Risk Management

Toyota's Basic Philosophy Regarding Risk Management

In response to the series of quality-related issues that occurred in 2009, Toyota has been reinforcing its risk management systems. A Risk Management Committee was established under the CSR Committee in June 2010, and the appointing of risk managers and other measures were taken globally to prevent and reduce all risks that may occur in business activities.

Implementation Systems

Appointment of Risk Management Personnel

Toyota appointed a Global Chief Risk Management Officer (CRO) to head global risk management and established systems under the Global CRO to monitor risks on a daily basis. This makes it possible to respond immediately in the event that a risk occurs. Regional CROs are appointed under the Global CRO to oversee individual regions, and each region has its own risk management system. In addition, Chief Officers and functional secretariats are responsible for managing risks within the company according to function, and they coordinate and support regional risk management relating to their specific functions.

Actions of the Risk Management Committee

The Risk Management Committee meets twice annually to identify all risks that may impede business activities and take action to prevent those risks. The Committee is chaired by the Global CRO, and its members include regional CROs and all Senior Managing Officers and Chief Officers. The Committee works to manage and prevent risks by reporting on major risks in each region, confirming all current risks, and reporting on the status of measures addressing immediate and serious risks.

Organization of the Risk Management Committee

Basic Approach to Internal Controls

An internal control system has been developed under the following basic policies organized in May 2006.

Basic Approach to Internal Controls
Fundamental Approach
  • Draw out the good will, enthusiasm, and autonomous decision-making abilities of the people who perform work, based on the idea of "respect for people"
  • Establish structures within the work processes carried out by people and organizations that incorporate internal controls and establish checks and balances as well as management and oversight by directors
  • Establish inter-departmental organizations to supplement internal controls
Basic Policy
  1. Legal compliance by Directors
  2. Retention and management of information relating to the execution of responsibilities by Directors
  3. Regulations and other systems related to the management of risk of losses
  4. Efficiency of execution of responsibilities by Directors
  5. Legal compliance by employees
  6. Appropriateness of the business operations of the group
  7. Employees assisting the Corporate Auditors
  8. Independence of employees described in the preceding item (7)
  9. Report to Corporate Auditors
  10. Ensure the efficient execution of audits by the Auditors

Corporate Governance Reports

The report contains a summary of the following items:

  • Capital structure, business attributes, and other basic information;
  • Organization and structure
  • Implementation of measures for shareholders and other stakeholders;
  • Basic approach to the internal control system and its development;
  • Other information.

Business Continuity Management at Toyota

Background of Business Continuity Management (BCM) at Toyota

Even though Toyota was not directly affected by the past large-scale disasters such as the Great East Japan Earthquake and the Thailand floods, it was temporarily unable to fulfill its mission of continuing to deliver always better cars and services to its customers. Furthermore, Toyota Group's main functions are concentrated in areas that are likely to be hit by a Nankai Trough earthquake and the risk that Toyota would suffer damage in that event is rising. Damage to Toyota and various Group companies could severely impact production and other activities. Given this scenario, it is essential to assume that Toyota itself would suffer and to make preparations to enable early recovery with limited resources. For all these reasons, Toyota is reassessing its business continuity plan (BCP). The major premise of Toyota's BCP is to work on recovery after disaster in the following priority order:

  • Toyota's Basic Guidelines Priorities following a Disaster

  • Toyota's Basic Guidelines Priorities following a Disaster

Humanitarian Aid

Immediately following the Great East Japan Earthquake, Toyota sent 60 employees and later a total of 140 employees to its production sites in the disaster-affected areas, where they engaged in various activities such as restoring facilities and distributing disaster-relief supplies. Employee volunteers of Toyota Group and Toyota-related companies are continuing to assist with restoration efforts for the people in the areas hardest hit by the disaster. In 2011 and 2012, a total of 360 employees from 15 Toyota and Toyota-related companies implemented activities such as wreckage removal in the Kesen region of Iwate Prefecture. These activities are continuing this year as well. In addition to this type of human support, Toyota also provided material support. Eighty-seven 11-ton trucks filled with relief supplies from the Toyota Group and Toyota-related companies were gathered at two local production sites and distributed. Because severed communication infrastructures made it impossible to assess the situation in the disaster-affected sites from a distance, employees from the individual sites traveled to the disaster-affected sites along the coast to assess needs first-hand, then delivered the needed relief supplies (such as food, daily necessities, water and fuel) on their own. Learning from such experiences, Toyota has prepared a nationwide framework for sending relief supplies to disaster-affected areas that utilizes the warehouses and logistics network of its parts distributors throughout Japan. In addition to stocking emergency supplies at the 34 parts distributors nationwide for use by their employees, Toyota has built a framework for sending such relief supplies to parts distributors in disaster-affected sites. Toyota is aiming to achieve fast and reliable support of disaster-affected sites taking into account such potential issues as gasoline shortage. For example, relief supplies will be sent via a parts distributor relay, depending on the distance to the disaster-affected sites.

