Mitsubishi Electric Corporation

Economic security risk is rising due to intensified U.S. tariffs, export restrictions in various countries, and heightened geopolitical tensions. As more than half of the Mitsubishi Electric Group's sales are overseas, social, economic, and political turmoil could affect product demand and customer sales trends. In response, the Group conducts research and analysis of policy trends and legal systems, manages sensitive technologies, and implements integrated risk control including the supply chain.

Diverse changes in the supply chain environment—including logistics network disruptions due to geopolitical risk, raw material price fluctuations, supply disruptions from natural disasters, expanding economic security regulations, and responses to human rights issues—may affect business activities and financial results. Reducing dependence on specific regions has become an urgent priority, and the Group is promoting resilience measures such as diversifying procurement, securing inventory, exploring alternative products, and developing new routes.

Laws and regulations related to carbon neutrality, the circular economy, and human rights due diligence are being developed in a multipolar manner centered on Japan, Europe, and the U.S., requiring timely responses to carbon pricing systems, emissions trading, regulations on the use of recycled materials, and other requirements. Delayed responses could impact business activities and financial results, as well as pose risks of economic sanctions and reputational decline. The Group is operating an internal carbon pricing system, strengthening human rights due diligence based on the RBA, and building a system to visualize non-financial information.

Sophisticated cyberattacks exploiting AI technology may lead to leaks of customer information, sales information, technical information, and intellectual property, as well as impacts on factory production. Attacks extend beyond IT environments into OT environments, and the risk of disruption to critical infrastructure control systems and factory management systems is rapidly expanding. The Group is building an advanced attack response system that includes using AI for defense, and is strengthening measures to prevent information leaks caused by human error.

The acceleration of technological innovation and intensifying competition are increasing uncertainty in the business environment, raising game-change risk. In particular, regulations in the AI field are expanding in various countries, requiring the Group to comply with laws and regulations while also capturing business opportunities. The Group has introduced an AI risk assessment system based on the Mitsubishi Electric Group Ethics Policy, and is working to create new value through collaboration and co-creation with universities, other companies, and customers.

Large-scale disasters such as infectious diseases, earthquakes, tsunamis, typhoons, flooding, volcanic eruptions, and fires could damage manufacturing, sales, and R&D sites in Japan and overseas, potentially disrupting business activities. Disruptions to the supply chain could affect procurement, production, and logistics, posing a risk of substantial losses. The Group addresses these risks through management discussions at the Risk Management and Compliance Committee, establishment of a company-wide emergency response office, and BCP measures implemented at each business site.

Losses recognized due to product or service defects, as well as reputational decline resulting from compliance violations, could affect overall management. In light of past instances of multiple compliance violations, preventing the emergence of internal risks stemming from insufficient human resources and other resources remains a challenge. The Group is working on business process reform utilizing DX and AI, promoting speak-up culture, and early detection and response through internal audits and various inspection activities.

North America, Europe, and China each account for approximately 10% of sales, and the Group purchases imported components denominated in U.S. dollars and euros and conducts foreign-currency-denominated transactions at manufacturing sites in Asia, meaning sudden exchange rate fluctuations could affect financial results. Although hedging is implemented through forward exchange contracts and other means, risk remains if actual rates deviate significantly from assumed rates.

A decline in the stock market could reduce the value of marketable securities held by the Mitsubishi Electric Group and decrease pension assets. While the basic policy is to "in principle, not hold cross-shareholdings," the Group holds certain shares deemed necessary for business operations, which remain exposed to market declines. Each year, the Executive Officers Meeting and the Board of Directors review the rationale for holding such shares, and shares deemed to have little rationale are sold or reduced.

Individual risks such as geopolitical risk, cyberattacks, large-scale disasters, and compliance violations may become compounded and complex, spreading throughout financial markets—including foreign exchange and stock markets—and potentially causing chain-reaction effects on the Mitsubishi Electric Group's financial results. The Group categorizes and prioritizes each risk using risk maps to reduce impact and improve the effectiveness of preparedness measures.