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 : 13 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, CTO, Head of Production, Head of Consumer Safety Center, ESG/Head of External Relations, 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(QA)
    Division
  • Information
    Protection
    Division
  • IT DR*
    Division

    *Disaster Recovery

  • Purchasing
    Division
  • Logistics
    Division
  • Production.
    Ref Division
  • Production
    Division
  • Human
    Resources/
    Labor
    Division
  • Finance
    Division
  • Compliance
    Division
  • External
    Relations
    Division
  • Quality
    (research)
    Division

Non-Financial Risks

Non-Financial Risks
Risk Name Definition and Impact of Risks Response Status Related Departments
Climate and Environmental Risks

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

Risks resulting from policies and regulations

Increased treatment costs due to expanded regulations on the transboundary movement and disposal of hazardous waste (non-recyclable plastics).

Declare 2050 Carbon Neutrality for climate change response

Continuously monitor applicability of greenhouse gas regulations

Strengthen natural disaster risk management system, including manuals and scenarios

Monitor regulatory trends and forecasts in product sales regions

Continuously monitor domestic and international trends and regulations

Green Management Part

ESG Team
Human Rights Risks

Violation of the dignity and value of individuals guaranteed by law or recognized internationally, leading to corporate reputation damage due to workplace harassment, discrimination, etc.

Identify and address potential human rights risks through human rights impact assessments

Operate Sexual Harassment/Workplace Bullying Counseling Center to remedy workplace harassment and sexual harassment

Conduct workplace harassment and sexual harassment prevention training for all employees

HR Division

Labor Relations Division

ESG Team
Global Economic and Supply Chain Risks

Risks arising from rapid political, economic, and social changes

Supply chain management crisis risks due to global regulations (such as the Supply Chain Due Diligence Act)

Strengthen due diligence monitoring for global trends and overseas supply chain management

Enhance internal communication and minimize unnecessary reporting

Pioneer new markets, develop innovative new products, and conduct marketing activities

Each Business Unit and Overseas Subsidiaries

Global SCM Center
External Environmental Risks

Operational disruptions due to unforeseen environmental changes such as epidemics, wars, terrorism, and earthquakes, affecting raw material purchasing and plant closures

Establish Overseas Subsidiary Crisis Response manual and enterprise-wide crisis management system

Overseas Subsidiaries

Purchasing/Logistics Division, etc.
Reputation Risks

Risks of losing consumer trust due to poor management, social controversies, major lawsuits, and misinformation

Expand proactive communication through internal and external channels

Establish enterprise-wide crisis management publicity manual and strengthen communication channels with external stakeholders

PR Division
Safety Risks

Environmental and safety-related risks that can occur in business operations

Invest in forklift human detection systems to prevent serious forklift accidents

Conduct inspections to prevent plant fires and safety accidents

Expand integrated health promotion system

Environmental Safety Division
Quality Risks

Major risks in quality management, such as harmful substances in products or insufficient active ingredient content

Increased treatment costs due to expanded regulations on the transboundary movement and disposal of hazardous waste (non-recyclable plastics)

Improve supplier change management processes

Enhancing Quality Issue Management Systems and Strengthening Quality Capabilities

QA Division

Quality Management Team

Consumer Reassurance Center
Information Protection/IT Risks

Risks of theft, loss, leakage of personal information handled within the company, hacking of information assets, and infections from viruses and malware affecting key systems

Continuously monitor domestic and international information protection policies

Create and operate Disaster Recovery Guide manual

Establish centralized document system for research institutes to prevent core information leakage

Expand integrated security management system for subsidiaries

Information Security Center
Intellectual Property Risks

Risks from infringements on the company's trademarks and patents

Protect and preempt patents and trademarks

Monitor misleading and exaggerated advertisements

Intellectual Property Division
Customer Risks

Risks in managing domestic and international customer information regulations and protection measures, complaints handling, and compensation policies

Risks of reduced demand and behavioral changes due to customer preference for low-carbon products

Establish and strengthen integrated management system and monitoring for domestic and international customer claims

Introduce self-service using answer bots and apply AI technology for customer consultations

Enhance eco-friendly corporate image by expanding green product development

Monitor regulatory trends and expand internal control systems

Consumer Reassurance Center
Regulatory Compliance Risks

Risks arising from violations of major regulations, including fair trade, privacy protection, product quality, HR and labor, environmental and safety, and intellectual property

Identify and prepare for key risks

Send compliance newsletters to all employees to ensure legal compliance

Legal Division

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
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