Governance

Risk Management

Integrated Risk Management

To realize sustainable growth by maintaining sound management and improving profitability, the Company is conducting business operations that incorporate frameworks to manage integrated risks. Specifically, the Company has in place a structure for distributing risk capital to each risk category based on the Risk Capital Management Policy and after quantifying each risk through risk assessment methods that correspond with the characteristics of each asset and business. This structure also supports rational risk-taking within an acceptable range. In addition to implementing integrated risk management frameworks, the Company promotes the regular monitoring of the status of risk capital use and asset portfolios. This status is reported to the Risk Management Committee and the Management Committee as well as to the Board of Directors, which is responsible for managing this information. This structure facilitates enhanced internal communication in relation to risks as well as more appropriate responses to risks. In addition, the Company conducts stress tests based on multiple scenarios to verify its resistance to risks from a wide variety of perspectives.

Overview of Risk Management Framework

Major Risks and Management Systems

Credit Risk

Nature of Risk	Primary Management Systems
The Mitsubishi UFJ Lease & Finance Group conducts business that extends credit over the medium-to-long term through leases, installment sales, monetary lending, and other forms. Depending on future business trends and the financial landscape, additional provisions of allowance for doubtful receivables could be necessary with increasing non-performing loans due to the deterioration of a company's credit status, which could impact the Group's business results. Moreover, due to the fact that we operate businesses globally, we bear the risk of incurring losses based on the political and economic conditions in the countries and regions where we operate businesses or engage in investments.	The Group makes a comprehensive study in light of the customer's credit standing and country risk as well as factors such as the value of the leased property. The Group checks the credit standing of customers on an ongoing basis even after entering into business relations. The Group endeavors to take risk diversification into account in credit management for its portfolio overall so as to not concentrate credit in particular customers, industry sectors, countries, or regions. The Group engages in periodic monitoring to quantitatively measure the risk of its portfolio.

Nature of Risk

Primary Management Systems

The Mitsubishi UFJ Lease & Finance Group conducts business that extends credit over the medium-to-long term through leases, installment sales, monetary lending, and other forms. Depending on future business trends and the financial landscape, additional provisions of allowance for doubtful receivables could be necessary with increasing non-performing loans due to the deterioration of a company's credit status, which could impact the Group's business results. Moreover, due to the fact that we operate businesses globally, we bear the risk of incurring losses based on the political and economic conditions in the countries and regions where we operate businesses or engage in investments.

The Group makes a comprehensive study in light of the customer's credit standing and country risk as well as factors such as the value of the leased property.
The Group checks the credit standing of customers on an ongoing basis even after entering into business relations.
The Group endeavors to take risk diversification into account in credit management for its portfolio overall so as to not concentrate credit in particular customers, industry sectors, countries, or regions.
The Group engages in periodic monitoring to quantitatively measure the risk of its portfolio.

Responsible Departments:Credit Department, International Credit Department

Asset Risk

Category	Nature of Risk	Primary Management Systems
Global Assets	The Mitsubishi UFJ Lease & Finance Group holds global assets such as aircraft, aircraft engines, ships, containers, and railcars and conducts a business leasing these assets. In addition to the aforementioned credit risk, the Group must bear the risk of price fluctuations of these assets. The Group collects funds through leasing fees received from customers, and from asset sales after a lease expires. In cases where a customer goes bankrupt, the Group will withdraw the asset and lease it to another customer, and sell the asset to recover funds. Fluctuations in the selling price of an asset due to economic trends and market conditions, impairment losses, increased costs associated with property management, or other factors may affect business results.	The Group conducts a comprehensive study that includes items relevant to movable property to be confirmed at the time of transaction, future asset liquidity, and other factors. The Group checks industry trends as well as the credit standing of customers on an ongoing basis even after entering into business relations. The Group sets and employs investment criteria to maintain a portfolio that accounts for risk diversification, including target models, regions, and times of expiration. The Group holds regular predictive management meetings to investigate indications of asset value fluctuations or trends in a target industry. The Group engages in periodic monitoring to quantitatively measure customers' credit risk and price fluctuations in the value of assets in its portfolio.
Real Estate	The Mitsubishi UFJ Lease & Finance Group engages in the investing, lending, and leasing of offices, residences, commercial facilities, logistics facilities, hotels, and other commercial real estate. These assets are subject to risks related to income and price fluctuations. In addition to collecting rental fees from tenants, the Group collects funds from selling assets when appropriate. Income from rent and asset sales may fluctuate according to market conditions, which may affect business results.	The Group makes a comprehensive judgment after carefully assessing future asset value and liquidity. The Group conducts ongoing checks of the operational status of its assets and both price and industry trends even after transactions are made. The Group holds regular predictive management meetings to investigate indications of asset value fluctuations or industry trends. The Group engages in periodic monitoring to quantitatively measure price fluctuations in the value of assets in its portfolio.

