(1) Risk Management System

The Group established a risk management structure that supports further growth to achieve 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, we established the Risk Management Department, which is independent of the Audit & Supervisory Board, to strengthen Group-wide risk management, and appointed an executive officer in charge of the department. The Executive Committee evaluates and confirms Group-wide management risks in line with the Group Vision and the risk control status and reports them to the Board of Directors, which evaluates and supervises the system. Thus, we can manage risks by adapting to changes in our operating environment.

Furthermore, we have established 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 of our businesses and risks that have impacts on the whole Group. Accordingly, we identify, evaluate, address, and solve risks promptly. The executive officer in charge of the Risk Management Department reports information to the CEO & President and Representative Director.

(2) The Group Business Management Risks

We appropriately identify risks and develop countermeasures considering the risk impact from a company-wide 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 Foundation Vision - in the Meiji Group 2026 Vision. We have identified the Meiji Group Business Management Risks based on those three Visions.

Among the matters related to the status of business, accounting, etc. as described in this annual securities report, the main risks that management recognizes as having a significant impact on the financial position, operating results and cash flows of the consolidated company are as follows.
The future risks outlined in the table below are categorized based on our medium- and long-term management strategies. We have assessed their importance to the Group, taking into account the likelihood of occurrence and the level of impact on the Group.

The information represents risks recognized by the Group as of the date of submission of this annual securities report. These risks are not a comprehensive representation of all the risks related to our businesses.

(As of June 29, 2022)

	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 Company'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 Cessation of production due to production problems, etc. Difficulties in procuring raw milk Unstable product supplies due to distribution problems	Gather information on raw materials markets and promote procurement strategies Strengthen coordination between production and sales divisions Diversify suppliers and consider alternative materials Improve distribution efficiency through labor-saving/automation	↗︎	$$
Technological advances	Insufficient adaptation to rapid advances in digital technologies Discovery of innovative treatment methods, manufacturing methods and formulation methods	Consider introducing new technologies as early as possible Research new manufacturing and formulation methods, and search for alliances	↑	$$
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 of greater importance $: Risks of great importance

	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 Understand diversity, and use a diverse workforce effectively Consider human rights, and human rights issues	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 Create organizations and cultures that value diverse perspectives and abilities Address challenges of human rights based on due diligence Strictly comply with policies, guidelines, etc. related to procurement, human rights, society, and so on.	→	$

	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 Group or 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	↗︎	$

The Board of Directors selected the priority initiative topics for FY2021 relating to Group business management risks and confirmed the initiatives of each operating company.

Priority initiative topics for FY2021:

(1) Confirmation of quality assurance systems and reliability assurance structures applied to contract manufacturers and development partners.
There was an incident whereby a hypnotic substance was contaminated in Itraconazole tablets manufactured by Kobayashi Kako Co., Ltd. and sold by Meiji Seika Pharma Co., Ltd. In response, we confirmed the quality assurance system and the reliability assurance structure applied to contract manufacturers and development partners.

(2) Discovery of innovative treatment methods, manufacturing methods and formulation methods
In responding to the rise of mRNA vaccines as COVID-19 vaccines, we confirmed recognition and evaluation of and response to the technology.

(3) Information leaks and system shutdowns due to unauthorized access, etc.
Damage suffered by companies due to ransomware and targeted email attacks have become more prominent, and therefore, we confirmed our countermeasures against unauthorized access under usual conditions and responses when such incidents occur.