Mitsubishi Chemical Group Corporation

Escalating geopolitical tensions, trade friction and economic sanctions, and large-scale natural disasters or pandemics could disrupt the supply chain, causing difficulties in procuring raw materials or selling products. If economic security issues materialize, procurement and sales activities could also be affected. As countermeasures, the Group is diversifying procurement sources and considering alternative raw materials, building a promotion structure for responding to economic security risks, enhancing country risk assessment, and strengthening BCP.

If systems or cloud services used by the Group are breached by cyberattacks, corporate activities such as production, sales, and settlement could be halted, with potential impact on business partners as well. There are also risks of reduced competitiveness due to leakage of technical information and damages/administrative penalties associated with personal information leaks. The Group is promoting continuous monitoring through the establishment of a CSIRT/SOC, implementing zero trust-based security measures, and strengthening security for plant control systems in the OT domain.

In segments such as Basic Materials, large volumes of raw materials and fuels such as crude oil and naphtha are consumed, and if product prices cannot be adjusted sufficiently or in a timely manner in response to sharp price fluctuations, business performance could be adversely affected. There is also procurement risk arising from dependence on specific regions or suppliers. The Group addresses this through early collection of information on raw material and fuel price trends, diversification of purchasing, and thorough adjustment of production plans and inventory management.

A global economic downturn or capacity expansion by competitors could disrupt the supply-demand balance for various products, making it difficult to secure returns commensurate with capital investment. Changes in demand trends for products such as LCD panels directly affect the performance of film and sheet products, and for products with high dependence on specific customers, demand fluctuations at those customers affect performance. The Group addresses this through adjustment of production plans based on sales trend forecasts, structural reform, and development of new customers and applications.

Large-scale natural disasters such as earthquakes, tsunamis, typhoons, and floods could cause human casualties among employees, equipment damage, and disruption of social infrastructure, potentially halting development, manufacturing, and sales activities temporarily. Even if direct damage is minor, damage to the supply chain or logistics could disrupt product supply, and if recovery is prolonged, the impact on business performance could be severe. The Group has implemented measures such as formulating BCM guidelines and BCPs, strengthening the disaster-resistance of facilities, and taking out property insurance.

If a compliance violation occurs, it could result in administrative penalties such as business suspension, revocation of licenses, or fines, as well as criminal penalties, suspension of transactions, and damages, potentially causing substantial losses and significant damage to brand image. Costs of responding to changes in and tightening of domestic and international regulations (investment and labor burden) could also affect business performance. The Group has established a compliance structure headed by a Chief Compliance Officer, and monitors regulatory trends through departments responsible for each legal field and region.

Accidents such as fires or explosions at manufacturing plants could result in facility restoration costs and business suspension, as well as human casualties and impact on local communities, potentially leading to a decline in social trust. Leakage of chemical substances outside the manufacturing site could cause environmental contamination and human harm, affecting performance through resolution costs and reputational damage. The Group addresses this through continuous implementation of safety activities, building disaster prevention systems utilizing DX technology, and taking out property insurance and preparing BCPs.

As the Group conducts extensive production and sales activities overseas, fluctuations in foreign exchange rates related to foreign currency-denominated transactions affect business performance, and translation differences in the consolidated financial statements could also affect financial condition. There is also a risk that rising interest rates or a decline in credit ratings could worsen the terms of borrowings and bond issuance, increasing interest payments. The Group strives to curb financial risk through hedging via forward exchange contracts, diversification of funding methods, and procurement of long-term funds at fixed interest rates.

The persistence of legacy systems and insufficient securing and development of excellent digital talent could hinder business process reform and efficiency improvement, causing the Group to fall behind competitors in competitiveness. If planned DX investment is not made, there is a risk of excessive investment burden arising in the future as well as missed new business opportunities. The Group addresses this through establishing an educational system for developing smart talent, integrating and standardizing core systems, developing data infrastructure, and making planned digital infrastructure investments.

Amid the strengthening of human rights-related regulations centered on Europe and the United States, if human rights violations such as child labor or forced labor occur within the Group or its supply chain, this could lead to a decline in social trust and brand strength and suspension of transactions, affecting business performance. Harassment in the workplace risks deteriorating employee health and increasing turnover, as well as leading to litigation and a decline in social credibility. The Group addresses this through establishing global policies in line with international norms, promoting human rights due diligence, and engaging with the supply chain.