigation, which heightened concerns that accounting violations had occurred, with the company filing a report with the Bombay Stock Exchange on April 20, 2016.
  • On July 19, Ricoh India continued its probe into financial irregularities by some employees, announcing that it projected losses for the year ended March 31, 2016, to reflect corrected results.
  • On November 18, Ricoh India announced its results for the year ended March 31, 2016.
  • On September 11, 2017, FDS (one of Ricoh India's vendors) filed a petition to initiate insolvency resolution process against Ricoh India under the Insolvency and Bankruptcy Code of India.
  • On September 29, the National Company Law Tribunal dismissed the petition and FDS withdrew the petition based on this settlement.
  • On October 26, FDS filed a petition to initiate corporate reorganization proceedings as one of Ricoh India's creditors under the Insolvency and Bankruptcy Code of India.
  • On January 1, 2018, Ricoh India filed a petition with the National Company Law Tribunal to initiate insolvency resolution process under Section 10 of the Insolvency and Bankruptcy Code of India.
  • On February 15, 2019, the COC of Ricoh India approved one of the plans, amongst the several resolution plans submitted. The Resolution Professional filed this Resolution Plan with the NCLT for its approval. The submitted resolution plan is presently pending consideration of the NCLT.
  • On May 9, 2019, the Company allocated expenses which relate to Ricoh India of ¥14.9 billion in consolidated operating results for the fiscal years ended March 31, 2019.

Ricoh takes the above matter seriously, and will fully cooperate with any continuing oversight by India regulators and courts. Concerning its global systems, it will reflect external expert assessments of the effectiveness of governance and internal controls at overseas subsidiaries in formulating and deploying measures to reinforce internal audits at those subsidiaries and prevent similar incidents from recurring.

BCP (Business Continuity Plan) of the Ricoh Group

The Ricoh Group has created a Business Continuity Plan (BCP) to enable the business to quickly recover and continue and to minimize the degree of damage in the event of an unanticipated disaster or accident.

In addition to the business continuity plan we enforce BCM issues such as implementation, application, education, training, correction and reviews as the coverage of BCPs.

BCP Conceptual diagram

image: BCP Conceptual diagram

Each Group company establishes BCPs depending on its situation. Overall, the Ricoh Group has formulated a BCP to manage three possible scenarios: new influenza pandemic, a wide-area disaster in Japan including major earthquakes, and a long-term suspension of product supplies.

Main steps of formulation
  1. Policy
  2. Plan
    (1)
    Identification of phenomenon to be examined
    (2)
    Evaluation of impact
    (3)
    Assumption of “important operations” damage
    (4)
    Extraction of “important elements”
    (5)
    Development of BCPs
  3. Implementation and application
  4. Education and training
  5. Inspection, correction and review by the management

Currently, the Ricoh Group has two BCPs, one being formulated on the assumption of “New Influenza epidemic” and the other being the “Widespread disaster in Japan, such as major earthquakes.”

New Influenza BCP

The Ricoh Group establishes response systems and execute necessary actions against the risk of a new influenza epidemic, based on the following basic policy.

<Basic policy>
1)
Ensure lives and health of Employees and their family members.
2)
Prevent infection from spreading.
3)
Provide services and products that are strongly requested by our customers and societies.
4)
Maintain business foundation.

Alert Level

In order to facilitate Ricoh Group companies around the world to recognize the conditions of outbreak of new influenza, and to respond based on a prescribed action plan, in the event of an outbreak of new influenza the Ricoh Group has established and has been applying the original alert level and criteria of issue. Having experienced the new influenza (A/H1N1) epidemic around the world from 2009 to 2010, the Ricoh Group conducted a review of the alert level in order to enable appropriate responses according to the individual conditions, and has been adopting the current level since FY2011.

<Original “Alert Level” of the Ricoh Group>

The 5-step decision levels are formulated, and each Ricoh Group company implements countermeasures according to each level.

By referring to the phases released by the WHO, the Headquarters of Ricoh conducts a comprehensive study of : (1) the spread of infection, (2) the severity level, and (3) the damage to the Ricoh Group in each region, etc., and make a specific assessment of the alert level in each region.

The following is the overview of the alert levels.

Original  Alert Level of the Ricoh Group

Action Guideline

The Ricoh Group has established and is implementing the “Ricoh Group New Influenza Action Guideline.”

The Action Guideline provides operations and activities to be conducted by each department and employee, approved/prohibited actions under each alert level. It also provides necessary preparations and execution items for operations to be continued under the alert level 5.

