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Compliance and Risk Management

Compliance and Risk Management Structure

Compliance and risk management in the Shiseido Group is led by the Risk Management Department established at the Company’s global headquarters, which reports into the Office of Chief Legal Officer of the Group. Furthermore, to ensure compliant and fair business activities and implementation of risk countermeasures across the Group, a Risk Management Officer (RMO) is assigned in each regional headquarters. Incidents in Japan and overseas regions are reported, in accordance with certain criteria, to the Risk Management Department through RMOs or the division responsible for the incident. The division, RMO, and the Risk Management Department set up a taskforce as needed and work together toward a speedy resolution. In addition, the Risk Management Department and RMOs conduct regular training and educational activities to raise employees' awareness and knowledge of compliance and risk management.

To oversee compliance and risk management of the Shiseido Group, a Global Risk Management & Compliance Committee chaired by the CEO has been established at the global headquarters. In addition, HQ/SJ Compliance Committee oversees compliance in the Japan region.

Significant matters and progress related to compliance and risk management, including major incidents, are reported/proposed to the Board of Directors through the CEO or the management team.

Risk Management Oversight by the Board of Directors

Risk management oversight on a Group-wide basis is one of the key responsibilities of the Board of Directors. The Board provides feedback on reports from the management on significant matters and progress related to compliance and risk management, as well as confirms background, risk tolerance, and risk limit for matters included in individual reports and proposals. This allows the management to appropriately identify risks and decide whether the risk should be taken, mitigated, or avoided. In addition to receiving individual reports/proposals from the management, the Board compiles risk-related information through collaboration with auditors and the Audit & Supervisory Board for effective risk management oversight.

Enterprise Risk Management

In fiscal year 2022, the Risk Management Department interviewed HQ Executive Officers, Regional CEOs and External Directors for their perception of Group risks. Regional risk assessments and input from relevant functions, as well as insight from external advisors, were also taken into consideration. As a result, the Risk Management Department identified material risks that may impact the key areas of our medium-term strategy, SHIFT 2025 and Beyond. As shown in the table below, the identified risks were evaluated with three axes: “the impact on business,” “likelihood,” and “vulnerability.” Furthermore, the above-mentioned committees and related meetings held discussions to prioritize the risks and consider the status of countermeasures.

<Risk evaluation methodology>

Impact on business
  • ・Quantitative impact on business performance (e.g., topline sales) in case of manifestation
  • ・Qualitative impact on our corporate/brand image and culture
Likelihood
  • ・Likelihood and timing of risk manifestation
Vulnerability
  • ・Preparedness to the risk
  • ・Controllability of the manifestation of the risk due to external factors

Total 21 material risks identified through our risk assessment have been organized into three risk categories: “Consumer and Social-related Risks,” “Operation & Fundamental Risks,” and “Other Risks.”

We have identified “Risk Owners” for each risk category in an effort to clarify responsibility for countermeasures. Moreover, we have implemented a transparent monitoring and communicative framework within the Global Risk Management & Compliance Committee and the Board of Directors to regularly discuss and assess our progress in addressing these risks.

Business and Other Risks

Business and Other Risks

Whistleblowing System

The Company has established a whistleblowing system to discover acts which violate laws, the Articles of Incorporation, or other regulations within the Shiseido Group and to promptly correct such issues and has received reports of all forms of misconduct, including harassment and bribery, as well as any potential misconduct. In the Japan region, the Company has established an internal hotline managed by in-house counselors, an external hotline operated by a third party, and the HQ/SJ Compliance Committee Hotline through which employees are able to make direct reports to the Committee Chair. The hotlines allow anonymous reporting. The Company has also created a whistleblowing hotline for reports related to corporate officers and promotes the use of these hotlines. For other regions, the Company has set up local/regional hotlines, in addition to a Shiseido Group Global Hotline at the global headquarters for direct reports from employees worldwide. These hotlines contribute to strong compliance/governance structure of the entire Group.

To secure effectiveness of the whistleblowing system, the Company has developed and promotes internal regulations to protect whistleblowers’ personal information and confidentiality. These regulations also protect whistleblowers from retaliation such as dismissal from their position or workplace.

 

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