RISK MANAGEMENT AT NISSAN

001

1 Risks Related to Financial Markets

2 Risks Related to Business Strategies and Maintenance of Competitiveness

3 Business Continuity

1 Automotive

1)-1 Liquidity

An automotive business must have adequate liquidity

to provide for the working capital needs of normal day-

to-day operations, ongoing research and development,

capital investment needs for future expansion and

repayment of maturing debt. Liquidity can be secured

through cash and cash equivalents, internal cash flow

generation and external funding.

As of the end of fiscal 2019 (March 31, 2020),

Nissan

s automotive business had ¥1,494.6 billion of

cash and cash equivalents (compared with ¥1,309.6

billion as of March 31, 2019). In addition to cash,

Nissan had approximately ¥522.1 billion of committed

credit lines available for drawing as of March 31, 2020.

As for external funding, we raise financing through

several sources including bond and commercial paper

issuance in capital markets, long- and short-term loans

and committed credit lines from banks.

Nissan has a liquidity risk management policy that

is intended to ensure adequate liquidity for the

business while at the same time ensuring mitigation

of liquidity risks such as unmanageable bunched

maturities of debt. The policy defines minimum

liquidity requirements taking several factors into

consideration, including debt maturity, upcoming

mandatory payments

such as dividends, investments

and taxes

and peak operating cash needs. We

also benchmark liquidity targets against other major

Japanese corporations and global auto companies to

ensure that our assumptions are reasonable.

1)-2 Financial Markets

Nissan is exposed to various financial-market-related

risks, such as foreign exchange, interest rates and

commodity prices. Although it is not possible to

eliminate all risk with the use of derivative products, we

do hedge select currencies and commodity price risks

on an opportunistic basis to reduce financial market

risks.

Foreign exchange

Nissan

s products are produced in 18 markets and sold

in more than 170 markets. We procure raw materials,

parts/components and services from many countries

and face various foreign currency exposures that result

from the currency of purchasing cost being different

from the currency of sale to customers. In order to

minimize foreign exchange risk on a more permanent

basis, we are working to reduce foreign currency

exposure by such measures as shifting production to

the countries where vehicles are sold and procuring

raw materials and parts in foreign currencies. In the

short term, we may keep risks in foreign exchange

volatility within a certain range by using derivative

products in accordance with internal policies and

procedures for risk management and operational rules

regarding derivative transactions.

Interest rates

Nissan

s interest rate risk management policy is based

on two principles: long-term investments and the

permanent portion of working capital are financed

at fixed interest rates, while the non-permanent

1 Risks Related to Financial Markets

002

portion of working capital and liquidity reserves

are built at floating rates. We may hedge risks of

interest rate fluctuation by using derivative products

in accordance with internal policies and procedures

for risk management and operational rules regarding

derivative transactions.

Commodity prices

Nissan purchases raw materials both directly and, in

the form of parts provided by suppliers, indirectly.

In both cases, we are exposed to the price fluctuation

risks of raw materials. For precious metals, which are

used in catalysts, we are making continuous efforts

to reduce usage through technological innovation to

minimize commodity price risk. In the short term, we

manage commodity price volatility exposure through

the use of fixed-rate purchase contracts in which

commodity prices are fixed for a period of time. We

may also hedge risks in commodity price volatility

within a certain range by the use of derivative products

in accordance with internal policies and procedures

for risk management and operational rules regarding

derivative transactions.

Marketable securities

Nissan may hold marketable securities for various

reasons, including strategic holding, relationship

management and cash management. Decision-

making authority for such transactions is defined in our

internal policies and procedures for risk management.

We also take measures regarding these risks,

including mandatory periodical reporting with fair value

of such financial transactions.

1)-3 Counterparties

Nissan does business with a variety of local

counterparties, including sales companies and

financial institutions in many regions around the world.

This exposes us to the risk that such counterparties

could default on their obligations.

We have established transaction terms and conditions

for operating receivables in Japan and overseas based

on credit assessment criteria. These criteria enable us

to take measures to protect such receivables and may

include bank letters of credit and/or advance payment

requirements.

As for financial transactions including bank deposits,

investments and derivatives, we manage our

counterparty risk by using an evaluation system based

on external credit ratings and other analysis.

We enter into such transactions only with financial

institutions that have a sound credit profile within their

respective countries.

1)-4 Pensions

Nissan has defined benefit pension plans mainly in

Japan, the United States and the United Kingdom.

The funding policy for pension plans is to make

periodic contributions as required by applicable

regulations. Benefit obligations and pension costs are

calculated using many different drivers, such as the

discount rate and rate of salary/wage increase.

Plan assets are exposed to financial market risks,

as they are invested in various types of financial

assets including bonds and stocks. When the fair

value of these assets declines, the amount of the

unfunded portion of pension plans increases, which

could materially increase required cash pension

contributions and pension expenses.

As a countermeasure to manage such risks, the

investment policy of these pension plans is based upon

the liability profile of the plans, long-term investment

views and benchmark information regarding the asset

allocation of other global corporations

pension plans.

Nissan holds Global Pension Committee meetings on

a periodic basis to review investment

performance, asset manager performance and asset

allocations and to discuss other issues related to

pension assets and liabilities.

