Sustainability Management Strategy

Risk Management

It is with our CEO’s firm commitment to making LG H&H more resistant to external shocks that we operate an integrated company-wide risk management system. Business segment-specific risks are monitored regularly and non-financial risks are diagnosed by internal experts to be addressed more appropriately. In addition, operational and hazardous risks in the environmental and social sectors are identified by respective functional units and are effectively managed through an organically aligned reporting system.

Integrated Risk Management Process

  • Internal and
    external analysis
    Monitoring
    changes in the
    internal and
    external business
    environment
    Analyzing
    the history of
    major events
    and accidents
  • Understanding
    crisis situations
    and identifying
    key risks
  • Risk Management
    Governance
    Company-wide crisis management committee

    (Company-wide integrated core risk management)

    • Setting up crisis management policies
    • Approving core risks
    • Reviewing mitigation measures
    • Supporting the implementation of company-wide perspectives
    Risk management by subcommittees* and functional departments
    • Identifying and evaluating risks
    • Establishing and implementing risk mitigation measures
    • Developing crisis response manuals
  • Risk Management
    Areas
    • Strategic/Future Risk
    • Political / Economic / Social
    • Market environment
    • Major national policies, etc.
    • Operational risk
    • Environmental safety accidents
    • Quality incidents
    • Information security incidents
    • Production interruptions, etc.
    • Financial risks
    • Accounting fraud
    • Tax fraud
    • Financial incidents, etc.
    • Compliance risk
    • Violation of laws and regulations
    • PLAN
    • DO
    • ACT(Improvement)
    • CHECK(Evaluation)
    Sustainability
    Management

* Subcommittees: 12 committees in total, including Environment & Safety, Quality & Service, Information Security, Production, Beverage Production, Purchasing, Logistics, Compliance, and Finance, to discuss issues related to their respective subcommittees. They define crises and major risks for each division, establish a response system in the event of a crisis, and conduct risk improvement activities.

Crisis Response System

Establishing a crisis response system to prevent the spread of accidents/issues to a company-wide crisis and early recovery in the event of an accident/issue.

After consulting with each subcommittee, we defined core crises by major categories, defined accident grades, and established a dissemination/communication system based on accident/issue levels(grades). Through the crisis management information system, we simultaneously disseminate information to management and related departments in the event of an accident and respond quickly to prevent it from escalating into a major crisis. In the event of a company-wide crisis, the ‘Company-wide Crisis Management Committee’ is converted to the ‘Emergency Response Committee’ to review and decide on agenda items for immediate and efficient response.

Integrated Risk Management System and Major Management Issues

Company-wide Crisis Management Committee

LG H&H organized the Company-wide Crisis Management Committee to improve crisis response execution and strengthen risk prevention activities from an integrated company-wide perspective and operates it every other month. The CRO chairs the Company-wide Crisis Management Committee for efficient decision-making, and key executives are organized as standing members and subcommittee chairs.
The Crisis Management Committee is the highest decision-making body in the company and discusses and resolves the overall operation of the crisis management system, including determining the company-wide crisis management policy and checking the crisis response system by division. It also selects priority risks from a company-wide perspective, discusses improvement measures for high risks identified by each subcommittee, analyzes risk phenomena, and checks mitigation activities by ordering onsite inspections or short-term task operations as needed.



Company-wide Crisis Management Committee

Chairman : CRO
Standing members CHO, Head of External Relations, Head of Consumer Safety Center, Head of Production, Head of Domestic Legal Affairs, Head of Jeong-Do Management
Secretary Crisis Management Division

* Scope of attendance adjusted according to agenda

  • Environment/
    Safety
    Division
  • Quality/Service
    Division
  • Information
    Protection
    Division
  • IT DR*
    Division

    *Disaster Recovery

  • Purchasing
    Division
  • Logistics
    Division
  • Production
    Division
  • Beverage
    Production
    Division
  • Human
    Resources/Labor
    Division
  • Finance
    Division
  • Compliance
    Division
  • External
    Relations
    Division

Non-Financial Risks

Non-Financial Risks
Risk Name Risk Definition Response Status Relevant department
Climate and Environmental Risks

Risks arising from natural disasters and changes in weather patterns due to climate change

Risks arising from policies and regulations

Risk of increased treatment costs due to expanded regulations on the cross-border movement and treatment of hazardous waste(e.g., non-recyclable plastics)

Declared 2050 carbon neutrality to combat climate change

Continuously monitoring the applicability of greenhouse gas regulations to LG H&H

Enhancing LG H&H’s natural disaster risk management system, including building manuals and scenarios

Continuously monitoring regulatory trends and prospects in the regions where LG H&H sells its products

Continuously tracking domestic and international trends and regulations

Green Management Part

ESG Team

Human Rights Risks

Risk of damage to corporate reputation due to workplace harassment, discrimination, etc., violating human dignity and values guaranteed by law or recognized internationally.