Responsible Departments:Risk Management Department, Asset Management Department, Each Business Division

Investment Risk

Nature of Risk	Primary Management Systems
The Mitsubishi UFJ Lease & Finance Group is engaged in investment activities that include investment, lending, and financing for projects in a variety of businesses. These investment activities are subject to numerous risks, including changes in the business environment, profits that do not meet expectations, low possibility of recouping investment amounts, a drop in the stock price of an investee below a certain level, that said stock price drop will stay low because of changing economic or financial conditions, that some or all of an investment may be lost, or that extra funding may be required. Other risks include the possibility that the Group will be unable to withdraw from or reorganize a business within the ideal time frame or via optimal methods, or that a lack of appropriate information from the investee could lead to unprofitability. These risks and others could affect business results.	The Group holds investment council meetings according to the investment amount of and risks related to individual projects. The Group makes a comprehensive judgment after carefully assessing the future value of the investment and its liquidity. The Group conducts ongoing checks of the operational status of its assets and industry trends even after transactions are made. The Group engages in periodic monitoring to quantitatively measure risks pertaining to fluctuations in the value of investments in its portfolio.

Nature of Risk

Primary Management Systems

The Mitsubishi UFJ Lease & Finance Group is engaged in investment activities that include investment, lending, and financing for projects in a variety of businesses. These investment activities are subject to numerous risks, including changes in the business environment, profits that do not meet expectations, low possibility of recouping investment amounts, a drop in the stock price of an investee below a certain level, that said stock price drop will stay low because of changing economic or financial conditions, that some or all of an investment may be lost, or that extra funding may be required. Other risks include the possibility that the Group will be unable to withdraw from or reorganize a business within the ideal time frame or via optimal methods, or that a lack of appropriate information from the investee could lead to unprofitability. These risks and others could affect business results.

The Group holds investment council meetings according to the investment amount of and risks related to individual projects.
The Group makes a comprehensive judgment after carefully assessing the future value of the investment and its liquidity.
The Group conducts ongoing checks of the operational status of its assets and industry trends even after transactions are made.
The Group engages in periodic monitoring to quantitatively measure risks pertaining to fluctuations in the value of investments in its portfolio.

Responsible Departments:Investment Management Department, Each Business Division

Market Risk

Category	Nature of Risk	Primary Management Systems
Interest Rate Fluctuations	The fees for leases and installment sales conducted by the Mitsubishi UFJ Lease & Finance Group are set based on the purchase price for the transacted property and the market interest rates at the time of finalizing a contract and do not fluctuate during the contract term as a general rule. Acquisition funds for the leased property, on the other hand, are procured via a balance of fixed interest rates and variable interest rates, and the cost of capital is affected by fluctuations in the market interest rate. Should the market interest rate rise precipitously, it could impact the Group's business results and financial position.	The Group takes part in asset liability management (ALM) to keep constant watch for any imbalances in the form of interest rates or exchange rates for asset management and for procurement of funds. The Group manages interest rate fluctuation risks through appropriate hedge operations while taking interest rate movements and other factors into account. As a general rule, the Group raises funds in the currency matching that of an operating asset to mitigate risk of foreign exchange rate fluctuations and works to minimize valuation gains and losses from foreign exchange. The Group engages in periodic monitoring to quantitatively measure to what extent and the likelihood that its portfolio may incur a loss over a certain period of time. The ALM Committee meets quarterly or as necessary.
Exchange Rate Fluctuations	The Mitsubishi UFJ Lease & Finance Group actively conducts business outside Japan, and assets in foreign currencies are increasing. In principle, overseas consolidated subsidiaries raise funds in the same currency as their assets. Since these companies record their financial statements in their local currency, fluctuations in exchange rates may affect business results when converted to Japanese yen.		The Group takes part in asset liability management (ALM) to keep constant watch for any imbalances in the form of interest rates or exchange rates for asset management and for procurement of funds. The Group manages interest rate fluctuation risks through appropriate hedge operations while taking interest rate movements and other factors into account. As a general rule, the Group raises funds in the currency matching that of an operating asset to mitigate risk of foreign exchange rate fluctuations and works to minimize valuation gains and losses from foreign exchange. The Group engages in periodic monitoring to quantitatively measure to what extent and the likelihood that its portfolio may incur a loss over a certain period of time. The ALM Committee meets quarterly or as necessary.