2) Sales Finance

2)-1 Liquidity

Nissan operates majority-owned captive sales

finance companies in Japan, the United States,

1 Risks Related to Financial Markets

003

Canada, Mexico, China, Australia, New Zealand,

Thailand, Indonesia and India. Nissan is also a minority

shareholder in a sales finance company (bank) in

Russia. In these countries, banks and other financial

institutions also provide financing solutions to our

customers and dealers.

In Europe and other regions, RCI Banque and several

other banks/financial institutions provide financing to

Nissan

s customers and dealers.

We monitor the liquidity of sales finance companies on

an ongoing basis to ensure we have adequate liquidity

to meet maturing debt and continue operations.

According to our policy, we target to match maturity

of liabilities with maturity of assets wherever possible.

In some of the countries where we operate, long-

term capital markets are not developed and thus it

is not always possible to be perfectly match-funded.

However, match-funding policy allows us to meet

maturing debt obligations even in an environment in

which we cannot raise additional debt due to the state

of capital markets.

In addition to match-funding, we manage liquidity risk

in sales financing through several measures including

keeping adequate liquidity in the form of cash and

unutilized committed lines, unencumbered assets

(mainly vehicle loans and leases), liquidity support from

auto operations to the extent we have excess cash

in auto operations, diversified funding sources and

geographical diversification of capital market access.

As of March 31, 2020, our sales finance companies

liquidity (cash and unutilized committed lines) was

approximately ¥971.4 billion. Additionally, we have

a healthy mix of secured (29.6%) and unsecured

and other (70.4%) funding sources, which support

a stronger balance sheet and incremental liquidity

through utilization of unencumbered assets.

The pie chart below describes our diversified funding

sources in the sales finance business. During

fiscal 2019, we were able to raise new funding

through bank loans, asset-backed securities, asset-

backed commercial paper, commercial paper and

bonds reflecting our diversified access to financing

instruments.

2)-2 Interest Rate Risk

The sales finance business is exposed to interest

rate risks. Interest rate risk is defined as the potential

variance in the earnings of an entity or the fair value

of the portfolio that would result from a fluctuation in

the general level of market interest rates where funds

with differing fixed-rate periods or differing terms are

financed and invested.

Nissan measures these risks by using sensitivity

analysis with various interest rate scenarios and

determines its risk tolerance level. We control the

interest rate maturities of both assets and liabilities to

maintain the risks within an acceptable tolerance level.

The sensitivity analysis mentioned above uses

assumptions that are considered reasonable, but the

Sales Finance Business Funding

Sources (As of March 2020)

ABS

29.6%

Loans

27.8%

Equity

14.9%

Commercial Paper and others

9.8%

Bonds

17.9%

1 Risks Related to Financial Markets

004

actual fluctuation of market interest rates and its

impact may deviate from these significantly.

Nissan enters into interest rate derivative financial

instruments to maintain the potential variability of

interest rates at the desired level of risk exposure. The

main objective of these transactions is to mitigate risk

and not to pursue speculative profit maximization.

2)-3 Credit Risk

Credit risk is the potential for loss due to the failure

of counterparties in the consumer lending and dealer

finance business to meet their credit obligations as

agreed. Nonperformance may be driven by changing

economic conditions, deterioration in financial stature

of a dealer or individual, or other unexpected events.

Nissan manages credit risk through a framework that

sets out policies, procedures, measurements and

regular reviews across the full life cycle of a financial

product from underwriting to collections and write-off.

In consumer lending, applicants undergo a

comprehensive screening process to establish their

credit worthiness. To measure credit worthiness, we

use credit scoring systems that assign a credit score to

an applicant on the basis of data provided by the credit

bureaus and/or data provided by the applicant on the

credit application. The underwriting decision is then

made based on an automated or expert judgement

process that includes assessment of the credit score,

applicant

s capacity to pay, available capital, debt

repayment history, vehicle collateral and financing

conditions. If necessary, and depending on regional

business practices, further telephone or field visit

verifications may be undertaken.

For dealer finance, each application for a new credit

limit, change to credit limits or annual re-approval of

credit limits goes through an extensive committee-

based evaluation and decision process. The

evaluation focuses on the dealer

s financial standing,

internal rating, capacity to service debt, operational

performance, appropriateness of the request, and the

availability and amount of guarantees and collateral.

The internal rating system used during the evaluation

is based on a dealer scoring model taking into account

key financial performance metrics and, at times,

results of operational performance.

All scoring models for consumer lending and dealer

finance are regularly reviewed and revised to keep

them up-to-date and applicable for current credit

applications. These models have a direct impact on

pricing where risk-based pricing is practiced and/or

applicable and also regulate stock audit frequency for

dealer floorplan financing.

As a matter of accounting policy, Nissan maintains

adequate credit loss provisions to cover any future

probable credit losses. However, we also take all

necessary measures to collect on outstanding bad

debt promptly. Depending on the region, collections

may utilize behavioral scoring, auto-dialer systems, call

queue optimization or external third-party collection

agencies to maximize recovery of outstanding debt.

2)-4 Residual Value Risk

Residual value risk is the risk that the future market

value of a vehicle will be lower than the

guaranteed end-of-term residual value for such

financial products as operating leases and some

balloon-type loans. We are exposed to residual value

risk if a customer exercises the option to return their

vehicle to Nissan and the vehicle is subsequently sold

in the market for less than the residual value.