Volunteer activities in the Kesen region
Volunteer activities in the Kesen region

Material support
Material support

Early Recovery of the Affected Areas

Collaboration with Disaster-affected Regions

On December 13, 2012, Miyagi Prefecture, Ohira Village, Toyota Motor Corporation (TMC), and Toyota Motor East Japan signed a cooperative disaster relief agreement designed to help build a disaster-resistant community through the utilization of plant facilities.

Agreement-signing ceremony
Agreement-signing ceremony

Overview of the Cooperative Disaster Relief Agreement

Overview of the Cooperative Disaster Relief Agreement

[Comments] From the Miyagi Prefectural Government

I would like to express our heartfelt appreciation to Toyota Group and all the Toyota-related companies for providing tremendous support toward our recovery from the Great East Japan Earthquake. The agreement we have just signed with TMC and Toyota Motor East Japan represents a new approach to cooperative disaster relief that will save lives and provide material support following a disaster, as well as making available company plants as temporary evacuation shelters. I believe this cooperative approach would work well as a model for all of Japan. We hope to continue strengthening our cooperation with TMC to enhance our community's ability to withstand disasters.

Masahiro Wako Vice Governor of Miyagi Prefecture

Masahiro Wako
Vice Governor of Miyagi Prefecture

Vehicles that Excel and Prove Useful in Disasters

After experiencing the Great East Japan Earthquake, Toyota worked to address the issue of "energy, information and transport network fragmentation" when disasters occur, and developed hybrid and plug-in hybrid vehicles installed with external power supply systems. In addition to providing good fuel efficiency and environmental performance during normal times, during disasters, these cars can be driven on gasoline or electricity, and also have a power supply function that allows electricity to be drawn from the automobile. Toyota has made it possible to install two electrical outlets (AC 100 V, 1,500 W) inside the Prius and the Prius PHV. Moreover, Toyota installed connectors in the Prius PHV that allow power to be supplied to the outside even with the vehicle doors and windows closed.

PHV Introduction Examples

Miyagi Prefectural Police PHV patrol car
Miyagi Prefectural Police PHV patrol car

  • Twelve PHVs were deployed at police boxes in Sendai City in FY2012.
  • These PHVs can be connected to traffic lights or lights at evacuation shelters to power them during a disaster.

Restoration of Company Operations and Production

To ensure that Toyota will be able to continue delivering always better cars and services to customers all over the world even when affected by a disaster that limits its resources, Toyota is reassessing its existing disaster-preparedness plan. Toyota plans to expand its activity scope to achieve the following three objectives: (1) Recovery from the customer's viewpoint, (2) Preparedness during normal times to enable autonomous recovery, and (3) Involvement of the entire supply chain including "All Toyota" and all suppliers. To enable recovery from the customer's viewpoint, Toyota has defined production resumption goals for high-priority vehicle models and strives to be prepared at all times, in order to minimize impact on customers. To maintain preparedness during normal times, Toyota aims to fortify its production facilities while making them easy to repair should they be damaged. Finally, the supply chain required for purchasing the extremely large number of parts and materials utilized in car manufacturing has become a huge network and restoring production means restoring the entire supply chain. Thus, Toyota shares its restoration goals with its entire supply chain in order to achieve the quickest possible recovery in the event of a disaster. Toyota is also in the process of surveying the entire supply chain to build a database that will give a visual representation of the entire situation to allow assessment of the impact a disaster-damaged parts or material plant would have on the entire supply chain.

Restoration of Company Operations and Production