Business Risks and Other Risk Factors
As NSK’s business activities spread to more areas, the range of anticipated risks also widens. Listed below are the principal risk factors we have identified with the potential to significantly impact the NSK Group’s financial position, business performance, and cash flow. These risks represent the NSK Group’s judgment as of June 28, 2022.
NSK has established a risk management framework as stipulated in the NSK Group’s Risk Management Rules and adopted a range of measures in order to avoid or reduce risks. Risks including changes in technology, natural disasters and infectious diseases, and changes in local conditions are comprehensively identified and reported on either a regular or immediate basis.
Representative Risks and Mitigation Measures
Risk Heat Map
Risks Related to the Impact of COVID-19
The global spread of the COVID-19 pandemic has become a significant risk to business operations. The stringent movement restrictions in China under the government’s zero-COVID policy have led to reduced product sales from the drop in automotive production and downturn in demand in the industrial machinery sector. As it is extremely difficult to predict when the COVID-19 pandemic will come to an end, and when global economic activity will recover in the post-corona world, it is possible that the NSK Group will see its business performance and financial position seriously impacted moving forward.
The NSK Group puts the safety and security of its customers, business partners, and employees first. In addition to thoroughly implementing measures to prevent the spread of COVID-19 and establishing response procedures, the NSK Group has also been promoting work style reform in preparation for a post-corona world through measures that include working from home and encouraging the use of online conferencing. Additionally, NSK is working to minimize its supply chain risk and secure liquidity on hand in order to ensure business continuity. The NSK Group will work to strengthen its corporate foundation by sharpening its competitive edge and restoring profitability.
Risks Related to the Crisis in Ukraine
The growing uncertainty surrounding the situation in Ukraine is a major risk to NSK’s business operations. If the business environment does not significantly improve moving forward, there is a possibility that the NSK Group’s performance and financial position will be seriously impacted.
Climate-related Risks
NSK recognizes that global climate change caused by the increase in CO2 and other greenhouse gas emissions has an impact on its business activities. As such, NSK declared its support for the recommendations of the Task Force on Climate-related Financial Disclosures (hereinafter TCFD) in January 2020 and has worked to identify the climate-related risks and opportunities in its business activities in accordance with the TCFD recommendations. NSK believes that striving to reflect these risks and opportunities in its management strategy and enhance its disclosure of climate-related financial information will lead to both the sustainable development of society and the sustainable growth of NSK.
Of the risks related to the environment, NSK has placed a high degree of importance on addressing climate-related risks across its businesses and divisions. However, from fiscal 2021, NSK has been working to further bolster its management of climate-related risks by using the scenario analysis method recommended by the TCFD to quantitatively analyze anticipated changes in the business environment and their financial impact on NSK’s business. As a result of this analysis, NSK determined that its basic strategy for tackling climate-related risks would be to contribute to the realization of a sustainable society that can limit global warming to below 1.5°C-2.0°C. NSK will promote climate change countermeasures in its overall business activities, namely by working to address the transition risks related to CO2 emissions regulations and by taking society’s need for decarbonization throughout a product’s lifecycle as an opportunity to advance its Motion & Control™ technology. On the other hand, NSK will promote measures against natural disasters that are caused by climate change based on the results of scenario analysis.
For information on NSK’s climate-related financial disclosures based on the TCFD recommendations, please see NSK’s sustainability information page.