To mitigate this risk, we take a number of steps, both

operational and strategic. On an operational level,

residual values are set objectively based on third-

party independent evaluation (e.g. Automotive Leasing

Guide in North America) and/or statistical analysis of

historical used-car market data (e.g. in Japan). On a

strategic level, to build brand value and hence increase

the future market value of Nissan vehicles, we take

steps to control the level of sales incentives on new

vehicles, maintain appropriate fleet sales levels and

promote certified pre-owned vehicles.

We evaluate the recoverability of carrying value of our

vehicles versus estimated future market values on an

ongoing basis. Per accounting policy, if an impairment

is identified, we recognize an appropriate provision for

potential residual value losses.

1 Risks Related to Financial Markets

005

Risks Related to Business Strategies and Maintenance of Competitiveness

1 Product Strategy

To secure profitability and sustainable growth based

on our future product lineup plan, as part of our

product strategy developing process, we monitor

the impact of various risk scenarios

such as global

market changes and deterioration of demand

on our

future profitability as projected by the plan.

Risk Scenario Examples:

1. Drastic decline of total global demand

2. Demand shift between vehicle segments drastically

faster than our midterm planning assumptions

3. Demand shift from mature markets to emerging

markets drastically faster than our midterm planning

assumptions

We periodically monitor the impact of these scenarios

to secure future profitability and sustainable growth,

as well as updating our future lineup plan based on the

results.

To improve the robustness of our product lineup

against these risks, our main approach is to take the

following countermeasures when planning our product

strategy:

Expand availability of individual products across

markets to mitigate the risk of single-market demand

fluctuations.

Increase volume and efficiency per product to

lower the break-even point and thereby improve our

resilience to global demand fluctuations.

Prepare a more balanced product portfolio, meeting

needs in a broader range of markets and segments

and reducing reliance on specific large markets.

2 Quality of Products and Services

The Quality midterm plan establishes product quality

and customer-centric focus as the foundation of our

business. It also sets numerical targets and promote

them across the whole company.

With respect to new model projects, in order to

achieve quality targets, milestone meetings are held

for processes from design, production preparation

and production. At these meetings, key check points

are confirmed, such as achievement of quality targets,

prevention of recurring problems, and adoption of

measures for potential risks related to new technology,

mechanisms and design changes.

Commercial production starts after confirmation at the

Start of Production (SOP) Judgment Meeting, which

confirms all issues are solved and quality targets can

be achieved. The final decision that the model can be

sold is made at the Delivery Judgment Meeting after

confirmation of the quality of commercial production

and preparedness for service/maintenance.

We implement thorough quality checks before new

models launch. We also advance quality improvement

activities after launch, by constantly gathering quality

information from markets and promptly deploying

countermeasures if problems arise. If safety or

compliance issues do occur, necessary actions such

as recalls are implemented in close cooperation with

the marketing side based on management decisions

reached by independent processes. Incidents are

thoroughly investigated and analyzed, and the lessons

are applied to existing or upcoming models to prevent

recurrence.

In addition to activities such as quality assurance

for new model projects and quality improvement

activities on a daily basis, we operate a

Quality Risk

Management

framework. The framework represents

a higher-level system to ensure successful quality

management for both ongoing and future projects.

Appraisal involves an objective evaluation of whether

risk exists and the level of such risk for the company,

after which responsible persons are assigned to

follow-up activities based on risk levels.

These processes are implemented by the Quality Risk

Management Committee, chaired by an executive with

this responsibility, twice a year.

3) Environment and Climate Change

The automotive industry is affected globally and

throughout its value chain by various regulations and

social requirements related to the environment and

safety, such as exhaust emissions, CO

/fuel efficiency,

fossil fuel restrictions, noise, chemical substances,

recycling, and effects on water resources, ecosystems

006

and other natural capital. These regulations will

become more stringent going forward. To meet these

requirements, we formulate environmental strategies

based on materiality assessments of management risk

factors, analyzing potential risks and opportunities in

our business and identifying issues that are crucial

for both us and our stakeholders. We manage the

achievement of these targets with appropriate key

performance indicators (KPIs). In particular we work

to identify and evaluate the near-term, medium-term,

and long-term risks and opportunities that climate

change represents to our business. The amount of

emitted by our vehicles in use is extremely high

compared to our emissions from corporate activity,

accounting for more than 80% of total CO

emissions

across our entire value chain, so there is a chance

that regulatory risk from climate change (impact to

our businesses due to more stringent restrictions on

greenhouse gas emissions) could arise. Accordingly,

based on our own calculations incorporating the

findings of the IPCC

s Third Assessment Report

and the goal of keeping global temperatures from

rising more than 2 degrees Celsius, we established

a long-term vision for 2050 of reducing product CO

emissions from new vehicles by 90% compared

to 2000 levels. To address transition risks due to

climate change (risks arising from the transition to a

low-carbon society, such as stricter regulations and

contraction in oil-related markets), we successfully

released the world

s first mass-produced electric

vehicle (EV), the Nissan LEAF, in 2010. Nissan's target

is to sell 1 million electrified vehicles a year globally by

the end of fiscal 2023 and is considering partnering

with national and local governments to promote

zero-emission mobility and help build supporting

infrastructure.

