Hitachi’s new risk management
Up until now, Hitachi’s risk management team was mainly centered on the legal department – which I suspect is probably the case in most Japanese companies. Now Hitachi’s President Keiji Kojima has added the finance department to it, wanting the company to take a more proactive approach to global risks. The aim is to visualize risks – such as the impact of the economic slowdown in Europe due to the Ukraine crisis and soaring component costs due to inflation – and respond quickly.
When Russia invaded Ukraine, GlobalLogic was empowered to act quickly to evacuate 7,200 local employees in the country – and was told that they could put off contacting Japan HQ until later. By the end of April, remote working and overseas bases had been put in place and the operations were back up to 95% level.
Hitachi’s overseas business has expanded recently thanks to the acquisition of US company GlobalLogic and the power grids business of ABB, now Hitachi Energy.
Strengthening the risk management system is one response to this, along with introducing a global standard job description system to the Japanese organisation, aiming to have 30% women and 30% non-Japanese representation ont he board by 2030, aiming for zero carbon by 2050. Five out of the 9 external directors are non-Japanese.
Hitachi has learnt from past failures in overseas expansion, such as the Horizon Nuclear Power project in the UK, and the failure of a joint venture thermal power project in South Africa.
These changes have impacted the way the board operates. Now, when an executive officer reports that a plan has not been achieved, the non-Japanese directors respond “so?” – by which they mean, don’t just report the result, tell me what you are going to do next. A former external director of Hitachi, Harufumi Mochizuki comments in the Nikkei that “thanks to training by foreign directors, the executive officers have acquired a world class management style, and the ability to action, with a sense of speed.”
The next challenge for Hitachi will be to make the best use of the global human resources that it now has thanks to its acquisitions. Only three of Hitachi’s 34 executive officers are non-Japanese. The Nikkei comments that these changes are very much in line with the vision of Mr Nakanishi, the former President and Chairman who died in 2021, for an organisation with world class leaders who can respond quickly to global risks.
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Partly this is due to the large proportion of potentially “brass plate” type Japanese companies, with no employees in the Netherlands – often the regional holding company for a group of companies. Partly it is due to the lack of disclosure – information on companies in the Netherlands does not seem to be as readily available as it is in the UK, where data on 
potential customers or employers, it is important to understand this, as the regional headquarters tend to be where the decision makers, big budgets and the most interesting career paths will be based. The number of Japanese expatriates in the country is also an indication of where the decision making influencers are. Although the Netherlands is only the 5th largest host of Japanese nationals in Europe, after the UK, Germany, France and Italy, this number has grown 41% since 2015.
The companies we have identified employ around 48,000 people, a 29% increase on 2017/8 – the vast majority (39,000) of whom work for the Top 30 employers in the Netherlands. Japanese companies in the UK, by comparison, employ around 170-180,000 people, and there has been a slight decline in numbers over the past 5 years.
How this compares with other European countries can be seen in the chart on the left – which shows the numbers of all manufacturing companies in Europe, including automotive. According to Toyo Keizai, the number of Japanese manufacturers in the UK dipped around 2017/8, but recovered, with another more recent fall. But there was growth overall since 2015/6, with 228 companies in 2021/2 compared to 215 in 2015/6 – a 6% increase. This is much lower than the overall 20% growth in Europe, and as a consequence the UK is no longer the largest host of Japanese manufacturers.
Examining the statistics from Japan’s Ministry of Finance on direct investment flows, it seems the UK benefitted from a big inward investment from Japan into the finance and insurance sector in 2016, then there was net disinvestment in 2017-2019, and then increasing net investment in 2020-21. Conversely, there was little investment into Ireland, Luxembourg or the Netherlands in 2016, but major investments into their finance and insurance sectors in 2017, 2018 and 2020-21.
around 15,000 employees joining Hitachi in the Europe, Middle East and Africa region, but did not have so much of an impact on HItachi’s presence in the UK, where its European headquarters is based.