Identifying and responding to potential human rights risks through the implementation of human rights impact assessments

Operating the ‘Sexual Harassment/Workplace Harassment Consultation Center’ to resolve human rights violations such as workplace harassment and sexual harassment.

Conducting workplace harassment and sexual harassment prevention training for all employees

Human Resources

Labor&Management Relations

ESG Team

Global Economic and Supply Chain Risks

Risks arising from rapid changes in political, economic, social, etc. conditions

Risk of supply chain management crisis due to global regulations
(supply chain due diligence laws, etc.)

Enhancing due diligence monitoring to identify global trends and manage overseas supply chains

Strengthening communication within the organization and minimizing unnecessary reporting

Developing new markets, innovative new products, and marketing activities

Business divisions and overseas subsidiaries

Global SCM Center

External Environmental Risks

Business operations disrupted due to unexpected environmental changes such as epidemics, wars, terrorism, and earthquakes, including the procurement of raw materials and the closure of business sites.

Establishing a “Crisis Response for Overseas Subsidiaries” manual and establishing a companywide crisis management system

Overseas subsidiaries

Purchasing/Logistics, etc.

Reputational Risks

Risks arising from a company losing the trust of consumers, such as poor management, social disruption, major lawsuits, and misleading information.

Expanding active communication utilizing internal and external channels

Establishing a company-wide crisis management public relations manual and enhancing communication channels with external stakeholders

Public Relations Division

Safety Risks

Risks related to environment and safety arising from business operations

Investing in forklift human body detection systems to prevent forklift accidents that could lead to serious accidents

Conducting inspection activities to prevent workplace fires and safety accidents

Expanding an integrated health promotion system

Environmental Safety

Quality Risks

Significant risks arising from quality management, such as harmful substances or inadequate content of active ingredients in products.

Increased treatment costs due to expanded regulations on cross-border movement and treatment of hazardous wastes
(e.g., non-recyclable plastics)

Improving change management processes at suppliers

Operating the Reassurance Quality Management(RQM) system, an integrated quality management system to meet national quality standards.

QA Division

Quality Management Team

Customer Service Center

Information Protection/IT Risks

Risks of theft, loss, or leakage of personal information handled within the company, hacking of information assets, virus and malware infections, and other breaches or disasters on key systems.

Monitoring domestic and international information protection policies at all times

Creating and operating a ‘Disaster Recovery Guide’ manual

Establishing a centralized documentation system for research institutes to block sources of core information leakage

Expanding the integrated security management system for subsidiaries

Information Security Center

Intellectual Property Risks

Risks arising from infringement of our trademark and patent rights, etc.

Protecting patent and trademark rights and preemption

Monitoring exaggerated and false advertising

Intellectual Property Division

Customer Risks

Risks arising from the management of protective measures such as domestic and international customer information management regulations and remedies, complaint counseling, and compensation regulations

Risks of decreased demand and behavioral changes due to customers’ preference for low-carbon products

Establishing an integrated management system and strengthening monitoring of domestic and international customer claims

Introducing self-service using answer bots and applying AI technology for customer counseling

Raising the awareness of LG H&H as an eco-friendly company by expanding the development of green products

Monitoring regulatory trends and expanding internal control systems

Consumer Safety Center

Risks of legal violations

Risks arising from violations of major laws and regulations such as fair trade, personal information protection, product quality, human resources/labor, environment/safety, intellectual property, etc.

Identifying and preparing for key risks

Sending compliance newsletters to all employees to ensure compliance with laws and regulations

Legal Department

External Cooperation Team

Financial Risks

Financial Risks
Risk Name Risk Definition Response Status Relevant department
Accounting Fraud Risks

Risk of embezzlement or other accounting irregularities by internal employees

Expanding the consolidated internal accounting management system

Monitoring financial statements and financial ratios of small subsidiaries

Conducting on-site inspections of overseas subsidiaries

Accounting Division

Liquidity Risks

Funding risks arising from temporary shortage of liquid funds

Future market instability and sudden volatility, such as sudden exchange rate fluctuations, interest rate fluctuations, capital risk, credit risk, tax risk, etc. Market instability and sharp volatility

Monitoring macroeconomic conditions, including short-, medium-, and long-term funding plans in foreign currencies

Long-term management of financial liabilities and financial assets through analysis and review of cash outflow budgets and actual cash outflows

Accounting Division

Tax Risks

Tax risks in business

Enhancing expertise by hiring tax experts

Establishing a process to review taxes before making major decisions

Tax Trade Division