We will help reduce CO

emissions by continuously

developing technologies to improve fuel economy

in internal combustion engines and bringing them

widely into the market. In particular, in response to

strict regulations on fuel economy and CO

emissions

in Europe and the United States, we are expanding

our lineup of highly fuel-efficient, low CO

-emitting

vehicles equipped with such technologies as our

flagship e-POWER electrification technology and

revolutionary variable compression ratio turbo engine,

fuel-efficient direct injection engine and continuously

variable transmission (CVT).

The Paris Agreement adopted at the 21st Conference

of the Parties (COP21) in 2015 calls for global peaking

of greenhouse gas emissions as soon as possible,

with subsequent reductions resulting in net zero

greenhouse gas emissions from human activity in the

second half of the 21st century. We will aim to achieve

these goals, and in recognition of the need to respond

to risks and opportunities rooted in uncertain future

phenomena like climate change, we are developing

resilient strategies that account not just for the

2-degree temperature increase scenario already set,

but also multiple temperature increase scenarios like

1.5 degrees and 4 degrees as proclaimed by the Task

Force on Climate-related Financial Disclosures (TCFD).

Stricter controls on environment-impacting substances

are being implemented around the world. In

accordance with a globally uniform policy on reducing

the use of environment-impacting substances, Nissan

has continued to strengthen its management of

environment-impacting substances, adhering to a well-

planned schedule for their reduction and advancing

the use of alternative substances. In 2005, Nissan

formulated its Policy for the Use of Environment-

Impacting Substances regarding the cessation of

use of substances scientifically recognized as being

hazardous or carrying high hazard risks, as well as

those identified by NGOs as dangerous. In 2007, these

policies became unified global standards for Nissan,

and in 2016 they were issued as common technology

standards for the Alliance, restricting environment-

impacting substances to a stricter degree than the

domestic laws of the countries and regions where it

operates. Based on this approach, we have developed

internal engineering standards restricting the use

of designated substances. The standards identify

chemicals whose use is either prohibited or controlled,

and are applied in selecting the materials, parts and

articles for our vehicles from the initial development

stage.

Demand for mineral resources and fossil fuels has

steadily increased in response to the economic

growth of emerging countries. In addition to

promoting reduced use of virgin natural resources

through resource-saving and recycling measures, it is

becoming important to procure natural resources that

have a lower impact on the Earth

s ecosystems, not

2 Risks Related to Business Strategies and Maintenance of Competitiveness

007

only because these resources are limited (including the

mineral resources for motor and battery applications,

the use of which is expected to increase with

electrification) but also considering the wide-ranging

effects that resource extraction has on ecosystems.

Our aim is that by 2022 some 30% of the resources

used in the manufacture of our vehicles will not rely on

newly mined resources. To achieve this, we consider

vehicle lifecycles and promote weight reduction,

less use of scarce resources, waste reduction and

increased use of recycled materials. We also promote

rebuilding, remanufacturing and reuse to maximize

opportunities for recapturing the residual value of cars

and parts.

Air pollution, along with climate change and traffic

congestion, is one of the issues facing urban areas,

and one which it is necessary for Nissan as an

automaker to address and contribute to solving. The

spread of EVs such as the Nissan LEAF that emit

absolutely no exhaust gas during operation is an

effective way to improve atmospheric pollution levels

in urban areas. As a leader in electrification, Nissan

promotes zero-emission mobility and investigates the

setting up of infrastructure through partnerships with

national and local governments, as well as various

industry groups such as electric power companies.

Emissions from Nissan

s manufacturing plants typically

include nitrogen oxide (NOx), sulfur oxide (SOx) and

volatile organic compounds (VOCs). We are carefully

establishing global management standards and

systems for these and other substances released into

the atmosphere, while working to reduce the amount

of these materials used and emitted. Our goal is to

address these issues beyond the extent required by

local regulations.

The issue of water resources is ever more serious

with the retreat of glaciers and rainfall fluctuation due

to climate change in addition to increasing water use

due to the growing world population and economic

development. We also use water resources in our

production process, and we recognize the importance

of this issue and continuously work to preserve

water resources at plants around the world through

measures such as reducing consumption, recycling

water discharged in the production process and

thorough water quality control of wastewater.

The purchasing divisions of Nissan and Renault carry

out supply-chain management in a manner consistent

with The Renault-Nissan Purchasing Way, a booklet

outlining policies for dealing with suppliers, and

the Renault-Nissan CSR Guidelines for Suppliers.

With respect to environmental issues, we have set

standards for the efforts of our automobile parts and

material suppliers in the form of the Nissan Green

Purchasing Guidelines. In 2018, we added language

encouraging suppliers to undertake individual

environmental initiatives, and in 2019 we strengthened

regulations on the management of environment-

impacting substances. Additionally, since fiscal 2012,

through seminars and other means, we have asked

suppliers to regularly report environmental data,

including their CO

emission levels and energy use,

to provide reports on management of environment-

impacting substances, recycling of resources and

water-conservation efforts, and to reduce their

environmental impact. We then work with suppliers

to reduce environmental impact throughout the value

chain.

