Risk Management System

The Meiji Group has established a risk management structure that promotes further growth to realize the Meiji Group 2026 Vision. Under this risk management structure, we identify overall Group management risks, reduce risks, and manage appropriate risk-taking.

In April 2021, Meiji Holdings Co., Ltd. established Risk Management Department and strengthened the Group-wide risk management. Our Executive Committee and Board of Directors evaluate and confirm management risks aligned with our Group Vision. Thus we can manage risks adapting to changes in our operating environment.

Furthermore, we have developed risk management systems that are suited to the Food and Pharmaceutical businesses respectively. We regularly share risk information across the company, which includes risks common to all our businesses and risks that impact on the whole Group. Accordingly, we identify, evaluate, treat, and solve risks promptly.

Meiji Group Business Management Risks

We appropriately identify risks and develop countermeasures considering the risk impact from a companywide business management perspective. In this way, we not only minimize risks, but we also achieve sustainable growth and gain new growth opportunities. We outlined the three visions—the Business Vision, Sustainability Vision and Management Vision—in the Meiji Group 2026 Vision. We have identified the Meiji Group Business Management Risks based on those three Visions.

Listed on the following tables are risks inherent in matters indicated in our securities report in relation to the status of operations and accounting. The management recognizes them as major risks that may significantly affect the financial position, operating performance, or cash flows of our consolidated results.

The future risks outlined in the tables are categorized based on our medium- and long-term management strategy. We have assessed their importance to the Group, taking into account the likelihood of occurrence and the level of impact on the Group.

$$: High Risk
$: Moderate Risk
The information represents risks recognized by the Meiji Group as of the date of submission of the securities report. These risks are not a comprehensive representation of all the risks related to our businesses.

	Risks	Countermeasures	Change in risk recognition from previous year	Importance to the Group
Sale and supply of products and services	Abandon to launch planned product Changes in customer lifestyles and values Negative rumors about the Meiji Group's core materials (milk, cocoa, etc.)	Establish solid Proofs of Concept (POC) Gather information on market trends Develop products that are friendly to the environment and society Create products and services unique to Meiji that address social issues Appropriately disseminate relevant information about products and materials	↑	$
The majority of profits comes from specific products	Sluggish sales of products that account for a considerable portion of sales and profits	Implement promotions that maximize unique value Improve product portfolio management Explore new markets and new business domains	→	$$
Supply chains	Insufficient or excess procurement or price increases of raw materials Difficulties in procuring raw milk Cessation of production due to production problems, etc. Unstable product supplies due to distribution problems	Gather information on raw materials markets and promote procurement strategies Diversify suppliers and consider alternative materials Strengthen coordination between production and sales divisions Improve distribution efficiency through labor-saving/automation	↗︎	$
Technological advances	Rapid advances in digital technologies Discovery of innovative treatment methods, manufacturing methods and formulation methods	Consider introducing new technologies as early as possible Research new manufacturing and formulation methods, and search for alliances	↗︎	$
Laws and regulations	Revisions that significantly impact corporate activities NHI drug price revisions	Obtain information about system revisions early and implement countermeasures Make appropriate approaches to relevant government authorities Expand portfolio of products that are not affected by NHI drug price revisions	→	$
Overseas expansion and overseas Group companies	Rapid changes in society, or outbreaks of war or terrorism Revisions of the systems that greatly exceed expectations in various countries	Gather information, and investigate and implement countermeasures early Create product supply systems from multiple locations	→	$$
Business plans, etc.	Failure to achieve the Visions or Medium-Term Business Plans due to change in business conditions Growth slowdowns in Core Business, or failure to achieve targets for overseas markets or new business domains Impairment losses on non-current assets or goodwill Fluctuations in foreign exchange or interest	Enhance unique value and search for new value Provide unique value in overseas markets Manage business portfolio from the perspectives of profitability, growth and productivity Make decisions and monitor investment and M&A plans appropriately Use foreign exchange contracts and borrow at fixed interest rates	→	$

	Risks	Countermeasures	Change in risk recognition from previous year	Importance to the Group
Caring for the Earth	Environment friendliness in corporate activities	Reduce CO2 emissions and prevent fluorocarbon leaks, switch to renewable energies, appropriately treat wastewater and industrial waste, and conduct initiatives in compliance with ISO 14001 Manage supply and demand, and decrease food loss Comply with policies related to the environment	↗︎	$
Climate change	Address climate change	Analyze climate change scenarios according to the TCFD framework, formulate strategies and release information	↗︎	$
Thriving Communities	Sustainable raw material procurement Consider human rights, and human rights issues Understand diversity, and use a diverse workforce effectively	Increase the ratio of sustainably procured raw materials, such as cocoa beans and palm oil Strengthen cooperation and collaboration with dairy farmers and other suppliers Address challenges of human rights based on due diligence Create organizations and cultures that value diverse perspectives and abilities Comply with policies related to procurement, human rights and society, etc.	↗︎	$