Responsible Department:Treasury Department

Liquidity Risk

Nature of Risk	Primary Management Systems
The Mitsubishi UFJ Lease & Finance Group procures large amounts of funds when conducting business such as monetary lending and the acquisition and installment sales of properties for leasing. Should financial institutions and investors become more risk averse as a result of a free fall in economic and financial conditions or a decline in the Group's creditworthiness, the Group may experience difficulty in procuring funds, which could impact its business results.	The Group tries to ensure the liquidity of funds through efforts to diversify by procuring funds via corporate bonds, commercial papers, and liquidation of lease receivables, in addition to borrowing from financial institutions. The Group ensures the liquidity of funds by implementing measures to supplement liquidity during emergencies, which includes the acquisition of commitment lines. The Group manages the liquidity of its funds in stages and confirms their liquid status to ensure that required funds can be secured even amid poor procurement conditions.

Nature of Risk

Primary Management Systems

The Mitsubishi UFJ Lease & Finance Group procures large amounts of funds when conducting business such as monetary lending and the acquisition and installment sales of properties for leasing. Should financial institutions and investors become more risk averse as a result of a free fall in economic and financial conditions or a decline in the Group's creditworthiness, the Group may experience difficulty in procuring funds, which could impact its business results.

The Group tries to ensure the liquidity of funds through efforts to diversify by procuring funds via corporate bonds, commercial papers, and liquidation of lease receivables, in addition to borrowing from financial institutions.
The Group ensures the liquidity of funds by implementing measures to supplement liquidity during emergencies, which includes the acquisition of commitment lines.
The Group manages the liquidity of its funds in stages and confirms their liquid status to ensure that required funds can be secured even amid poor procurement conditions.

Responsible Department:Treasury Department

Risk Related to Expansion of Operating Base, Strategic Partnerships, and M&As, etc.

Nature of Risk	Primary Management Systems
In pursuit of continuous growth through expansion of its operating base, the Mitsubishi UFJ Lease & Finance Group engages in strategic partnerships with outside entities and tries to diversify and expand business through M&As, in addition to expanding business on its own, and conducts these activities both domestically and overseas. However, changes in domestic or global economic and financial conditions, intensification of competition, changes in the business environment or strategy of partners, revision of relevant legislation or other systems, and other factors could cause a failure to achieve expected results or necessitate the recording of additional expenses. Such a situation could impact the Group's business results.	The Group considers the investment amount of each individual project and the degree of risk, and applicable departments conduct an examination in this regard. In addition, outside experts are appointed as well so as to make a comprehensive judgment on the future impact of an investment from a wide perspective. After execution of an M&A project, the rules and regulations of the Group are applied and a system for appropriate operations is established. The Group sets up a system to monitor business plans and performance in order to take necessary actions in a timely manner.

Nature of Risk

Primary Management Systems

In pursuit of continuous growth through expansion of its operating base, the Mitsubishi UFJ Lease & Finance Group engages in strategic partnerships with outside entities and tries to diversify and expand business through M&As, in addition to expanding business on its own, and conducts these activities both domestically and overseas. However, changes in domestic or global economic and financial conditions, intensification of competition, changes in the business environment or strategy of partners, revision of relevant legislation or other systems, and other factors could cause a failure to achieve expected results or necessitate the recording of additional expenses. Such a situation could impact the Group's business results.

The Group considers the investment amount of each individual project and the degree of risk, and applicable departments conduct an examination in this regard. In addition, outside experts are appointed as well so as to make a comprehensive judgment on the future impact of an investment from a wide perspective.
After execution of an M&A project, the rules and regulations of the Group are applied and a system for appropriate operations is established.
The Group sets up a system to monitor business plans and performance in order to take necessary actions in a timely manner.

