Message from the Director in Charge of Risk

Lessons Learned from Compliance Issues at Shimadzu Medical Systems

In 2022, our Group faced significant issues due to misconduct at our domestic subsidiary, Shimadzu Medical Systems Corporation, which caused considerable inconvenience to our stakeholders. Currently, the company is working on reforming its organizational culture and building systems to monitor human resource policies and business processes that enhance employee satisfaction. Simultaneously, the entire Shimadzu Group is committed to raising compliance awareness further and working diligently to prevent any recurrence of such misconduct.

Summary of the Second Year of the Medium-Term Management Plan and Future Outlook

Our Group is promoting risk management (measures related to management and business operations) and compliance/internal controls (responses to risks in job execution) in an organic and integrated manner. Through our efforts until FY2024, we have implemented necessary measures regarding economic security (supply chain) and labor safety. In FY2025, we will focus on addressing the following two high-impact risks that are common globally:

• The first is cybersecurity. We will establish defenses against cyberattacks and ensure we have a recovery system in place to minimize the impact on our business in the event of an attack.
• The second is the delay in new product development. We will formulate effective measures in collaboration with the business divisions.

Additionally, for region-specific and individual company risks, each Group company will conduct risk assessments and set priority initiatives to advance countermeasures. In implementation, members from the relevant departments at Shimadzu headquarters will join to provide guidance and support to facilitate activities. In the final year, FY2025, we will strengthen and improve the Group's overall risk management system and internal control framework to enhance our sustainable corporate structure.

Challenges and Solutions

There are two challenges to address in strengthening our sustainable corporate structure:

• The first challenge is to leverage the lessons learned from risk incidents that have occurred to ensure effective prevention of recurrence. In FY2024, there were some significant risk incidents. If we had actively communicated within the organization to recognize potential risks and implemented preemptive measures, these incidents might have been prevented. As a countermeasure, we will expand initiatives to recognize risks in our departments and take action through workplace discussions and e-learning, extending these efforts from Japan to our overseas Group companies.
• The second challenge is to enhance the activity levels of each Group company to increase the effectiveness of risk reduction. To achieve this, headquarters will continue to provide education on risk management, compliance, and internal controls to each Group company in collaboration with the corporate headquarters responsible for governance in each region, as well as training through Group exchanges. Furthermore, the regional corporate headquarters will strengthen its function to support the initiatives of subsidiary Group companies by promoting the development of key personnel in each region.

Risk Management in Daily Operations

We believe that compliance can be achieved by fostering and maintaining a corporate culture that prioritizes ethics throughout the Group. To do this, it is essential to enhance psychological safety in the workplace, enabling employees to raise questions or concerns without hesitation, allowing us to identify issues early and prevent them from escalating into risk incidents. We will create an environment where communication flows freely in all directions, enhance employee engagement, and promote risk management in daily operations.

Promotion of Sustainability Management

Our Group upholds the corporate philosophy of "contributing to society through science and technology" and the management philosophy of "realizing our wishes for the well-being of mankind and the Earth", and we practice sustainable management as outlined in our Sustainability Charter. Recognizing existing risks and the new risks arising from rapidly changing global conditions, it is my role to implement appropriate countermeasures, foster a governance-driven ethical corporate culture, and develop the human resources necessary to realize these goals. I will promote ongoing efforts toward building a more governance-driven global system.