	Risks	Countermeasures	Change in risk recognition from previous year	Importance to the Group
Corporate Governance	Make business decisions in a timely and appropriately manner Internal or external non-compliance	Improve effectiveness of the Board of Directors Enhance corporate governance systems Provide education on compliance and social media usage, and comply with internal and external policies	↗︎	$
Damage to the Meiji brand	Product recalls or withdrawals from the market due to quality defects or unexpected side effects of pharmaceuticals, etc. Unexpected harmful rumors about the Meiji Group or its products	Pursue quality and safety Communicate appropriately with each stakeholder	↑	$$
Human capital and culture	Recruit and develop human capital required for corporate growth Employee engagement Effects of business environment on productivity	Appropriately implement succession planning Improve employee training Enhance employee engagement Enhance health and productivity management and create comfortable work environments	→	$$
Information asset leaks	Information leaks and system shutdowns due to unauthorized access, etc. Data breaches due to inappropriate system management	Strengthen information management systems and information security Strengthen education on information management and comply with regulations and policies	↗︎	$
Disaster, emergency or other unforeseen circumstances	Temporary or full suspension of business operations due to disasters, pandemics or other unexpected emergency Increases or decreases in product demand due to changes in business conditions in an emergency	Develop business continuity plans and risk management plans for swift recovery Maintain a broad product portfolio across the Group	→	$

There was an incident that hypnotic substance was contaminated in Itraconazole tablets manufactured by Kobayashi Kako Co., Ltd. and sold by Meiji Seika Pharma Co., Ltd. Meiji Seika Pharma stopped shipments of such products and instituted a voluntary recall. The Meiji Group works to confirm and enhance the reliability assurance structure applied to contract manufacturers and development partners.

The Meiji Group will fulfill the product supply responsibilities as a manufacturer of essential foods and pharmaceuticals. To undertake these responsibilities, we are working to improve workplace hygiene and establish safe and secure work environments at all manufacturing facilities in Japan and overseas. Due to the COVID-19 pandemic, we are seeing dramatic changes in our business environment: increase in prevention awareness and health consciousness, the significant expansion of e-commerce, workstyle changes, and decrease in numbers of outpatient visits to medical institutions. We will continue to perform our responsibilities to ensure a stable supply as Food and Health professionals. Also, we will try hard to develop and launch vaccine against COVID-19, and propose products that match people's needs living with COVID-19.

Business Continuity Plans

We are in the process of further strengthening our business continuity plans and developing our systems. In the event of a major earthquake, pandemic or other large-scale disaster, our obligation as a corporate group involved in Food and Health is to restore operations as quickly as possible so that we can fulfill our mission to supply necessary pharmaceuticals and food products. We carry out ongoing disaster awareness measures, and conduct regular drills for our employee safety confirmation systems. We are also implementing improvements throughout the value chain. These improvements include establishing robust operational and infrastructural systems, earthquake-proofing facilities, increasing the number of production sites, decentralizing supply sources, and establishing IT system backups.

Basic Policies Concerning Our Business Continuity Plan (BCP)

Meiji Group’s mission is to continue supplying the products and services our customers need, even in the event of a large-scale disaster. In order to ensure this is possible, we have implemented our Business Continuity Plan in line with the following policies:

1. Protect the lives of people involved in Meiji Group’s business operations, as well as their families
2. Fulfil Meiji Group’s social responsibilities
3. Minimize damage to business caused by stoppage of operations, or similar causes

Information Security

We have established a variety of information security policies and rules which aim to protect our intellectual property and strengthen the management of personal, confidential, and other sensitive information. We train employees thoroughly in information security, and we strive to remain abreast of advances in IT technology.

We are committed to providing stakeholders with all necessary information. Help desks and websites are available for customers at each of our businesses, and information is disclosed to shareholders and investors through investor relation activities and specialized websites.

Reducing Risk Associated with Social Networking Services

The Meiji Group has established various rules to reduce risk associated with social networking services. Moreover, we draw employee attention to such risks via an in-house portal site.

Privacy Protection

We appreciate the importance of customer privacy. We comply with relevant laws and standards for the protection of personal information, and we have established a Group Personal Information Protection Policy.

• Privacy Policy

Intellectual Property

Intellectual property has grown increasingly important in recent years due to growing awareness of intellectual property issues in society and a variety of new government measures. We acquire intellectual property rights for the new products and technologies we research and develop. These rights make it possible for us to continue supplying customers with high added-value products.