Responsible Department:Each Related Department

Operational Risk

Category	Nature of Risk	Primary Management Systems
Damage from Earthquakes, Wind, Floods, Disease, Terrorism, etc.	Business activities of the Mitsubishi UFJ Lease & Finance Group could be hindered by wind and flood damage, earthquakes, or other natural disasters as well as infectious diseases, terrorism, outbreaks of disease, or other unpredictable circumstances. Furthermore, it could take a long time for business activities to recover or considerable expenditure could be needed to restore systems and other facilities. Such a situation could impact the Group's business results.	The Group maintains a plan to establish a response headquarters in case of a crisis. The Group has formulated a business continuity plan (BCP). The Group has taken resiliency measures for key systems. The Group has established infrastructure to support teleworking for business continuity. The Group will limit work to essential duties and employ alternating shifts.
Information Systems	The Mitsubishi UFJ Lease & Finance Group uses a variety of information systems to conduct account processing, management of various contracts, customer management, asset management of leased properties, and other operations. Improper maintenance of systems or inadequacies in the development thereof could result in a system suspension or failure, which could in turn cause operating and sales activities to come to a halt or cause economic losses, thereby affecting business results.	The Group has installed and operates a robust maintenance management system used with cooperating companies. The Group promptly coordinates information and initiates a response when system failure occurs. The Group has built a series of response systems, which include formulating and implementing measures to prevent recurrence. The Group has its own Group-based IT control system.
Cyber Security, Information Security	The Mitsubishi UFJ Lease & Finance Group uses a variety of information systems to conduct account processing, management of various contracts, customer management, asset management of leased properties, and other operations. These systems are susceptible to cyberattacks and similar risks. Unauthorized access to these systems from outside, penetration by computer viruses, human error, fraud, or other illegal activity could cause a system suspension or failure, financial damage, and leakage or unauthorized use of confidential information. Such a situation could cause operating and sales activities to come to a halt, economic losses, as well as a fall in social confidence caused by leakage of important information to external parties, and therefore impact the Group's business results.	The Group has established the MUL Computer Security Incident Response Team (MUL-CSIRT). The Group employs management systems that update software to the latest version, detects cyberattacks from the outside, and prevents problems before they can occur. The Group implements incident training in cooperation with internal and external parties. The Group continuously implements in-house training for all employees related to target e-mail attacks and information security.
Compliance	The Mitsubishi UFJ Lease & Finance Group's operations are subject to a range of relevant legislation in and outside Japan. Should there be a failure of compliance with legislation, social norms, or Company rules, it could impact the Group's business results by causing restriction on or interruption of operations, claims for damages from customers or others, and a fall in social confidence.	The Group provides ongoing compliance-related training. The Group employs preventive measures to combat money laundering, terrorist financing, and fraud.
System Changes and Revisions	If the Mitsubishi UFJ Lease & Finance Group is unable to respond to changes or revisions to various legislation, taxation, accounting, and other systems in Japan or overseas, the Group may be subject to penalties for noncompliance, products may be discontinued, operations may be subject to restrictions, and sales may decrease as a result. If these situations occur, the Group's business results may be affected.	The Group maintains constant monitoring of relevant systems for changes or revisions. Group monitoring is supported by making active use of outside experts. The Group works to gather information in advance on changes and revisions to relevant systems and enacts measures in response.
Operations	The Mitsubishi UFJ Lease & Finance Group conducts business transactions over which administration may be affected by human error, fraud, or similar activities, which could result in the halt of operations and sales or cause a loss of confidence with customers, either of which could affect the Group's business results.	The Group sets administrative rules for each transaction and duties are performed in accordance with those rules. The Group revises rules as necessary. The Group has constructed a system for when an incident occurs that involves reporting the incident and formulating a response in a prompt manner, and identifying the cause and putting measures in place to prevent recurrence.

Responsible Departments:Risk Management Department, General Affairs Department, Information Systems Department, Legal & Compliance Department, Corporate Communications Department

Risk Management System

Subjects We have put in place a set of risk management rules, disaster response rules, and response manuals as a precaution to minimize the impact on operations of natural disasters, manmade disasters, accidents, or other events. Having learned lessons from the Great East Japan Earthquake, we have additionally put in place a practical business continuity plan (BCP*1) and carry out related drills regularly.

BCP:Business Continuity Planning