We are working to adhere to guidelines and achieve

targets with the mind of corporate responsibility to go

beyond just complying with laws and regulations. In

order to address diversifying environmental issues and

promote comprehensive environmental management

on a global basis, our Global Environmental

Management Committee (G-EMC), which is co-chaired

by a board member and convenes twice a year, and

our Environmental Management Committees (EMCs)

in seven regions worldwide confirm the progress of

activities and decide companywide policy and the

content of reports to the Board of Directors.

2 Risks Related to Business Strategies and Maintenance of Competitiveness

008

2 Risks Related to Business Strategies and Maintenance of Competitiveness

Board of Directors

Global

Environmental

Management

Committee

Global/corporate focuses

Functional/regional

focuses

Environmental

Strategy

Organization

Plan

Check

Act

PDCA

Customers

Communities and

future generations

Business

partners

National and local

governments

NGOs/NPOs

Shareholders and

investors

Employees

Board of

Directors

Advisory

Meetings, etc.

4 Compliance and Reputation

We have produced a Nissan Global Code of Conduct

for all employees of the Nissan Group worldwide.

To ensure thorough understanding of the code,

training and education programs such as e-learning

are provided, and our compliance with laws and

ethical standards is monitored by regional and local

compliance committees that report to the Global

Compliance Committee. We have also implemented

a globally integrated whistleblowing system allowing

employees to report suspected compliance issues to

management.

We have created sets of internal regulations globally

covering insider trading prevention, personal

information management, information security and

the prevention of bribery and corruption. We strive

to prevent noncompliance and reputation risk to the

company by implementing various education and

training programs.

Nissan s Framework for Global Environmental Management

Nissan

s Global and Regional Environmental Management Organization

Dialogue with stakeholders

Nissan Global and Regional Environmental Management

Major Issues

Climate Change

Resource Dependency

Air Quality

Water Scarcity

Suppliers

and

Procurement

Product

and tech.

Development

Manuf.

and

Logistics

Sales

and

Ofﬁces

Use,

Service and

E LV

009

3 Business Continuity

1 Natural Disaster Measures

In case of an earthquake measuring 5-upper or higher

on the Japanese seismic intensity scale, or other

natural disasters causing heavy damage affecting

Nissan

s business activities, a First Response Team

(organized by the main units of the Global Disaster

Headquarters) will gather information and decide

actions to be taken based on the results. If necessary,

the Regional Disaster Headquarters will be set up to

gather information about employee safety and damage

to facilities and to work for business continuity.

At the same time, we are working with suppliers

to develop Business Continuity Plans (BCPs). This

includes assessment of work priorities by each and

every function and development of

countermeasures to continue priority work. The BCPs

will be reviewed annually in a PDCA (plan, do, check,

act) cycle.

Information flow

Regional Disaster Headquarters (Example)

Chief

Deputy Chief

Human Resources ManufacturingGeneral & External Affairs

Secretariat

Decision/Instruction

Chief

Decision-maker for important issues

Corporate Service Management Dept.

(Secretariat)

Human Resources Div.

Production Control Dept.

Purchasing Administration Group

Japan Planning Div.

Secretariat

Decision/Instruction

Report damage situation

Decision/Instruction

Report damage situation

Disaster Recovery Organization (Earthquake)

Decision/Instruction

Report

Decision/Instruction

Report

Deputy Chief

(Administration function)

Corporate Service

Management Dept.

Gathers information on the disaster situation

companywide

Checks disaster situation of social infrastructure

External & Government

Affairs Dept.

Interfaces with central and local governmental agencies

Human Resources Div.

Gathers information on safety status of employees

companywide

Implements measures related to employees welfare

Global Communications

Div.

Interfaces with the press

Provides information for business partners and general

customers

Sustainability

Development Dept.

Considers rendering humanitarian aid to disaster areas,

etc.

IR Div.

Responds to investors, provides information

IS/IT Div.

Checks detailed system status

Plans measures for system recovery, etc.

Safety & Health

Administration Group

Deals with and takes measures for casualties

Considers and implements dispatching of occupational

health physicians

Administration Dept. for

Affiliated Companies

Gathers information on safety status of employees of

affiliated companies

Checks disaster situation of affiliated companies

Budget & Accounting

Dept./Finance Dept.

Gathers and organizes information on the financial

situation in emergencies

Corporate Security

Office

Serves as point of contact for overseas affiliated

companies, etc.

Advises on dispatch of advance teams

Production Control Dept.

Checks disaster situation of plants in detail

Estimates impact of stopped production

Makes plans for measures to restore production, etc.

Purchasing

Administration Group

Checks disaster situation of suppliers

Supports recovery of suppliers

Considers alternative procurement sources, etc.

Alliance SCM Div.

Checks damage to logistics network and impact on

production

Checks situation of logistics companies

Considers alternative means of transportation, etc.

Alliance Manufacturing

& SCM Human Resource

Dept.

Checks safety status of production division personnel

Considers tentative lines, securing of personnel, etc.

Vehicle Production

Engineering Div./

Powertrain Production

Engineering Div.

Checks details of damage to production facilities

Considers tentative lines, securing of personnel, etc.

Global Asset

Management Dept.

Checks and organizes information on buildings and

peripheral equipment

Japan Planning Div.

