Risk ManagementSustainability
Fundamental Approach and Issue Awareness
JERA continues to work toward highly effective risk management as we seek to gain a proper understanding of and prevent the risks associated with our corporate activities and want to minimize loss should these risks materialize. We view these efforts as underpinning the enhancement of our corporate value and the fulfillment of our social responsibility to our stakeholders.
Potential risks that could have a significant impact on our corporate activities include operational accidents, damage to facilities due to natural disasters, shutdowns or construction delays, and threats such as cyber-attacks and malware on power plant control and other systems.
In addition, with the advent of the global economy and the shift toward borderless economic activity, we must respond appropriately to increasingly diverse and complex risks today, including global risks such as inequality, poverty, and political instability.
The JERA Group is committed to the continued enhancement of our risk management to fulfill our social responsibility as an energy company that supports social infrastructure.
Risk Management System
Risk Management System
We have established a highly effective risk management system headed by the company president to ensure that we can provide a stable supply of energy in addition to other important social responsibilities.
In non-emergency situations, our fundamental approach to risks associated with our business activities is to manage them within the execution of duties by the unit responsible for the operations. When the risk affects multiple divisions, we manage it appropriately in a cross-organizational manner. In the event of a crisis, an emergency task force headed by the company president is deployed to respond quickly and appropriately to minimize the impact on our business.
In addition, the Financial Strategy and Planning Group, which serves as the risk management division at JERA, is organizationally and structurally independent from each department that conducts business, contributing to healthy tension within the system.
Reporting to the Risk Management Committee, the Leadership Panel, and the Board of Directors
The Risk Management Committee, chaired by the president, meets quarterly and is attended by several parties to ensure appropriate monitoring of risks (see Risk Management Structure below). These include the officer in charge of each division, corporate auditors, the Internal Audit Group, the Financial Strategy and Planning Group (risk management division), and the General Affairs Group (crisis response division), among others. In particular, we strive to prevent risks from materializing by reporting on our policies and specific measures for dealing with risks that could significantly impact our business. In the unlikely event that a risk materializes, the necessary reports on the response of the emergency task force are provided quarterly.
Discussions at the Risk Management Committee are reported to the Leadership Panel and the Board of Directors each time, reflecting the opinions of executive officers, directors, and outside directors.
In addition, all outside directors receive an explanation of the company’s risk management system and methods upon appointment, and their opinions are incorporated through exchanges of views and other means.
Risk Management Structure
Highly Effective Risk Management
Our approach to risk management is based on combining the functions of integrated risk management, evaluation of financial soundness, and evaluation of individual investments
Integrated Risk Management
We quantify our total risk exposure based on market risk and credit risk.
The difference between total risk exposure and risk capital is calculated as a risk buffer. This risk buffer is maintained at a certain level by considering operational risk as an uncertainty whose probability of occurrence is incalculable.
Our Approach to Integrated Risk Management
Operational risk is managed using a risk map with impact on management activities on the vertical axis and frequency of occurrence on the horizontal axis. For each managed risk, we take measures such as retention, mitigation, and transference in cooperation with each department and the Financial Strategy and Planning Group, depending on the type and characteristics of the risk.
Among operational risks, risks that have a high impact on management activities and a high frequency of occurrence are identified as significant risks subject to review by senior management.
The Risk Management Committee, the Leadership Panel, and the Board of Directors meet quarterly to discuss the amount of integrated risk as well as policies and specific measures to address these significant risks subject to review by senior management in particular.
Risk Heat Map
Evaluation of Financial Soundness
In our evaluation of financial soundness, we use the rating methodologies of rating agencies to evaluate the long-term outlook for financial rating levels in the business planning workflow and implement balance sheet management to maintain a financial rating of A through FY2025. (Please refer to the “Financial Strategy” section on p.41 in the “Message from the CFO on Financial Strategy.”)
Evaluation of Individual Investments
After confirming the consistency of individual investment evaluations with our field-specific investment strategies, our Investment Valuation Committee, which includes members with experience in investment screening at financial institutions and other organizations, conducts reviews by which we verify the long-term investment potential.
In addition, we properly evaluate and manage risks by engaging in regular monitoring and establishing withdrawal criteria.
Our risk-return analysis utilizes more than 200 guideline rates calculated for each strategic target country and business.
Investment Valuation Process
Countermeasures for Large-Scale Disasters
We own around half of the thermal power plants in Japan. Based on the Basic Act on Disaster Management, we have put together and published our Operational Disaster Risk Reduction Plan, Operational Plan for the Protection of Citizens, and Operational Plan for COVID-19 and Other Pandemic Countermeasures. We also have emergency and disaster response rules and manuals in place to enable prompt decisionmaking and a swift response in the event of an emergency.
Recently, there has been concern regarding natural disasters such as earthquakes occurring directly beneath the Tokyo metropolitan area or off the Nankai Trough and an eruption of Mt. Fuji, which has prompted revisions by the national and local governments to damage estimates and disaster risk reduction measures. In light of these revisions, we are undertaking the necessary measures, such as earthquake-proofing our facilities in addition to periodically conducting drills to simulate large-scale disasters.
JERA-BCP drills include alternative strategy drills envisioning transportation disruptions and communication outages, such as drills for information sharing between both of our shareholders and we are constantly making efforts to improve our disaster risk reduction capabilities.
Enhancement of JERA’s BCP and BCM
As described above, JERA has a response system in place for the event of a major disaster. In light of the expansion of our business domains after integrating our thermal power business in 2019 and other changes in the business environment, we are taking various steps to further improve business continuity.
In the event of a large-scale disaster, we must ensure that the JERA Group’s important business operations are not interrupted or, if interrupted, that they are restored in the shortest possible time. And so, we have established Business Continuity Management (BCM) Rules to strengthen our everyday management activities.
Based on these rules, we have established the BCM Subcommittee, which reports to the Risk Management Committee regarding the establishment and review of the Business Continuity Plan (BCP) and regularly checks progress on disaster drills and advance measures.
Basic Policy for JERA’s BCP and BCM
- In the event of any disaster or risk event, we will place the highest priority on the safety and security of people and ensure public safety in compliance with laws and regulations.
- In order to fulfill our responsibility as an energy provider supporting the social infrastructure in Japan, we will contribute to society and local communities by quickly restoring and continuing our core business of supplying them with electricity and gas
JERA’s BCP and BCM Cycle
COVID-19 Response
Considering the global nature of our business activities, JERA has always provided employees with laptop computers and smartphones, and we have built IT infrastructure that enables our employees to stay connected no matter where they are in the world. Accordingly, we were able to offer remote work as the COVID-19 situation developed. As many as 90% of our employees were working remotely, yet we were able to maintain a stable power supply while protecting against infection. (Many power plant employees and other staff who needed to be on-site to perform their duties are not included in this figure.)