Mitsui O.S.K. Lines, Ltd.

With approximately 900 vessels and offshore facilities in operation, damage to hulls, cargo, and crew from accidents such as collisions, groundings, and fires, as well as environmental pollution (oil pollution) from fuel oil spills, are among the most significant risks. Risks of piracy and terrorism also exist. The Safety & Quality Promotion Headquarters works together with each business division and ship management companies to conduct education and maintain hull specifications, while also transferring risk through liability insurance, hull insurance, war insurance, and loss-of-hire insurance.

Since business operations are heavily dependent on information systems, if a major ICT incident occurs due to cyberattacks, ICT system failures, natural disasters, or operational errors, it could have a severe impact on business continuity, brand, and credibility. Based on the "Major ICT Incident Response Headquarters Regulations" and the "Major ICT Incident Response Guidelines," the company has established criteria for judging incident levels and response policies, and has built an organizational response system through the establishment of a response headquarters.

For investments in vessels not premised on mid- to long-term contracts, charter rates and freight rates are significantly affected by market conditions. The company reduces its exposure to market fluctuations by closely examining supply-demand balance outlooks, diversifying its portfolio across a wide range of vessel types and non-shipping businesses (offshore, offshore wind, logistics, real estate), and utilizing FFAs (Forward Freight Agreements). In addition, since introducing Asset Risk Control (VaR-based) in 2014, the company quantitatively manages total risk exposure, which is overseen by the Board of Directors and the Management Committee on a semi-annual basis.

As the company expands operations around the world, there are risks that changes in political and economic conditions, changes in legal systems, and tightening of foreign exchange and remittance regulations could make it difficult to recover invested capital or could impair asset value. In particular, with respect to Russia, the company has taken measures to respond to the tightening of sanctions by the US and Europe regarding 3 icebreaking-capable LNG carriers and 1 condensate tanker (total investment of approximately ¥100.8 billion). Since 7 vessels with special specifications (total investment of approximately ¥159.1 billion) are difficult to redeploy to other businesses, there is a risk that asset value will decline if contracts cannot be continued. The company has established a system in which the Board of Directors and the Management Committee grasp the overall invested capital by country and region on a semi-annual basis.

In the ocean shipping business, most revenue is denominated in US dollars, while some expenses and borrowings are denominated in yen, creating foreign exchange risk. The company addresses this through dollar-denominating expenses, dollar-denominated borrowings, and flexible foreign exchange hedging. For interest rate fluctuation risk, the company utilizes fixed-rate borrowings and interest rate swaps, and for fuel oil price fluctuation risk, it keeps the impact on profit and loss to an extremely limited level by incorporating price fluctuation clauses into mid- to long-term contracts and utilizing fuel oil futures transactions.

The ocean shipping business is subject to extensive regulation by international organizations, national governments' laws and regulations, and classification society rules, and changes in or new introduction of regulations may result in additional costs, as well as risks of investigation and sanction by relevant authorities. In particular, since the scope of economic sanctions regulations, including target countries and transaction restrictions, can change rapidly in line with shifts in the international situation, violations could result in serious impacts that make business continuation itself difficult, including trade bans, asset freezes, and restrictions on access to the financial system. The company has established a management system centered on sanctions list management, screening, and internal audits by a specialized department.

Compliance violations such as harassment, bribery, antitrust law violations, and insider trading could lead to massive damage claims and significantly affect sustained business activities. The company was found to have violated the Antimonopoly Act in 2014, and since then has worked to prevent recurrence and raise awareness through the development of compliance regulations, ongoing training, quarterly Compliance Committee meetings, the establishment of internal and external consultation desks, and the development of Antimonopoly Act compliance action guidelines and bribery prevention regulations, among other measures.

Since vessels and other assets are typically held for 20 to 30 years, rapid advances in digital technology and alternative fuel technology could render held assets obsolete or less competitive, creating a risk that increased capital expenditure burdens to address this could affect business performance. The company addresses this by evaluating and verifying new technologies through collaboration with domestic and overseas shipyards and external research institutions, as well as through in-house development of advanced technologies, and utilizing them in business operations.

With numerous subsidiaries and affiliated companies, if governance of subsidiaries does not function sufficiently and incident response is delayed, this could affect business performance. Since fiscal 2023, the company has established a "Chief Officer System" and transitioned to a structure that directs and controls the entire group in a cross-functional manner. In addition, since fiscal 2022, the company has introduced risk assessments for domestic and overseas group companies, building a system in which head office management can grasp the location and content of risks through self-assessments conducted by each company.

Human rights risks such as discrimination, excessive working hours, harassment, forced labor, and child labor exist throughout the entire value chain, and the manifestation of these risks could damage corporate value. The company has established the "MOL Group Human Rights Policy," the "MOL Group Basic Procurement Policy," and the "Supplier Procurement Guidelines," and is advancing the planning and implementation of a value chain monitoring scheme that incorporates human rights due diligence, working to understand and resolve the actual state of environmental, human rights, and governance-related risks.