Checks disaster situation of dealers in detail

Makes plans for measures for the dealers recovery

Japan After-Sales Div.

Checks disaster situation of dealers in detail

Makes plans for measures for the dealers recovery

R&D Administration &

Facility Management

Dept.

Checks disaster situation of parts dealers in detail

Makes plans for measures for the parts dealers

recovery

Production Strategy

Planning

Safety Headquarters

Handles budgeting related to recovery in production

departments

Point of contact for recovery support requests (in-

house, suppliers, dealers)

Deputy Chief

(Value chain: R&D, purchasing, manufacturing, sales)

Report

010

Policy and Principles in Case of Earthquake:

1. Human life as the first priority (use of employee

safety confirmation system)

2. Prevention of secondary disaster (in-house

firefighting organization, stockpiling, provision of

disaster information)

3. Speedy disaster recovery and business continuity

(measures for hardware, improvement of

contingency plan, development of BCP)

4. Contribution to local society (cooperation/mutual aid

with neighboring communities, companies, local and

central governments, provision of supplies, etc.)

The Global Disaster Headquarters and Regional

Disaster Headquarters conduct simulation training

assuming a large earthquake to ensure preparedness.

These drills test the effectiveness of this organization

and contingency plan and identify the issues to be

improved. The contingency plan is reviewed based on

this feedback.

In the aftermath of the March 11, 2011 disaster, our

periodic simulation training helped to ensure the

smooth launch of our Global Disaster Headquarters

and Regional Disaster Headquarters on the initiative of

our First Response Team. This also helped to complete

confirmation of employee safety and checks on the

extent of the damage.

Additionally, based on our policy of contributing to

local society, we reacted rapidly to provide rest space

for people who could not return home on March 11 and

to support damaged areas.

At the stage of business recovery, our Disaster

Headquarters and project teams of each function

continuously shared up-to-date information and

addressed issues for production and business

recovery with companywide cooperation. Effective

communications supported quick recovery of our

total supply chain, including parts supply, production,

logistics, sales and services.

Since the Great East Japan Earthquake, we have

performed the following training exercises.

FY Training exercise Event

2011

Review of response to Great East Japan Earthquake

Simulation training (incorporating review findings)

2012

Simulation training (scenario: three simultaneous

earthquakes)

2013

Simulation training (scenario: earthquake directly beneath

Tokyo metropolitan area)

Japanese government

publishes estimates of damage

from earthquake

2014

Simulation training (scenario: earthquake directly beneath

Tokyo metropolitan area)

2015

Simulation training (scenario: earthquake directly beneath

Tokyo metropolitan area)

2016

Initial response training (scenario: night, non-workday)

Simulation training (scenario: three simultaneous

earthquakes)

Earthquakes in Kumamoto

Prefecture

2018

Simulation training (scenario: three simultaneous

earthquakes)

Torrential rains in western

Japan, an earthquake in

northern Osaka Prefecture

and the Hokkaido Eastern Iburi

Earthquake

*Not implemented in FY2017 (Response to vehicle inspection issues) and in FY2019 (Response to COVID-19 issue)

3 Business Continuity

0 11

A series of natural disasters occurred across Japan in

fiscal 2018, including torrential rains in western Japan,

an earthquake in northern Osaka Prefecture and the

Hokkaido Eastern Iburi Earthquake.

Regarding the risk not only from earthquakes but also

of water damage, we worked with Mitsubishi Motors to

provide supplies to affected areas and help suppliers

recover. Based on issues identified during fiscal

2016

s simulation training and the series of recent

disasters, we also conducted simulation training using

a scenario where the goal was to finalize recovery

plans (including restarting manufacturing) within

around one week.

Going forward, we will continue to hold simulation

training on set themes, including responses to issues

identified in training and to changes in the expected

scale of earthquakes as published by government

bodies, as we continue to refine our disaster plans

using a PDCA cycle.

Regarding our response to the risk of disasters

globally, our organization is capable of working

together at the Alliance level, and when disasters do

occur around the world, we use social media to share

information rapidly and provide the necessary support.

2 Response to Pandemics

In response to the outbreak of H1N1 type influenza in

April 2009, we established a global policy for infection

prevention. Each region has organized a response

team and promoted concrete countermeasures based

on the policy. Infection status can be monitored

globally thanks to firmly developed reporting lines

between our global response team and each regional

team.

We have promoted countermeasures based on three

basic principles stated in our global policy, which are:

1. Priority on employees

health and lives

2. Prevention of the spread of infection

3. Continuity of business operation

As specific actions, we established the

guidelines

for employee action,

which stipulated actions to be

taken by employees, sections and companies, and

kept employees informed when there is a suspected

outbreak of infections.

We also developed a BCP for each business section,

with several triggers to invoke the BCP depending on

the infection ratio, to maintain business continuity even

under a high infection situation.

We will run PDCA cycles to remain prepared for

contingencies like highly virulent flu through measures

such as updating response team members and the

BCP, carrying out educational activities for infection

prevention and stockpiling sanitary and medical goods.

During the current COVID-19 outbreak as well,

we began monitoring when there were signs of a

pandemic and put the full organization to work in

responding when infections expanded globally. We

have endeavored to ensure the health and safety of

our employees and their families, stem the spread of

infections and continue and restore business activities.