Important business operations

Ricoh Group companies / Divisions decide the business operations with priority that should be continued even during the pandemic of alert level 5, ensuring that safety of Employees is secured.

As a rule, the Ricoh Group suspends its businesses under the pandemic of alert level 5 and its Employees shall stay at home. Nevertheless, there are business operations whose continuation is considered indispensable in order to meet the strong needs of the society or due to inevitable reasons from the management point of view.

1)
Continuing businesses with the utmost priority

Operations to continuously provide customers who are engaged in public works* with products and services in the following

  • maintenance services and supplies of MFP / Printer / FAX.
  • thermal media products (products related to medical services, food and physical distribution industries.)
*
“Customers who are engaged in public works” refer to sectors directly engaged in social functions and infrastructure businesses and the like designated by the government (for instance, public organizations, medical services, public law enforcement and communication bodies, public transportation, food, gas, water, finance and physical distribution industries, etc.).
2)
Continuing jobs with priority

Basic jobs that must be performed by the Ricoh Group so that it can be sustained as a corporation (Payments of salaries, Payments to its creditors, etc.).

Jobs whose continuation under alert level 5 is regarded to be indispensable by each division, which is registered as such by the approval of the division manager in advance, and for which Response Plan that stipulated has been prepared.

Response Plan

The Ricoh Group has prepared a Response Plan, to continue business under the alert level 5.

Each company and each department has conducted analysis of impacts on the Continuing businesses with the utmost priority and Continuing jobs with priority, and prepared response plans based on the “Ricoh Group New Influenza Action Guideline.”

Large Scale Disaster BCP in Japan

In order to respond quickly and effectively to widespread natural disasters and accidental disasters in Japan, the Ricoh Group has established the Large Scale Disaster BCP in Japan based on the following basic policy.

<Basic policy>
  1. Utmost priority must be placed on securing the safety of employees, their families, customers and business partners.
  2. The priority must be placed on the responses to the customers who are engaged in the continuity of public works (e.g., public organizations with important roles for disaster response, medical institutions and government-designated infrastructure businesses).
  3. The impact on the business must be minimized by conducting advance study of countermeasures and making sufficient preparations and responses against possible damages on the business of the Ricoh Group.
  4. The viewpoint of BCP must be always be included in the review of business and operational process, instead of making a stand-alone framework of BCP a separate exercise of business activities.

Assumption

For the purpose of facilitating quick, appropriate and wide-ranging response to various disasters likely to occur in widespread regions in Japan (e.g., earthquakes, large-scale flood disasters, volcanic eruptions, nuclear power plant accidents, etc), BCP assumes representative disasters, such as “Tokyo-Epicentered Major Earthquake” and “Nankai Trough Huge Quake” as a basis of its formulation.

Steps for BCP establishment

After selecting the important functions which the Ricoh Group should address (e.g., disaster prevention, establishment of information infrastructure, sales, production & procurement, etc.) each of these functions establishes BCP according to the following steps.

«Diagram for BCP establishment steps»

image: Diagram for BCP establishment steps

Unified BCP Establishment in the Ricoh Group with the “Small BCP Establishment Manual”

What and how much is sufficient for BCPs established independently by Ricoh Group companies? Is there any part that is missing or that is unnecessary? Those are the questions we have asked. After participating in a model business project of the Ministry of Economy, Trade and Industry and taking advantage of know-how gained from ISO 22301, the Ricoh Group's unique “Small BCP Establishment Manual” was created in 2014. Each Group company subsequently created the BCPs in accordance with that.

This includes a simple checklist for establishment status, making it possible to grasp the response of each company at a glance.

Education and training

Promoting awareness and providing education

“Large Scale Disaster Response Manual” for employees was distributed, while at the same time, an e-learning material titled “Major disaster : Preparation in advance and responses to the outbreak – BCP of the Ricoh Group –,” was prepared to educate the outline of BCP that the Ricoh Group has developed and how to respond to disasters.

Providing training

In addition to the evacuation trainings conducted by each company and business site every year, various types of simulation trainings are provided for specific groups, including “the Group Disaster Task Force”, “the Group Companies Local Disaster Task Force”, “each company and business site of the Ricoh Group”, etc.
In the simulation trainings, Message Board (*) browsing training is also included, which was newly developed as a means of being contacted by the company.

* What is Message Board?
Message Board was developed as a means of transmitting all necessary information from the company to their respective employees even when it becomes difficult due to congested communication lines after an outbreak of a disaster.
In addition to the use of conventional safety confirmation systems and emergency contact networks, “Message Board” is applied as a way by which employees can read messages from their companies using their PCs and smartphones.