Operational risks faced by the Ajinomoto Group that could affect its performance and financial position are outlined as follows. However, this is not an all-inclusive list of risks, and risks that cannot be foreseen or are not viewed as material at present may have an impact in the future. The Group has developed various responses and mechanisms to minimize such management and operational risks.
Future risks outlined in this document are as judged by the Group as of March 31, 2019.

Financial risk

Related opportunities and risks
○ Opportunity ● Risk)

Main initiatives


● Failure of acquired subsidiaries, etc., to fulfill business plan
● Sharp increase in interest rates

· Deliberation by M&A Committee, Management Committee, etc., on appropriateness of acquisition price
· Post-acquisition follow-up to achieve synergies and periodic monitoring of macroeconomic environment

Bankruptcy of customers

● Unforeseen bankruptcies of customers including overseas customers

· Credit preservation, including through information gathering and credit management

Emergence of competition

● Presence of numerous competitors in business field with low entry barrier
● Possibility of other companies taking lead in similar product and technology areas despite efforts at differentiation

· Response to competition through improved differentiation, technology, and services

Capital procurement

● Depletion of capital due to financial crisis
● Ratings downgrade
● Additional capital procurement or other risk arising from failure to fulfill plans due to various risk factors, associated worsening of rating

· Appropriate diversification of capital sources and capital procurement periods
· Maintenance and strengthening of financial structure
· Timely analysis of and response to various risk factors
· Timely revision of plans based on latest information

Fluctuation in exchange and interest rates

● Slowdown in overseas business activity due to fluctuation in exchange or interest rates
● Impact on yen translation of business results of overseas subsidiaries due to fluctuation in exchange or interest rates

· Exchange contracts, swaps from variable to fixed interest rates, etc.
· Capital procurement, including by parent company, in countries with low risk of exchange rate fluctuation

Country risk

● Expropriation risk
● Risk of outbreak of war, conflict, etc.

· Appropriate diversification of countries of operation

Tax system change







Tax effect change

Reduction of future tax burden through system reform (e.g. reform of U.S. tax system)
● Increase in business operational costs due to system reform (e.g. value-added tax in Brazil)


Increase or decrease in tax expenses due to change, etc., in estimates of future taxable income

For example of tax risk countermeasures, see Group Shared Policy on Global Tax at link below:
· Implementation of countermeasures against changes in tax system and tax administration in each country
· Formulation and implementation of measures and plans to minimize tax and tax-related expenses

Materiality items

Related opportunities and risks
○ Opportunity ● Risk)

Key initiatives by the Ajinomoto Group

Assurance of product safety

Brand trust gained by increasing customer satisfaction
 Trust gained through fair disclosure to stakeholders
● Impact on business of growing negative rumors regarding umami and MSG
● Lower customer confidence due to product quality complaints or incidents

· Properly sharing information on package and website
· Reflecting customer feedback on developing and improving products and services
· Enhancing communication to share the benefits of umami and MSG
· Thorough quality assurance and human resource training based on the Ajinomoto System of Quality Assurance (ASQUA)

Contribution to health and nutritional issues

Rising health awareness and needs of consumers
Brand trust
Enhancing corporate value

· Offering tasty food and amino acid products as well as menus that nourish health and well-being
· Low-salt, low-sugar and low-fat products
· Promoting protein intake
· Contributing to disease prevention with “AminoIndex technology”
· Developing nutritional standards that Group products should meet
· Customized programs to each consumer for improving nutrition
(personal nutrition)

Rapid response to consumer lifestyle changes

Enhancing corporate reputation by offering the joy of eating together
New value creation using digital media, etc.
● Loss of growth opportunities due to delayed response to consumer lifestyle changes or diversifying values
● Impact on seasonings business due to less cooking time and skills

· Creating strong communities and social bonds through food
· Advanced marketing efforts by leveraging big data and consumer data
· Building strategies to deal with smaller markets (due to urbanization, etc.)
· Properly delivering products, services and information to customers
· Expanding products and services to meet the need for convenience, such as smart cooking

Sustainable materials sourcing

● Increased risk of raw material procurement failure due to delays in addressing social and environmental issues across the supply chain
● Increased risk of raw material procurement failure due to climate change

· Management of fair operating practices (traceability, etc.)
· Promoting sustainability to suppliers
· Human rights due diligence
· Identifying important raw materials and engaging in responsible procurement (paper, palm oil, skipjack, etc.)
· Ensuring fair competition and providing thorough employee training
· Contributing to sustainable agriculture by using co-products

Reduction of food loss and waste

Cost reduction through initiatives to reduce product returns and waste
● Depletion of food resources

· Using raw materials in manufacturing process without waste
· Upgraded, optimal supply-chain management using digital technology
· Reducing product returns and waste by extending product best-before dates, etc.
· Reducing food loss and waste during product use by customers
· Proposing eco-friendly lifestyles for enjoying food without leftovers

Climate change adaption and mitigation

Collaboration with outside organizations on decarbonisation
● Higher production costs due to delays in initiatives to eliminate carbon emissions or increased carbon tax burden
● Procurement risk of sustainable raw materials
● Damaged corporate value due to delayed response to climate change

· Long-term effort to turning the overall product lifecycle carbon neutral
· Initiatives to reduce energy use during production and transportation
· Shifting to renewable energy
· Disclosing information in line with the Task Force on Climaterelated Financial Disclosures (TCFD) (scenario analysis, etc.)
· Lowering environmental impact by feed-use amino acids (reduction of soil and water pollution)

Contribution to a circular economy

Development of environmentally-friendly materials
● Damaged corporate value due to delays in waste reduction or recycling efforts

· Supplying highly biodegradable amino acid-based detergent
· Promoting the 3Rs of containers and packaging (reduction of plastic waste, etc.)
· Using biodegradable plastic/plant-derived raw materials/certified paper
· Promoting use of environmentally-friendly product labels

Conservation of water resources

● Production stagnation due to droughts, floods or water quality deterioration
● Raw material procurement failure due to water resource depletion

· Maintaining forests for water sources
· Developing wastewater treatment technology

Diverse talent

Company growth by improving employee engagement
Creation of an innovative environment
● Rising costs due to intense competition for human resources

· Promoting PDCA cycle using the engagement survey
· Reforming organizational culture to promote diversity
· Training and promotion of female employees
· Promoting health management
· Human rights awareness training
· Occupational safety and health managemen

Strong corporate governance

Enhancing corporate value
Appropriate risk-taking
● Decreased competitiveness due to inability to adapt to digital technology advances
● Decreased competitiveness due to vulnerabilities in IT management structure
● Confusion in organizational management and reduced business profitability due to unstable political, economic, and social conditions such as financial crises, trade issues, etc.
● Impact of intellectual property risks on business

· Raising awareness of the Ajinomoto Group Policies among all Group employees
· Establishing whistleblower hotline
· Strengthening corporate governance system
· Selecting Group-wide significant risks and considering appropriate responses
· Managing intellectual property risk
· Strengthening information security through the creation of Information Security Regulations

Preparation for intense global competition

Value creation from external collaboration
Specialty creation through technological innovation
Establishment of competitive advantage by forecasting future changes
Business foundation reform through digital disruption
● Impact of digital disruption on main businesses

· Value chain restructuring (production system reorganization)
· Promoting digital transformation
· Rapidly commercializing research findings (R&D system reorganization)
· Competitive intelligence (medium- to long-term initiatives)
· Promoting open & linked innovation