3 Countermeasures for Production

Continuity Risk

Our production division has dealt with various risks

related to the three elements of production. For

natural disasters, we have identified the measures

needed to restart production within our established

goal of two weeks following a large-scale disaster.

Over the years, we have carried out continuous

prevention countermeasures for physical infrastructure

(quakeproofing and reinforcement of buildings

and other facilities), maintained an operations

recovery manual to shorten recovery time and

regularly executed BCP simulation drills. We are also

strengthening the resilience of our global production

network through measures such as establishing a BCP

for parts exports to enable continued operations at

overseas plants.

To prepare for the risks associated with our worldwide

expansion of production, we have designated critical

facilities around our global network that would play

major roles in ensuring business continuity.

We are working to bolster preventive maintenance by

ensuring thorough knowledge of globally standardized

facility maintenance guides. At the same time, to

minimize the impact on production, we are preparing

backup plans for implementation in the event of a

significant disruption.

3 Business Continuity

012

It is also vitally important to manage risks associated

with parts procured from Leading Competitive

Countries (LCCs) in order to expand markets. We

have been conducting risk assessments before

making sourcing decisions and providing support

for improvement activities after sourcing. As part of

preparations for production, we carry out assessments

of quality and capacity management processes.

During the production phase, quality checks are

implemented at key points in the production and

logistics process to prevent imperfect parts being

manufactured or used. We also work to reinforce

measures identifying the root causes of issues in order

to secure global market expansion and growth.

To efficiently and effectively promote these activities,

we are globally standardizing tools and practices

for improving processes and assessments. Through

organizations to manage supplier risk in major regions,

including North America, Europe, China, Japan,

Thailand, India and Brazil, we are reinforcing efforts to

prevent risks associated with parts supply.

It has also become vital to address the increasing

number of cyberattacks, and to minimize the effect

on Nissan when they occur. As well as monitoring and

managing all IT equipment and PCs at manufacturing

plants, we take preventative action to avoid risk

by installing anti-virus software and performing

equipment lifecycle assessments. Additionally, in order

to minimize damage in the very unlikely event that a

cyberattack occurs, we periodically conduct simulation

training for first response teams and business

continuity planning.

Furthermore, since FY2019 we have implemented

risk management training for all managers and

3 Business Continuity

Risk factor

HR/Workforce

Purchased parts

Raw materials

Facilities

Natural

disasters

(earthquakes)

Reinforcement of office buildings

(completed)

Review of earthquake response

manual (once/year or more)

Disaster-prevention drills (once/

year or more)

Assessment of earthquake

preparedness of major suppliers

located in high quake-risk areas

(FY2008)

Introduction of damage reporting

system on web base (FY2010)

Confirmation of BCPs to be

implemented in case of disaster

by suppliers in high quake-risk

a re a s (FY 2 011)

BCP for parts exports to continue

production at overseas plants

(FY2012)

Reinforcement of buildings and

machinery (continued)

Review of facility recovery manual

(FY2 011)

Regular audits of each business

facility

Fire

Risk assessment based on Fire

Prevention Evaluation System

(F-PES) (once/year)

Same as HR/workforce

Revision of equipment standard

based on the assessment result

Workplace

injury

Risk assessment based on Safety

Evaluation System (SES) (once/

year)

Assessment of health and safety

management system (once/year)

Same as HR/workforce Same as HR/workforce

Pandemic

Review of response manual for

new strains of flu (FY2018)

Requested suppliers to develop

response manual coordinated with

Nissan

Demand

fluctuation

Backup from other Nissan plants

(as needed)

Backup from other companies (as

needed)

Employment of short-term

employees (as needed)

Regular check of demand

projections and supply capacity;

implementation of measures

Installation of flexible

manufacturing system

(completed)

Regular check of demand

projections and production

capacity; implementation of

measures

Development of complementary

production systems for main

powertrains

3 elements of

production

013

Risk factor

HR/Workforce

Purchased parts

Raw materials

Facilities

Machinery

breakdown

Sharing of past incident

experiences and incorporating

these in preventive maintenance

Incorporating past experiences in

equipment standards

Bolstering of management at

critical facilities

Enhancement of preventive

maintenance by ensuring

thorough knowledge of facility

maintenance guides (checking

periods, points and methods)

Electric

power

shortage

Thoroughgoing energy-

conservation efforts

Flexibility in plant operations and

working hours in response to

requests from the government or

power companies

Expansion

of LCC-

manufactured

parts

Assessment of monozukuri ability

before supplier sourcing and

support for improvement activities

after sourcing; assessment

of quality and of quantity

management processes at

production preparation phase

Quality check at mass-production

phase (action

Gate1-3 ) and

preliminary study of backup

suppliers to reduce supply risk

Reinforcement of supplier risk-

management teams in key areas

(FY2013)

Cyberattacks

(FY2018)

Disaster simulation and response

team drills

Management (tools and process)

of updates anti-virus software

Reassessment of device lifecycle

and introduction of measures

to deal with obsolete operating

systems

Monitoring of installed terminals

and allocation of responsibility for

management

Decrease

in skilled

workers/

experts

Planning and implementation of

training program at each plant to

develop skilled workers (FY2010)

Global development of human

resources through the Global Pilot

Plant program (FY2011)

Nurturing of experts to teach

technical skills (planning and

implementation from FY2012)

3 elements of

production

014

supervisors in manufacturing departments to instill an

understanding of the importance of risk management

and have them apply it to their daily work.

