Risk Management
Milbon’s Approach to Risk Management
The Milbon Group (including Milbon Co., Ltd. and its consolidated subsidiaries, hereinafter collectively referred to as “Milbon”) defines “risk” as matters that could have a significant negative impact on the realization of its management philosophy and business continuity, and has established a basic risk management policy to reduce the likelihood of these risks occurring and to prevent the spread of any damage in the event that a risk materializes and a crisis occurs. Milbon is working to develop and improve its risk management promotion system and framework.
Management Structure
Milbon Co., Ltd. has established a Risk Management Committee, chaired by the President & CEO and composed of internal board directors, Standing Audit & Supervisory Board members, and executive officers. In principle, the committee meets three times a year. From among the risks surrounding Milbon, the committee designates “company-wide risks” as those risks that should be tackled on a company-wide basis, based on their level of importance and priority, the likelihood and timing of their manifestation, and the likelihood and impact that they may hinder the achievement of the medium-term management plan. For each company-wide risk, a member of the Risk Management Committee is then appointed to be responsible, and measures are advanced on a company-wide basis. The Risk Management Committee is subject to supervision and monitoring by the Board of Directors, and reports semiannually to the Board of Directors on the progress in addressing company-wide risks.
Risk Management System
Identification of Company-Wide Risks
The Milbon Group risk map of impacts and likelihood of materialization for major risk categories has been discussed and revised by Risk Management Committee. Our risk assessment and company-wide risks as of December 2025 are detailed below.
Note: The risk assessment is not based on general indicators, but is an independent assessment of the situation within Milbon.
List of Risks, Estimated Likelihood and Impact
Based on the revised risk map and the risk questionnaire administered to business division heads, Milbon will continue to promote risk reduction activities throughout the company.
Specific Initiatives for FY2025
1．Geopolitics
Details of risk and impact
Due to social conditions and tensions in the diplomatic landscape, we are facing prolonged instability in the countries and regions in which we operate and have production sites. This may lead to the difficulty of continuing business, stemming from human casualties or supply chain disruptions. Furthermore, we are facing a higher likelihood of increased tariffs in various countries directly impacting net sales and profit.
Response
In the countries and regions in which we operate and have production sites, we are considering measures to ensure the safety of local employees and to minimize the impact on our business from the suspension of operations at overseas production sites. In particular, in regions with ongoing instability, we have reviewed our information gathering and reporting systems to establish systems that enable us to respond more quickly to change. We are also taking steps to better understand the tariff impact in the countries so as to identify the scope of impact and review our cost structure.
2．Product quality management
Details of risk and impact
Mismanagement in formula changes or serious defects in production processes could cause skin and hair abnormalities, potentially requiring large-scale voluntary recalls. Failure to comply with pharmaceutical regulations in each country could also result in the suspension of exports from Japan to such countries and the incurrence of penalties for our local subsidiaries. These events could lead to decreased confidence in our product quality, additional costs, and damage to our brand value, resulting in a significant impact on business continuity and profitability.
Response
We are working to thoroughly raise awareness about how to use our products and to enhance guidance at product introduction training sessions and focus groups. To prevent minor errors in product quality management, we made headcount increases in Fiscal Year 2025, and have been working to enhance product quality management for products manufactured at overseas factories and export goods. With regards to pharmaceutical regulations in each country, we are working to gather information in cooperation with production sites and local subsidiaries, and to prevent quality problems and improve our market adaptability through deviation management and troubleshooting by the Quality Committee, regular Good Manufacturing Practice (GMP) training and comprehension tests, and the implementation of facility maintenance programs.
3．Sales strategy
Details of risk and impact
Sales of new products falling short of our targets, or market share contraction caused by intensifying competition and lower prices in the hair color market, could result in shortfalls versus our Medium-Term Management Plan targets stemming from a decrease in sales. Our brand value could also be damaged by the distribution of parallel imports and counterfeit products, and economic trends could cause demand for high-priced products to decline. These factors could lead to a deterioration in asset turnover and profit margins, potentially having a significant impact on our corporate value and business continuity.
Response
To strengthen our sales strategy, the product development and sales divisions are working together to implement promotional activities tailored to customers and product characteristics. We are expanding the options for sales and training activities at hair salons and promoting measures to boost sales. We also conduct regular monitoring and report the results to the Management Meeting, enabling swift decision-making on strategy plans. Furthermore, based on our Beauty Platform strategy, we are stepping up our branding activities in the advertising and digital marketing areas in an attempt to expand our sales areas and enhance our brand value.
Specific Initiatives for FY2025
1．Group governance
Details of risk and impact
Controls over management resources such as human resources, funds, and information not functioning adequately within the Group run the risk of governance inconsistencies, delays in decision-making, and hindering the optimal allocation of management resources. In particular, if personnel systems are not properly established or their operation is unclear in human resources management, this may lead to a decline in compliance awareness and the occurrence of fraudulent activities, posing the risk of damaging corporate value. Furthermore, if overseas subsidiaries do not have systems in place that comply with the laws and regulations of the countries and regions in which they operate, they could incur the risk of committing fraud due to inadequate controls, violate laws and regulations, and hollow out governance. Should any of the above occur, consistency could be lost across the Group as a whole, negatively impacting the soundness of our management and corporate value.
Response
We are progressively developing Group-wide management systems for human resources, information, and business processes to ensure that controls function appropriately throughout the Group. In particular, at our overseas subsidiaries and locations, we are working to establish systems that conform to the laws, regulations, and customs of each country and region, and are also conducting compliance training in accordance with local laws to prevent fraud and instill a strong sense of governance, thereby promoting the establishment of a consistent governance system throughout the entire Group. We have positioned Group governance as a company-wide risk for Fiscal Year 2026, and intend to focus on strengthening governance at our overseas locations as a key theme.