4 Supply-Chain Continuity

To minimize risk in the supply chain, we maintain

policies addressing both major disasters and daily risks

and follow up on their execution.

Promotion of BCPs

1. Identification of risks and development of recovery

plans

We identify natural disaster and single-source risks

and work with suppliers to develop and maintain up-

to-date countermeasures against natural disasters

(enhancing earthquake resistance, quakeproofing

facilities and preventing flood damage, etc.), securing

safe levels of inventory and considering alternate

production for suppliers in risk areas and high-risk

components.

2. Visualization of the supply chain

We maintain an up-to-date supply-chain database of

suppliers and the components, materials and custom

integrated circuits they provide that allows us to

quickly determine the damage to our supply chain

in case of major disaster. This lets us provide rapid

support to those heavily affected and ensure early

resumption of supplier activity and vehicle production.

3. Improvement of BCPs

We have a policy of visiting suppliers to hold

information exchange session and introduce

benchmark case studies to them. We also conduct

BCP Checklist surveys to assess supplier BCP

systems and activities and communicate and

implement follow up activities on the results. For

these surveys, we have added torrential rains, floods,

labor strikes, cyberattacks and pandemics to the

existing risk categories of earthquakes and tsunamis

and are envisioning risks and countermeasures to be

considered on a global basis.

4. Confirmation of suppliers

financial condition

We conduct periodic financial assessment of

suppliers globally in cooperation with Renault and

Mitsubishi Motors and communicate closely to ensure

maintenance of sound business.

5 Risk Financing and Loss Prevention

1. Global Insurance Management Policy

Nissan manages accident and natural disaster risk on

a global basis with risk-management techniques that

combine self-retained risk with external risk transfer

via insurance. In order to minimize the cost of risk, we

adhere to the following global insurance management

policy. This policy has provided appropriate coverage

for damage resulting from the unpredictable disasters

that the world has seen in recent years.

Predictable risks with low impact and high frequency:

Retain risks up to an acceptable level on a

consolidated basis by the company.

Unpredictable risks with low frequency and high

impact:

Risks whose financial impact may exceed the

acceptable level of self-retention are transferred

outside the company via insurance.

2. Global Insurance Programs

In order to minimize the cost of hazard risks and

manage risks occurring globally and interdependently

in a concentrated manner, global insurance programs

have been established for main lines of insurance. The

Finance Department in Nissan

s Global Headquarters

determines insurance conditions and structures and

negotiates directly with insurance companies for

these global programs. These insurance companies

are important strategic partners and are thus selected

with consideration given to risk hedging and financial

solvency.

The following risks are covered through global

programs.

Property damage and business interruption by

accidents:

The program covers risks not only for property

damage but also for business interruption and

contingent business interruption due to accidents,

taking into consideration the global expansion of the

supply chain for products and components. Nissan

identifies important suppliers globally and arranges

3 Business Continuity

015

insurance for risks caused by interruption of the

supply chain. Coverage limits are determined based

on the probable maximum loss amount measured by

third-party experts and the risk appetite of insurers.

We have achieved further improvement and

optimization of insurance conditions by negotiating

with insurance companies together with our Alliance

partner Renault from fiscal 2011. The program was

extended to new Alliance partner Mitsubishi Motors

from fiscal 2017.

Transportation and storage of vehicles and products

for sale:

This program covers risks relating to transportation

and the supply chain for components and products

globally. Covering geographically spread risks under a

global program lets us manage loss data on a global

basis and ensure stability of insurance costs.

In fiscal 2011, this program was combined with

Renault

s program for negotiating with insurance

companies to achieve best possible results utilizing

synergies of scale. The program was extended to

new Alliance partner Mitsubishi Motors from fiscal

2017.

Liability (including product liability and liability for

unanticipated accidents during operations or caused

by owned or managed facilities [general liability]):

To manage this risk, we have implemented insurance

programs suitable for each region

s legal

systems and practices. The programs are led by the

Global Headquarters in order to implement a globally

uniform strategy with consistent worldwide insurance

coverage and achieve lower insurance costs.

3. Utilization of Group Insurance Company

For the purpose of more efficient self-retention on a

consolidated basis for insurance programs, we utilize

an insurance company within the Nissan Group.

Utilization of a Group insurance company enables the

following:

The Group can reduce insurance costs by obtaining

the minimum necessary insurance.

Each Group company can obtain the necessary

coverage.

The Group can gather and analyze loss data below

self-retained limit.

4. Loss-Prevention Activities

Nissan conducts loss-prevention activities to improve

loss results and reduce the cost of premiums on

an ongoing basis. Since the introduction of global

insurance programs, loss-prevention activities have

been promoted more actively and globally to maintain

low premium rates.

Examples of our loss-prevention activities include

conducting risk-engineering surveys and obtaining

recommendations for safety from third-party experts,

creating manuals for actions in the event of typhoons

and constructing hail nets to prevent hail damage.

3 Business Continuity